Utah Health Exchange is no model for health reform

The Utah Health Exchange is the model some conservatives believe can be used to push back against Obamacare.

Witness the July 16 Wall Street Journal soundly rejecting regulatory guidance on what the administration is now calling “Affordable Insurance Exchanges,” but encouraging governors to get on the exchange bandwagon, in the hope they can build superior free-market exchanges.

The evidence? “Utah built a pilot exchange on this model in 2009, though the results so far are mixed and the rules are still being fine-tuned.” That calls for a closer look, but one can understand why Utah’s exchange might be tempting. It was established by state government, not the feds. It consumes no subsidies and it is voluntary.

The exchange launched in August 2009, with 136 businesses enrolling their employees. By December 2009, however, only 13 groups remained.  The reason for the initial failure was a classic death spiral of anti-selection.

Because carriers had greater underwriting latitude outside the exchange than inside, firms with sicker employees gravitated to the exchange and those with healthier employees stayed out. Premiums spun upward, out of control.

Legislative amendments passed in March 2010 forced carriers to use the same underwriting both inside and outside the exchange. The new rules took effect in September 2010 and the new exchange began coverage last January, having enrolled groups for a quarter of a year before the re-launch. In January, the new Utah Health Exchange covered 41 businesses including 1,042 employees and dependents. At the end of June, according to a recently published update, the count was 112 businesses, including 2,793 employees and dependents. By August, the exchange forecasts covering 157 employers including 4,059 lives.

One could say that enrollment grew by 289 percent in a year. But a full 100,000 of Utah’s uninsured are employed by small businesses, according to the Utah Small Business Coalition. And according to the Utah Health Exchange’s report, 16 percent of the businesses enrolled in the exchange did not previously offer coverage (or, the incidence of crowding out of traditional small-group coverage was 84 percent).

Of the 4,059 covered lives in the exchange, 1,424 are employees and 2,635 dependents. We can reasonably conclude that 228 of the previously uninsured 100,000 employees of small businesses have received coverage through the exchange. Clearly, the exchange has had effectively zero impact on the uninsured employees of Utah’s small businesses.

Utah has a population of 2.8 million, of which 1.1 million have full-time jobs. Approximately 200,000 work in firms of fewer than 20 employees and 540,000 work in firms of fewer than 500 employees. The Utah Health Exchange defines small businesses as those with up to 50 employees. So let’s say about 300,000 Utahans work for such businesses. The exchange covers 1,424 of them, an utterly trivial proportion of the exchange’s target market.

The results of the Utah Health Exchange are not “mixed” but basically non-existent. What’s needed is wholesale tax reform, so individuals can use their own pre-tax dollars for health insurance that serves their own needs, not their employers.

John R. Graham is director of health care studies at the Pacific Research Institute.

editorialsJohn R. GrahamOpinionUtah

Just Posted

A felled tree in Sydney G. Walton Square blocks part of a lane on Front Street following Sunday’s storm on Monday, Oct. 25, 2021. (Kevin N. Hume/The Examiner)
After the rain: What San Francisco learned from a monster storm

Widespread damage underscored The City’s susceptibility to heavy wind and rain

Plan Bay Area 2050 is an expansive plan guiding the region’s growth and development over the next three decades. The regional plan addresses progressive policy priorities like a universal basic income and a region-wide rent cap, alongside massive new spending on affordable housing and transportation infrastructure. (Shutterstock)
$1.4 trillion ‘blueprint’ would address Bay Area’s housing, transit woes

Analyzing the big ticket proposals in ‘Plan Bay Area 2050’

The Department of Building Inspection, at 49 South Van Ness Ave., has been mired in scandal since since its creation by voter referendum under Proposition G in 1994. (Courtesy SF.gov)
The Department of Building Inspection, at 49 South Van Ness Ave., has been mired in scandal since its creation by voter referendum under Proposition G in 1994. (Courtesy SF.gov)
Whistleblowing hasn’t worked at the SF Dept. of Building Inspection

DBI inspectors say their boss kept them off connected builders’ projects

A felled tree in San Francisco is pictured on Fillmore Street following a major storm that produced high winds and heavy rains on Oct. 24, 2021. (Photo courtesy of Philip Ford)
Storm updates: Rainiest October day in San Francisco history

Rainfall exceeded 10 inches in parts of the Bay Area

On Sunday, California bore the brunt of what meteorologists referred to as a bomb cyclone and an atmospheric river, a convergence of storms that brought more than half a foot of rain to parts of the Bay Area, along with high winds, concerns about flash floods and the potential for heavy snow in the Sierra Nevada. Much of the Bay Area was under a flash flood watch on Sunday, with the National Weather Service warning of the potential for mudslides across the region. (NOAA via The New York Times)
Bomb cyclone, atmospheric river combine to pummel California with rain and wind

What you need to know about this historic weather event

Most Read