Health Insurance Exchanges: How Economic and Financial Modeling Can Support State Implementation

Functional insurance exchanges will require careful operational and financial planning by states in order to ensure they are efficient and able to compete in the insurance market. As mandated by the Affordable Care Act (ACA), the U.S. Department of Health and Human Services has awarded grants to states for activities related to the implementation of health insurance exchanges. Many states plan to use part of this funding to conduct quantitative analyses aimed at predicting and measuring the impact of the ACA, and the outcomes of different exchange options.

This report from the Robert Wood Johnson Foundation-funded State Coverage Initiatives (SCI) and State Health Access Data Assistance Center (SHADAC) programs provides an overview of how states may most effectively conduct these analyses through a modeling approach. The report’s authors outline questions states will need to answer about the potential size of the exchange, how many of those eligible to purchase coverage through an exchange likely will, the size limit for small businesses participating in the exchange and more. They also stress that in order to achieve the greatest benefit from modeling, states must plan ahead for the key questions that will need to be answered by the analysis, carefully weigh tradeoffs associated with different modeling approaches and data sources, and perhaps most importantly, remain realistic about such an analysis’ limitations. Although many other considerations will no doubt play a role in the implementation process, the authors argue that the modeling approach is an important tool for deciding how to set up an exchange that not only meets ACA requirements, but also state goals and budgets.