The issue of how the House and Senate health care bills operate their insurance Exchanges has been getting interest today. Jon Cohn explained the differences today in The New Republic, and Igor Volsky at Think Progress had a chart comparing the two plans.

They’re right to highlight the differences. As California Congressional Representative John Garamendi told reporters today, "Under health reform, 30 million people will buy their insurance through the Exchanges. I spent years as insurance commissioner in California, chasing after the insurance company scoundrels. You’re going to toss 30 million Americans to these sharks unless there is a real strong regulatory environment [like the House's Exchanges] and public option."

As Karen Pollitz, a health policy expert at Georgetown, explained:

Exchanges pull health reform together. They make insurance markets work better, they make them more transparent.

In today’s insurance marketplace, anyone can sell anything. Junk insurance is sold alongside good insurance. It’s impossible for consumers to tell the difference. Exchanges are more organized and and create a stronger marketplace. Exchanges can be more selective about which products can be sold, and insurance companies have to bid to participate in the House Exchanges, meaning lower prices and better quality.

The Exchanges also provide services to consumers. They make insurance policies clear, understandable, and easy to compare. They’re certified by the entity that runs the Exchange, so consumers know the junk has been weeded out.

They also make price comparison meaningful. Today you can’t tell if a cheaper insurance policy is cheaper because the company that’s offering it is more efficient or simply because the company isn’t going to pay your claims.

Therefore, it’s crucial that these Exchanges work right, so people will be able to choose high-quality insurance at a decent price.

The House gives the federal government the power to create and regulate a national Exchange. The Senate bill has each state set up its own Exchange. The difference is stark. With a national exchange, you’ll have a simple, understandable, and enforceable framework that protects consumers. With state exchanges, you might not.

Why? With state Exchanges, each state would have different rules. Some might to a good job regulating, but some might not have the time, money, or inclination to hold insurance companies accountable. Wendell Potter explained the problems this way:

Insurance companies have long decried what they call the "patchwork" of the state regulatory system, but they’ve benefited mightily from that patchwork. They’ve developed cozy relationships with insurance commissioners and their staffs in some states. And they’ve been able to market insurance plans that shift costs to consumers. For example, one state gave permission for a insurance company to sell a plan that had a $20,000 annual deductible – essentially junk insurance.

Congressman Garamendi followed up:

State governments vary in their ability to enforce regulations, and insurance company influence also varies. You can wind up with a commissioner in a state that has no interest in protecting consumers.

To deal with that, you need a broad based Exchange that’s strong enough to overcome the insurance companies. That’s the role of the federal government. To make sure the insurance sold is valuable, claims will be paid, and companies will play by the rules.

A national regulatory framework is essential to make sure nobody is getting left at the mercy of insurance companies anymore. And that framework starts with a national Exchange. Under the House bill, the states would be able to take the ball and run their own Exchange after a few years, but the bill ensures strong regulations are present from the start.

By contrast, the Senate bill allows insurers to game the system and prey on states with weak regulators. In short, the insurers prefer the Senate bill because it lets them keep making money by denying care. That’s reason enough for Congress to pass the House version of the Exchanges as they work to finish reform right.

(also posted at the NOW! blog)

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