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Insurance Exchange at a Crossroads

Coverage for 1.4 million at stake as consumer, industry groups disagree

En español | A health insurance exchange is being touted as a marketplace where Illinois residents and small businesses could comparison-shop for affordable health care plans.

See also: The new health care law and affordable health insurance.

But for that to happen, the General Assembly, which convenes this month, must overcome the same significant obstacles that thwarted efforts last fall to pass legislation establishing such an exchange. Called for by the federal Affordable Care Act, a health insurance exchange would help provide coverage for 1.4 million currently uninsured residents by 2020, according to the state Department of Insurance.

The exchange would cut the number of the state's uninsured nearly in half, said Andrew Stolfi, the department's acting director. The exchange would offer individuals, families and small businesses federal subsidies and tax credits to help pay for private plans and would create a website for comparison shopping.

Jennifer Creasey, AARP Illinois associate state director of advocacy and outreach, said the exchange would be good for consumers who don't have insurance through their employers. It would offer them a place to compare the cost of various options, just as they can go to a travel website and decide whether to fly nonstop to a destination or take a longer flight and transfer for a cheaper price.

"This will provide a lot more transparency," Creasey said, noting that AARP will lobby for an exchange bill. "And it will hopefully promote competition between the insurance products so prices would stay down."

Brian Imus, state director of Illinois Public Interest Research Group (PIRG), a consumer watchdog, said: "We could see more competition, more choices and lower cost for health insurance premiums because of the health insurance exchange. … Of course, it's all about how the lawmakers design it."

Illinois — like more than half of the 50 states — is moving forward with an exchange through legislation or an executive order. Under the federal law, exchanges must be in place by January 2014. Democrats across the country hailed the federal act as a way to expand coverage and hold down costs, but Republicans criticized it as expensive and unworkable. Twenty-six states have challenged the law in federal courts, where rulings have been mixed. The U.S. Supreme Court has agreed to consider the law's constitutionality with oral arguments set to begin March 26.

Next: Consumer groups, insurance industry at odds. >>

Last fall, the Illinois legislature failed to pass a bill after consumer and industry groups split on two key issues. The disagreements centered on whether the insurance industry should have a seat on the exchange's governing board, and whether the exchange would be an active purchaser of insurance or simply a market organizer.

Consumer groups, including AARP Illinois and Illinois PIRG, oppose giving the insurance industry a seat on the board. Creasey said no one from the industry should be on the governing board because it would be a conflict of interest.

State Rep. JoAnn D. Osmond, R-Antioch, who holds an insurance license but doesn't practice, said the board needs the experience an industry representative would bring.

A possible compromise would allow someone who's retired from the insurance industry to serve.

AARP and Illinois PIRG want the exchange to require insurers to provide high-quality plans and lower prices for consumers. The insurance industry argues that would drive up the cost of policies and make fewer alternatives available.

"The concern always is the heavy-handed approach from the government side," said Laura Minzer, executive director of the Illinois Chamber of Commerce's Healthcare Council, which wants the exchange to supplement, but not control, the health insurance market.

Illinois lawmakers also worry about what would happen if federal grants promised by the Affordable Care Act are cut, or if the Supreme Court strikes down the law. The state has until June to apply for additional federal grant money to fund the exchange, but it would have to be self-sustaining by 2015.

"If the money for that, which is supposed to come from the feds, goes away, then I can tell you from the structure of our budget: we don't have $90 million to set this up," said state Rep. Frank Mautino, D-Spring Valley.

Osmond said she is concerned because when Massachusetts established a similar exchange, "they kept going back to the legislature for more money and more direction."

Also of interest: The health care law: What's still to come. >>

Russell Working is a freelance writer and author living in Oak Park, Ill.

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