In a recent blog posted on Forbes.com, John Graham wrote about the supposed failure of the Utah Health Exchange as a reason for conservatives to look at other models for health reform.  From reading past blogs, it is clear that Mr. Graham has one goal in mind – to prevent the Affordable Care Act from being implemented.  His main thesis seems to be that if states simply do nothing, the federal government will not be able to impose a federal program on them.

In reality, doing nothing is probably the worst thing any state can do to prevent federal action.  The best way for all states to prevent federal intrusion is to make health system reform a states’ rights issue.  Each state should boldly and aggressively stake out their territory in identifying what needs to be done and moving forward in a way that works best for their state.

Before President Obama was even elected, Utah studied this issue and decided to take a market-based, business-friendly approach to health system reform.  One piece of that plan was to implement a new defined contribution market that would make it easier for small businesses to offer health insurance to their employees.  Under this new type of market, employers give each employee a specific allowance that they apply toward the purchase of the health plan of their choice.  The support of this market is one of the key functions of the Utah Health Exchange. 

Mr. Graham himself supported this approach as recently as February 16, 2011, when he wrote, “I agree with Governor Herbert on this: Let Utah have its Exchange.  Maybe someday it will find its feet and make a serious impact.”

So it is a little surprising that as soon as March of 2011 and again this week that he is actively discouraging other states from looking at a defined contribution approach for small businesses as a conservative option to solving state insurance market issues.

It is particularly concerning that Mr. Graham’s dismissal of the Utah Health Exchange is based on misinformation and inaccuracies.  In his blogs, Mr. Graham consistently mischaracterizes both the goals and the outcomes of the Utah Health Exchange. 

Here are a couple of examples.  In his March blog, he laments the fact that the Exchange had not produced an annual report, which is simply not true.  He just never asked for a copy of it.  In his latest blog, he repeats false information about the genesis of the exchange being plagued by anti-selection, which he appears to have made up from whole cloth.  When he posted about that earlier this year, the correct information was provided to him.  There was initially some indication that a retraction would be forthcoming, but not only did that not happen, he has now repeated the same bad information in his most recent post.

So, what is the truth about the Utah Health Exchange’s development and history?  It turns out that starting up a truly open defined contribution market for small businesses is a fairly complicated enterprise that warrants a cautious approach.   There are a lot of components that have to fit together precisely for it to work. 

Mr. Graham’s version of the facts suggests that the Exchange has been in full operation since August 2009.  This is simply not true.  By design, the Utah Health Exchange conducted a beta test of the system in August 2009.  While many people seem to want to just jump in with both feet, it made sense to reach out to a few small employers to help work out the kinks in the technology on a small scale before going fully live.  Initially, there were quite a few businesses that expressed an interest in the defined contribution concept, and after working with them in the preliminary stages, we were fortunate to identify 11 that both met the qualifications to participate and were willing and able to fully partner in the development of a working technology. This reduction in the number from those that expressed interest to the actual partners had nothing to do with “anti-selection” or “death spirals” as Mr. Graham suggests, but rather identifying those who could be part of a beta-test of a novel concept.  (The reader may be interested to note that all 11 of the original testers are all still with the Exchange.)

Based on the lessons learned from the limited launch, significant changes and improvements were made throughout the test period.  The full launch of the Utah Health Exchange’s defined contribution market occurred in the Fall of 2010, when it began accepting applications on an on-going basis for coverage beginning as early as January 2011. 

Mr. Graham criticizes the “trivial” enrollment in the Exchange during the first seven months of its launch.  Yet, as with any technology startup, a major concern to Exchange leadership is the potential for the system to be overwhelmed by trying to grow too fast.  Less than a year after opening for business, there are still issues associated with increased volume that have to be addressed. Since it hasn’t made sense to try to bring in thousands of businesses all at once, there haven’t been any large-scale marketing activities.  However, even without a concerted marketing effort, as he correctly notes, the Exchange continues to grow at a steady pace, enrolling new businesses each month. Once the technology is refined to the point of being able to handle the stress of large volumes, the Exchange will work with the private sector to create more public awareness and volume will likely accelerate. 

Now, the Utah approach might not be the right solution for every state, however, for Mr. Graham to argue that states should avoid looking at it based on the false information and biased analysis he puts forward is inappropriate.  This has nothing to do with being conservative or liberal, but rather encouraging each state to look at all of their options, including the Utah and Massachusetts approaches, and develop a state-designed approach to address state-specific issues.

If all 50 states were to proceed in this manner, the federal government would have no choice but to give them the flexibility they need.  On the other hand, if a large number of states refuse to take any action, it would give those in Washington who really want a narrow, federal solution full license to impose a one-size-fits-all solution.

Norman Thurston, Ph.D.

Health Reform Implementation Coordinator for the State of Utah