Appraising a Health Insurance Exchange for Minnesota

This report reviews the possible advantages and the pitfalls of an exchange. The first section starts by defining the exchange concept. The following section outlines how an exchange can help solve or at least mitigate a number of problems ailing our health care system. An exchange can, however, encounter significant pitfalls if designed poorly, and the next section discusses these. The report concludes by answering some objections from both the left and the right.


  • An exchange would function as a new market for health insurance that helps correct problems related to certain tax inequities and insurance market distortions caused by the tax code and federal insurance regulations.
  • By transferring health plan purchasing decisions from employers to consumers (employees), an exchange delivers a number of advantages over traditional employer-based health plans. Advantages include more choice and variety when selecting a health plan, greater price transparency, portability, coordinated funding for dual-income couples, and more competition among health plans.
  • An exchange also can extend valuable tax advantages to new types of employer-sponsored health plan arrangements, as well as to people without access to employer-sponsored plans.
  • Establishing an exchange is not without risk. An overly ambitious exchange could result in costlier health plans that price more people out of the market. To avoid additional risk, an exchange must not be allowed to manage competition among health plans and the sale of health plans must not be prohibited outside the exchange.