Multi-state Health Insurance Exchanges

Brief

Multi-state Health Insurance Exchanges

April 7, 2011

Abstract

The Affordable Care Act allows multiple states to jointly operate exchanges. There are four reasons why states might consider doing so. First, administrative economies of scale could be significant. Second, regional exchanges might make sense in large metropolitan areas crossing states. Third, they could promote broader risk pooling. Fourth, multi-state exchanges could create a critical mass of insured persons to establish stable risk pools for small population states. However, multi-state exchanges are most likely to focus on shared administrative structures as opposed to risk-sharing. Cross-state risk-sharing would lead to one state subsidizing another and create a complex environment for decision-making.

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