Health Insurance Connectors

(aka Health Insurance Exchanges)

Nancy TurnbullHarvard School of Public Health

and Board Member of Massachusetts Health Insurance Connector Authority

October 3, 2008

What is a Connector?What is a Connector? An entity that helps the individual An entity that helps the individual

insurance market function better for insurance market function better for consumersconsumers More purchasing power/lower pricesMore purchasing power/lower prices Increase competitionIncrease competition More choice of productsMore choice of products Less confusing and complicated to compare Less confusing and complicated to compare

and buyand buy Not a purchaser of insuranceNot a purchaser of insurance Not a new conceptNot a new concept No single visionNo single vision

Minimalist Private vs. Strong Government Minimalist Private vs. Strong Government EntityEntity

Individual only vs. Individual and EmployersIndividual only vs. Individual and Employers

What Services Can a What Services Can a Connector Provide to Connector Provide to

Consumers?Consumers? Standardized health insurance productsStandardized health insurance products Negotiation of premiums with health plans on Negotiation of premiums with health plans on

behalf of consumersbehalf of consumers Negotiation of commissions with brokersNegotiation of commissions with brokers Easier comparison shoppingEasier comparison shopping Simpler enrollment in productsSimpler enrollment in products Enable purchase of coverage with pre-tax Enable purchase of coverage with pre-tax

dollars through Section 125 plans (for dollars through Section 125 plans (for employers)employers)

Allow “pooling” of premiums for part-time Allow “pooling” of premiums for part-time workersworkers

Education, outreach and assistanceEducation, outreach and assistance Administration of premium subsidy programsAdministration of premium subsidy programs

Massachusetts Connector’s Massachusetts Connector’s Role in Role in

the Individual Marketthe Individual Market Offers “standardized” benefits and cost-Offers “standardized” benefits and cost-

sharingsharing ““Actuarially equivalent” tiers: Bronze, Silver, GoldActuarially equivalent” tiers: Bronze, Silver, Gold Young Adult PlansYoung Adult Plans

Negotiates premiums with insurersNegotiates premiums with insurers Facilitates purchase through information, Facilitates purchase through information,

outreach and marketingoutreach and marketing Section 125 plans for employees to purchase Section 125 plans for employees to purchase

with pre-tax dollarswith pre-tax dollars Administers subsidized program for people Administers subsidized program for people

up to 300% FPL (Commonwealth Care)up to 300% FPL (Commonwealth Care) Plans for small employers to begin in Plans for small employers to begin in

NovemberNovember

Impact of Connector Is Impact of Connector Is Enhanced if Coupled with Enhanced if Coupled with

Other PoliciesOther Policies Insurance market rules (same inside Insurance market rules (same inside

and outside the Connector)and outside the Connector) Guaranteed issue and renewalGuaranteed issue and renewal Limits on rating practices/rate Limits on rating practices/rate

variationsvariations All products in same rating poolAll products in same rating pool

Strong base of public/subsidized Strong base of public/subsidized coverage for people with low and coverage for people with low and moderate incomemoderate income

Individual mandateIndividual mandate

Issues That Would Need to Be Issues That Would Need to Be AddressedAddressed

National, regional or state-based?National, regional or state-based? Who can buy through the Connector?Who can buy through the Connector?

Individual?Individual? Small employers?Small employers? Large employers?Large employers?

Competing with private insurers? Competing with private insurers? Replacing private market? Just Replacing private market? Just filling in gaps? filling in gaps?

Another distribution channel or a Another distribution channel or a disruptor?disruptor?

Issues That Would Need to Be Issues That Would Need to Be AddressedAddressed

Structure and GovernanceStructure and Governance Private, public or quasi-public Private, public or quasi-public

organization?organization? Existing or newly-created? Existing or newly-created? Subcontract with existing purchasing Subcontract with existing purchasing

entities (e.g., small employer association) entities (e.g., small employer association) for some services?for some services?

Financing start-up and operating costsFinancing start-up and operating costs Self-sustaining or subsidized?Self-sustaining or subsidized?

Issues That Would Need to Be Issues That Would Need to Be AddressedAddressed

What insurance rules will apply?What insurance rules will apply? State rules? State rules? Federal rules?Federal rules? Minimum federal standards with state Minimum federal standards with state

discretion?discretion? Same rules inside/outside the Connector?Same rules inside/outside the Connector?

What products?What products? Private plans? New public plan?Private plans? New public plan? Private plansPrivate plans

Anything?Anything? Meet minimum standards?Meet minimum standards? Standardized?Standardized?

Issues That Would Need to Be Issues That Would Need to Be AddressedAddressed

How to set premium rates? How to set premium rates? Negotiated by Connector or determined Negotiated by Connector or determined

through market forces?through market forces? Is Connector its own risk pool or Is Connector its own risk pool or

combined with people who buy outside combined with people who buy outside Connector?Connector?

How to guard against adverse selection?How to guard against adverse selection? Any limits on profit margins/amount of Any limits on profit margins/amount of

premium that must be paid for medical premium that must be paid for medical care?care?

Broker commissions?Broker commissions?

Issues That Would Need to Be Issues That Would Need to Be AddressedAddressed

Outreach, Education and EnrollmentOutreach, Education and Enrollment How much?How much? Coordination with insurers: Who Coordination with insurers: Who

“owns” the member?“owns” the member?

Overseeing the market/enforcement Overseeing the market/enforcement of the rulesof the rules

How to control the rising cost of How to control the rising cost of health insurance?health insurance? Negotiation/purchasing powerNegotiation/purchasing power Benefits and cost-sharingBenefits and cost-sharing Premium subsidiesPremium subsidies