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Push Employers to Use Private Exchanges: Harvard Professor

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Organizers of private exchange programs have faced slower-than-expected growth in recent years, but Leemore Dafny, a top antitrust expert, is still rooting for the programs.

Leemore Dafny, a professor at the Harvard Business School, spoke up for private exchange programs for employers Wednesday, at a hearing organized by the House Energy and Commerce oversight subcommittee.

The subcommittee held the hearing to look at the effects of consolidation on the health care market.

(Related: Economist: Hospital, Payer Consolidation Hurting Market)

Dafny said she believes consolidation involving hospitals, physicians and insurers has increased health care prices, rather than helping consumers by leading to more efficiency and lower costs.

One thing Congress could do to improve the situation would be to require the creation of new types of public databases, Dafny told the subcommittee.

“Create public databases containing information about the ownership and financial links among different health care providers, and net commercial prices for their services,” Dafny said, according to a written version of her testimony. “This database could form the basis for regularly scheduled reports and public hearings on industry consolidation and its effects.”

Congress could also help by encouraging, or even requiring, employers to use or develop private exchange programs, Dafny said.

Dafny said the programs should provide a menu of health plans, and let employees shop for their preferred plans, to make choices that reflect their own preferences.

Private exchange programs can work by making the employees the health coverage shoppers, Dafny said.

When employers choose the coverage, they tend to pick richer, but more expensive, options, Dafny said.

“Data from the public exchanges suggest consumers are more price-sensitive, and more willing to select narrow-network plans, than are employers,” Dafny said. “These preferences exert pressure on providers and health plans to develop lower-cost health care solutions, and can therefore reduce the incentive for anticompetitive upstream mergers or practices.”

Consumer demands for lower prices could keep health care entities from making deals that drive up prices, Dafny said. 


Hearing organizers have posted links to hearing resources, including a link to a video recording of the hearing, here.

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