Health Insurance Exchanges: Legal Issues

Health insurance purchasing exchanges have been proposed as a possible means of making insurance more accessible, increasing competition among health plans, and promoting choice of insurer. Health insurance exchanges are entities that organize the market for health insurance by connecting small businesses and individuals into larger pools that spread the risk for insurance companies.

Key Findings:

  • While there are legal issues that warrant consideration under a federal, state or private exchange framework, those issues are not insurmountable barriers to implementation at any level.
  • At the federal level, Congress has the power to implement health insurance exchanges but must address several laws and regulations, including:
    * Interstate commerce;
    * Tax and Spending;
    * The McCarran Ferguson Act;
    * Anti-commandeering laws;
    * Due Process and Equal Protection;
    * The Takings Clause; and
    * The Administrative Procedures Act.
  • At the state level, there are no insurmountable barriers to the creation of health insurance exchanges. State level reforms would have to address the Health Insurance Portability and Accountability Act (HIPAA), the Employee Retirement Income Security Act (ERISA), and state administrative procedures acts.
  • At the private domain, health insurance exchanges are not prevented by existing state or federal law. Key laws and regulations include antitrust laws, HIPAA, the Private Health Care Voluntary Purchasing Alliance Model Act, and Multiple Employer Welfare Arrangements Regulation.

Health insurance exchanges implicate many design and policy issues regardless of whether they are implemented by the federal government, state governments, or by individuals; but there are no absolute legal bars to their establishment.

This white paper was created by the O'Neill Institute for National and Global Health Law at Georgetown University and is part of the Legal Solutions in Health Reform project. The project aims to identify practical, workable solutions to the legal issues that may arise in any upcoming federal health reform debate.

Keywords: Policy reform ideas, Access, Delivery systems, Mandates, Legal issues/reforms, Federalism, Regulation, State models for national reforms, Cost reform ideas, Administrative cost/structure, Competition, Employer contributions, Plan competition, Subsidies, Play-or-pay, Market reform ideas, Insurance exchange

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