Plan Competition for Health System Efficiency

Publication Date:

Publisher: Center for Advanced Study in the Behavioral Sciences

Author(s): A.M. Garber; D.P. Goldman; D. Lakdawalla

Research Area: Health

Type: White Paper

Abstract:

As compared to single-payer financing of health care, health plan competition is posited to improve health care quality and efficiency and provide alternatives to health care delivery and financing by fostering competition among health plans.



In this paper, the authors review the role of plan competition in promoting health care reform. They present a proposal regarding plan competition and discuss the benefits and drawbacks.



Key Findings:



While there are cost-containing benefits to plan competition, adverse selection is also a common result of competition between health insurance providers. Balancing the cost benefits and adverse selection is a goal of regulation.
Qualified Insurance Exchanges (QIX) could prove successful at fostering competition on price, quality of care and plan features responsive to the needs of the insured. QIX would entail community-rated premiums with risk adjustment and health investment accounts. An independent federal authority that would oversee the plan, collect data, and disseminate premium and plan performance information.
Examples of qualifications for QIX would include choice of plans, open enrollment, reporting standards, and risk adjustment within and across exchanges.
Qualified Insurance Exchanges take plan competition into account and could be an integral element of health insurance reform efforts.