Implementing Insurance Exchanges — Lessons from Europe

Ewout van Ginneken and Katherine Swartz | New England Journal of Medicine | August 23, 2012

State-based health insurance exchanges are a key component of the health care reforms included in the Affordable Care Act (ACA). Starting in January 2014, each state's exchange will provide a marketplace where individuals and small employers can compare and purchase health plans. The idea is both to expand health insurance coverage and to foster competition among insurers, thereby promoting cost containment.

Exchanges are based on economist Alain Enthoven's concept of managed competition, which aims to establish regulated competitive markets in health insurance, health care purchasing, and health care provision (see diagram) Managed Competition in Three Markets and Key Provisions of the Affordable Care Act.).1 Exchanges are regulated yet competitive health insurance markets, and they usually function in an environment where individuals are required to purchase health insurance. In the exchanges, insurers offer structured choices, compete on the price and quality of their service, and must accept all applicants. The ACA creates a framework focused on these issues, and some states have begun implementing their own adaptations.