The Utah Health Exchange has gone from being a marginally interesting sideshow to a serious cognitive obstacle to conservatives’ wholesale rejection of Obamacare. Witness the Wall Street Journal’s editorial of July 16, which soundly rejected the recently released regulatory guidance on what the Administration is now calling “Affordable Insurance Exchanges,” but nevertheless encouraged governors to get on the exchange bandwagon, in the vain hope that they can build free-market exchanges that will blunt Obamacare’s worst effects. The evidence? “Utah built a pilot exchange on this model in 2009, though the results so far are mixed and the rules are still being fine-tuned”.

Mixed? Fine tuned? As I wrote last October, the Utah Health Exchange launched in August 2009, with 136 businesses enrolling their employees. However, only 13 groups remained enrolled by December 2009. The reason for the initial failure was a classic death spiral of anti-selection. Because carriers had greater underwriting latitude outside the exchange than inside it, firms with sicker employees gravitated to the exchange and those with healthier employees stayed out.

Legislative amendments passed in March 2010 forced carriers to use the same underwriting both inside and outside the exchange. The new rules took effect in September 2010 and the new exchange began coverage last January, having enrolled groups for a quarter of a year before the re-launch. In January 2011, the new Utah Health Exchange covered 41 businesses including 1,042 employees and dependents. At the end of June, according to a recently published update, the count was 112 businesses including 2,793 employees and dependents. By August, the exchange forecasts covering 157 employers including 4,059 lives. Well, I suppose that one way to look at this is that enrolment grew by 289 percent in a year.

Another way to look at it is that 100,000 of Utah’s uninsured are employed by small businesses, according to the Utah Small Business Coalition. According the Utah Health Exchange’s report, 16 percent of the businesses enrolled in the exchange did not previously offer coverage (or, in other words, the incidence of crowding out of traditional small-group coverage was 84 percent). Of the 4,059 covered lives in the exchange, 1,424 are employees and 2,635 dependents. We can reasonably conclude that 228 (0.16 * 1,424) of the previously uninsured 100,000 employees of small businesses have received coverage through the exchange. In other words, the exchange has had effectively zero impact on the uninsured employees of Utah’s small businesses.

Yet another way to look at it is that Utah has a population of 2.8 million, of which 1.1 million have full-time jobs, of which about 200,000 work in firms of less than twenty employees and 540,000 work in firms of less than 500 employees. The Utah Health Exchange defines small businesses as those with up to 50 employees. So, let’s say about 300,000 Utahans work for such businesses. The exchange covers 1,424 of them. Once again, that is an utterly trivial proportion of the exchange’s target market.

So, contra the Wall Street Journal’s editorial board’s assertions, the Utah Health Exchange’s results so far are not “mixed”. They are basically non-existent. If a venture capitalist had funded the Utah Health Exchange, it would certainly be shuttered on its first anniversary. So, conservatives, please stop citing the Utah exchange as a successful example of a non-Obamacare exchange.