Five Key Questions About an Insurance Exchange

"There are enough people who understand that they ought to have coverage and are interested in having some choices and this is a viable business model," says Antos, who recently wrote The Case for Real Health Care Reform.

He says creating a program heavy with regulations and mandates would price young people out of the insurance market. Antos adds young people want basic health insurance and not a plan that is designed for a middle-aged family man. Those types of plans are too expensive for recent college graduates, he says.

"If you set the bar very high, and that might be the direction that some Democrats want to go and certainly the direction Massachusetts went, then you will basically eliminate the economic incentive for insurers to try to come up with a better combination that reflects reasonable coverage at a reasonable price," says Antos.

Rather than federal lawmakers creating mandates for insurers to follow, Antos thinks private insurers should be allowed to design benefit programs that interest their various members.

"What you really want to do is enlist the smart people in insurance companies who design insurance plans and give them an economic reason to design a plan that would actually be attractive to a wide range of Americans, which implies balancing the benefits with a cost," he adds.

4. Is the exchange a way to compare plans or something more?
An insurance exchange could be merely a Web site that allows people to compare prices and benefit packages or it could take a more regulatory role (such as Massachusetts) and negotiate with plans. An exchange could also mandate types of coverage and plans that it allows in the program.

The argument for setting a floor for benefits and coverage is that prospective members could compare apples to apples. Those who oppose the idea, however, say that coverage mandates will add costs and price out people, particularly younger people who are needed to fund health insurance.

One benefit for the exchange idea is that a Web site could go beyond providing price and benefit information, but could help people learn more about health and how to become better healthcare consumers.

5. Who will have access?
Federal lawmakers can open the exchange to the individual market, small employers, or everyone.

Opening the exchange to only the uninsured to join individual plans would not help small employers who are struggling with health costs, but other experts are worried that opening the exchange to too many people initially will cause a stampede out of employer-based insurance and could flood the exchange in its infancy.

Trautwein says she would like an exchange to start with the individual market to work out the bugs before expanding to employers with as many as 50 workers.

Trautwein adds that the exchange must provide low-cost plans in order to woo younger people into the plans. "You have to really be careful about how you set up your rating model so it's still affordable for young people to come in. Those are the groups you really want in. They are a big part of the group that's not in today," says Trautwein.

Regardless of the specifics of the insurance exchange, supporters in both parties believe it could become a part of a bipartisan reform package that gives Americans a place to become better health insurance consumers.

"Virtually all economists agree that if you provide more information to consumers and more choices that they're likely to pick something that is closer to the combination of benefits and cost that appeal to them personally," says Antos.

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