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How Congress might change the way you buy health insurance

All the reform bills would establish a nationwide system of government-run insurance exchanges. Here's how they'd work.

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The exchanges would also be the place where lower-income Americans go to receive a government subsidy to help them pay for their insurance coverage. Currently, the House and Senate health panel bills would subsidize individuals or families with incomes up to four times the poverty level. So the exchanges might be much more than a Travelocity or Orbitz for health plans.

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“They are really important parts of the overall bills,” says Sarah Lueck, a policy analyst at the Center for Budget and Policy Priorities.

As to differences between the chambers, the House bill would establish a national insurance exchange. The Senate would set up state-based “gateways,” though the feds could step in and run gateways in less-populated areas or states that struggle to establish their rules.

To proponents, one important aspect of exchanges is relative exclusivity. In their view, the more Washington allows insurance firms to sell their products outside an exchange, the more the exchange might be weakened.

“If it’s not designed carefully, such a system could lead to a concentration of poorer and less-healthy people in the exchange,” says Edwin Park, a senior fellow at the Center on Budget and Policy Priorities.

Critics, however, score the proposed insurance exchanges as simply another possible layer of government bureaucracy in a marketplace that is already highly regulated. The draft House bill, for instance, would set rules about how extensively insurance plans could engage in marketing. It would regulate such things as the relative cost between policies for younger and older people.

The so-called “public option” – a purely government-run nonprofit insurance plan intended to compete with private insurers – probably will not be able to pass Congress. But it might not have to, say critics, as insurance exchanges could give Washington a back-door way to accomplish the same thing.

“We will get a highly regulated health insurance exchange which creates the equivalent of a public plan through private intermediaries that only look private and are mostly taking their orders from the rulebook made in Washington,” said Thomas Miller, an American Enterprise Institute fellow and former senior health economist for the Congressional Joint Economic Committee, at an AEI seminar on healthcare reform earlier this summer.

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