Dallas

THE Senate Finance Committee has for the moment rejected the idea of creating a public health insurance plan. It’s difficult to see how Americans will be able to find good, affordable health insurance without one. But if we are to go forward without a public option, it is more important than ever to make sure that we get another part of health reform right: the exchanges, where it is envisioned that small businesses and people without employer-sponsored insurance could shop for policies of their own.

Back in the 1990s, I was the founding chairman of Texas’ state-run purchasing alliance  an exchange, essentially  which ultimately failed. There are lessons to be learned from that experience, as well as the similar failures of other states to create useful exchanges.

The Texas Insurance Purchasing Alliance, created by the Texas Legislature in 1993, was meant to help small businesses, which often cannot afford coverage for their employees. (More than half of all uninsured Americans work for small businesses.) Small businesses are charged higher rates  on average 18 percent higher than those paid by large companies. And their administrative costs, built into those premiums, are typically as high as 25 percent of the premium, compared to only 10 percent for big companies.

Our system pooled small employers into purchasing groups large enough to obtain the lower wholesale insurance rates that big companies get.