Insurance exchange is key to health-care reform

WASHINGTON — The central problem in health-care reform is that good policy and good politics point in opposite directions.

Good policy proceeds from the understanding that our health-care system is a fractured, pricey, inefficient mess. Good politics, however, proceeds from the insight that a lot of people rely on this fractured, pricey, inefficient mess and don't trust Washington to change it.

Good politics means, as Barack Obama frequently says, that if you like what you have, you get to keep it. But put those imperatives together and you have a strange problem indeed: How do you reform a system that you're not allowed to change?

The answer that reformers have come up with is that you don't change the current system. In the short term, you strengthen it with subsidies and regulations on insurers. You make it kinder and gentler. But you also build the beginnings of a new, better health-care system off to the side. You let it demonstrate its efficiencies and improvements. You let the lure of lower costs and higher quality persuade Americans to migrate over of their own accord.

This is what the health-insurance exchange is designed to do. It is arguably the single most important element of health-care reform, because it is the bridge between the system we have and the system we want. But amid the clamor over public insurance options — which, incidentally, would be housed on the exchange — and employer tax exclusions and all the other points of controversy, the health insurance exchange is hardly being discussed. And there are signs that it, and thus the long-term promise of reform, might be in danger.

Compared with the crazy-quilt system we have now, the idea behind the health-insurance exchange is almost weirdly simple: It's a single market, structured for consumer convenience, in which you choose between the products of competing health insurers (both public and private). This is not a new idea. It is how we buy everything from books to socks to soup. Everything, that is, except health insurance. The benefits of reversing that bit of accidental exceptionalism are obvious to anyone who has ever stepped inside a Target: Consumers will benefit from more choice, from direct competition between insurance providers hungry for their business, from regulations meant to protect them from deceptive products, from efficiencies of scale, and from the sort of purchasing power that only a large base of customers can provide. They will benefit, in other words, from an actual, working market — something health insurers have managed to avoid for far too long.