October 12, 2012

By January 2014, the states and the District must either establish their own health insurance exchanges under the Affordable Care Act (ACA), combine with other states to form a regional exchange or have the federal government set up an exchange for them.

The District has opted for the first option, and this month it moved ahead with a model unlike anything pursued by any state in the nation, with the exception of Vermont: On Oct. 3, the D.C. Health Exchange Authority’s executive board unanimously approved a plan that would abolish the marketplace as we know it for firms with 50 employees or fewer and force them to obtain health insurance for their workers from the government-run exchange. Companies and associations with 100 employees or fewer would have to do so by 2016.

If virtually everyone else is choosing a more cautious approach, I am compelled to ask: Is the District so much smarter than everyone else?

The board’s decision was made despite clear opposition from the small employers who would have to live with it, and a broad coalition of 150 D.C. businesses and organizations has written to the board, the mayor and the D.C. Council to oppose the idea. Even the District’s own consultants have cautioned officials about this untested model. Yet the only option the board publicly considered has been this unpopular and unnecessary plan to close the private marketplace to many businesses.

What will this mean for small and medium-size D.C. employers? While it’s too soon to know all the impacts, it’s certain to curtail choice. If you manage a small organization, as I did for 31 years at the Center for Science in the Public Interest, and you’re happy with your current insurer and insurance — too bad. You must switch to an untested, government-run system.

The damage caused by this highly disruptive proposition could be enormous, and the demand that small and medium-size employers accept that risk, sight unseen, is an overreach. Such an approach runs counter to the ACA’s essential promise of more — not less — choice.

We can make some educated guesses about other likely effects of this decision, based on developments beginning to occur. First, our choices will be further curtailed as carriers move to standardized, cookie-cutter coverage in the government-run exchange. Health insurers are already moving to conform plan offerings to meet ACA requirements — a process that will eliminate many desirable consumer options.

We can also anticipate higher costs. The ACA contains many new cost drivers, aside from two new administrative costs associated with the D.C. plan: the annual operating cost of the exchange, plus carrier administrative costs for the new systems that insurers will have to build to participate. And don’t forget that these costs are separate from the ongoing expense of care itself, which continues to rise as well.

Small businesses simply cannot afford anything that adds to our financial burden in such challenging economic times. For some D.C. businesses, increased health insurance costs will mean the difference between staying in business and closing. I know our group struggles each year to provide quality benefits.

The Affordable Care Act is the law, but the District can move much more carefully to limit the costs associated with the exchange. Other states are moving incrementally to structure their government-run programs in tandem with the existing private market, ensuring that the result is more choice and more competition — which are fundamental goals of health reform, after all. The District should carefully assess the full financial impact of eliminating the private marketplace before continuing down the path it is on.

The changes being proposed for the District are far more than some esoteric public-policy debate. The decisions that the exchange board makes will affect small employers directly and personally. Implementing the core provisions of federal health care reform are daunting enough; there is no need to add to those uncertainties by instituting drastic and unnecessary changes to the marketplace.

The writer is deputy executive director emeritus for the Center for Science in the Public Interest.