Lessons from abroad

A recent study by a Harvard professor and her European colleagues has elicited a handful of insights about health exchanges similar to the ones that will be implemented in 2014 in the United States.
Katherine Swartz, professor of health economics and policy at the Harvard School of Public Health in Boston, took part in a fellowship through the Commonwealth Fund during which she found there were some lessons to be learned from other countries’ healthcare systems.
“We kept seeing more and more analogies to what we ought to be thinking about with exchanges in the U.S.,” Swartz said. “There were some good things and bad things that were observed.”
Swartz looked at health insurance markets in Switzerland and the Netherlands, created in 1996 and 2006, respectively. Though there are differences in the countries and their insurance structure, there are similarities in how the markets would operate.
The main thing that Swartz noted was that the models for risk adjustment should be both sophisticated and regularly updated.
Premium prices in Switzerland vary dramatically between its 26 cantons (states), and even within each canton, they can be dramatically different for the same person, Swartz said. This is partially because the majority of people purchase supplemental plans that are not regulated, skewing the market.
In the Netherlands, however, the program is more national and premiums are much less varied.
“If you think about how to measure if a market is competitive – if you have a standardized product – it is whether or not you see prices that are close together,” she said. “And you do see that in the Netherlands.”
They also have large uptake of supplemental insurance, much like Switzerland. The difference, she said, could be because the Netherlands has been working on a risk adjustment model for more than 30 years.
“We need to think about these risk adjustment models so we are constantly monitoring and tweaking them since things change,” she said. “So far most states are going to use the federal model in the first year instead of creating their own. I hope it will be more sophisticated like the Dutch.”
Michael Gusmano, a research scholar at the Hastings Center, agreed that risk adjustment is a key point to note. There is a big concern whether risk adjustment will be enough to keep premiums low and if there will be “adverse selection” in the exchanges.
Because the size of the penalty may be less than the cost of insurance ($95 in 2014 up to $695 or 2.5 percent of household income in 2016), Gusmano said many healthy people may chose not to purchase coverage. Also, many people who are shut out of the market now have pre-existing health problems, meaning a large pool of high-cost people may participate.
“The differences in these other countries reinforce the conclusions in the study even more,” Gusmano said. “The challenges we see with risk adjustment there are happening in environments that are a lot easier and straightforward than the ones we are dealing with here.”
Another major point Swartz touched on was the need to ensure that everyone that is eligible receives federal subsidies. The Dutch and Swiss thought they had a problem in this area but found out that only about 2 percent to 4 percent of eligible people weren’t enrolled.
There is already a problem with this in the United States. According to a 2010 report by the Urban Institute, there are 4.4 million children in the country that are eligible for public insurance but are not enrolled.
“It may sound simple, but if we don’t get people enrolling who are eligible, we need to think about why they aren’t,” she said.
One way to encourage enrollment is to make applying for subsidies simple. But this could be a problem, according to Gusmano. Subsidies under the Affordable Care Act are complex and it isn’t yet clear how people will enroll or how they will change plans if they become eligible or ineligible for plans during the course of a year, he said.
One of the final lessons is that a competitive market in and of itself will not slow growth in healthcare spending. There is an exchange in Germany similar to ones in the ACA, but Gusmano said pricing is kept low through regulation and price negotiations.
“It’s (the exchanges) a good idea but it’s missing pieces … the whole law is this way,” he said.
Gusmano said the law is essentially expanding on existing, but imperfect, systems. The exchange will act as a large employer does: by covering enough people, both sick and well in one pool to spread the risk, insurers can provide an affordable product. He said that standardizing insurance regulations dealing with issues like pre-existing conditions is also good practice.
But these things don’t touch on underlying causes of healthcare costs, he said. It doesn’t change the market for people covered under their employer plans – which he said are suffering from higher premiums and deductibles and less coverage.