California's struggle with insurance exchanges offers lesson for national reform

California's experience with insurance exchanges could prove a valuable lesson for the nation's flirtation with such pools for covering large numbers of people, The Wall Street Journal reports. 

For 13 years in California, small businesses could buy insurance through an exchange, but after it was bypassed by lower insurer rates forcing exchange coverage rates higher, rates went up forcing managers to shut the program in 2006. The lessons: "Employers and individuals who qualify must be required to obtain health insurance through the exchange. Failing that, John Grgurina, who ran California's exchange from 2002 until it ended, said government must impose rules governing rates and eligibility to protect the exchange from attracting a disproportionate share of high-risk people. An exchange aims to get better prices for coverage by banding together businesses and individuals. Insurers would have an incentive to join an exchange because they would gain access to more potential customers. Individuals and employees of businesses that participate in an exchange would be able to chose from the available plans and pay the same rate."

"Each of the three major bills -- one in the House and two in the Senate -- would create one or more exchanges. The specifics vary, but most of the proposals would impose more regulations than the failed California program, which analysts say would help the exchanges compete." Californians familiar with the effort said crucial details have not yet emerged. Exchanges in other states, including failed ones in Texas, Florida and North Carolina each lost because they covered too many high-risk participants. But in Connecticut and Massachusetts, exchanges have had more success because government set rules on how insurers set rates, The Journal reports (Sanserino, 8/3).