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July 09, 2012 at 02:29 AM
Las Vegas – The “health insurance exchanges” in the Patient Protection and Affordable Care Act of 2010 (PPACA) are descended from individual and small group purchasing health insurance alliances that have been around for decades.
David Smith has been there.
Smith, who is now a Morrisville, N.C., employee benefits advisor, helped revise North Carolina’s small group health insurance laws in the early 1990s, and he was policy director for the North Carolina State Health Plan Purchasing Alliance Board.
“My belief was that it was going to work,” Smith said recently during an interview here at the annual convention of the National Association of Health Underwriters (NAHU), Washington.
Smith said he sincerely believed that the alliance could lower small group health insurance prices by helping small employers join to bargain for better rates.
Smith said he lesson he actually learned as that pushing carriers to set rates too low can backfire.
In the real world, most carriers seem to use community rates as the basis for setting small group rates, and the carriers may add to the premiums for especially poor risks and lower the premiums for especially good risks, Smith said.
If a carrier tries to set prices any other way, “it just doesn’t work,” Smith said.
