Health Insurance Exchanges: Goals and Strategies

SCI Annual Meeting for State OfficialsAugust 4, 2010

Enrique Martinez-VidalVice President, AcademyHealthDirector, State Coverage Initiatives

Overview of Presentation

Minimum Requirements under PPACA Why Do It? Defining Goals Structuring Exchanges Impact of Current Markets Procurement Issues

Minimum Requirements under PPACA - Structural

Primary purpose is to array coverage options for consumers (individuals & employers)– Traditionally has been a lack of information/high search costs– Creates better balance for the purchasing side of the transaction

Operated by state agency or state-established, non-profit entity

Choice of state-wide, subsidiary exchanges across state, or multi-state

Requires an exchange in the individual and small group markets – Exchanges may be combined– Markets may be combined

Minimum Requirements under PPACA - Administrative

Certify, recertify, and decertify qualified health plans based on HHS criteria

Toll-free hotline Web site with standardized comparative

information Rate qualified health plans per federal

standards Present plan options in standard format (four

plan benefit options in standardized manner – bronze; silver; gold; platinum; catastrophic for young adults/exemptions)

Minimum Requirements under PPACA - Administrative

Determine and inform individuals of eligibility for public programs (Medicaid/CHIP/Other State programs) and enroll members

Provide economic calculator for consumers Determine whether individuals are exempt from

individual mandate Communicate with Treasury Department (eligibles

and exempts) Inform employers regarding changes in coverage of

employees

Minimum Requirements under PPACA - Consumer Assistance

Operate a Navigator program– Provide culturally/linguistically appropriate

public education– Facilitate enrollment in qualified health plans– Refer consumers with complaints/questions to

appropriate agencies Brokers/agents

– States may let brokers/agents sell coverage offered in exchange

Minimum Requirements under PPACA - Accountability

Consultation and stakeholder participation Accountability to federal government

– Annual report to HHS Secretary on activities, receipts, and expenditures

Transparency– Publish average costs of licensing, regulatory

fees, administrative costs, monies lost to waste, fraud, abuse, etc.

Potential Value of State-Based Insurance Exchange

Maintain regulatory authority over large share of market

Prevent risk selection issues caused by varying rating/underwriting rules inside/outside the exchange

State is better positioned to coordinate benefits and eligibility across state programs

Powerful state tool to help advance other health care priorities

Potential Risks of State-Based Insurance Exchange

Challenges of creating new institutions

Must be self-sustaining by 2015

Tension between demands to keep fees low and demands for high quality customer service

What Are Your State’s Policy Goals?

Make health insurance and care more like consumer- driven markets?

Increase health insurers’ accountability?To drive system affordability and cost containment?To transform the way carriers do business and contract

with providers?To build an easy-to-use shopping tool for consumers?To help ease the transition for safety-net providers from

reliance on disproportionate share payments and other uncompensated care funding to commercial insurance reimbursement?

To moderate premium increases?

How to Structure Exchange: Market Organizer

Utah Health Exchange– Impartial source of information on health plans– Provides structure to market to enable

consumers to compare health plans and purchase coverage

How to Structure Exchange: Selective Contracting Agent

Massachusetts Connector– Market organizer + attempts to influence market and

enhance competition• Contracts with limited number of carriers; offers limited

number of plans

– Provides structure to market to enable consumers to compare health plans and purchase coverage

– Does not necessarily negotiate premiums with carriers but can “encourage” carriers to “sharpen their pencils”

How to Structure Exchange: Active Purchaser

Plays a more active role in the market– Establishing plan designs– Purchasing coverage like a large employer procures health

benefits for employees– Reminiscent of purchasing coops of ’90s

May be necessary to get the best prices where competition is limited

Can push insurers to invest in quality improvements and delivery system changes

Can aim to elicit more consumer information to be used to negotiate and remove problematic plans and protect consumers from unexpected barriers

How Local Conditions May Affect Policy Decisions – Part I

How many carriers are in the state?   How competitive

are the carriers for the non-group and small group

market populations?

Should non-group/small group markets be merged?

How competitive are the provider systems?  Is physician

access currently adequate?

Are there regional variations regarding carriers and

providers that require special consideration?

How Local Conditions May Affect Policy Decisions – Part II

What is the nature of insurance market reforms

inside/outside the exchange? Should exchange rules be

extended outside the exchange?

How will adverse selection be addressed for the

exchange?  Impact on reinsurance/risk adjustment

requirements?

Should the exchange be the sole distribution channel for

a market segment such as non-group?  (impact on

undocumented)

What are the mandated benefits in the state?

Procurement and Contracting Dynamics Importance of strategic planning Need to sequence and coordinate inter-related tasks Effort required to procure the services of and manage

relationships with large vendors, including issuers of qualified health plans

Essential activities:– Eligibility and Subsidy Determination– IT/Website Infrastructure– Outreach, Marketing, and Advertising– Qualified Health Plan Procurement – Call Center Development – Enrollment and Premium Billing