Transcript The Dbriefs Health Reform series presents:

Health Insurance Exchanges
Steve Wander, Principal, Deloitte Consulting LLP
Sally Fingar, Sr. Manager, Deloitte Consulting, LLP
February 15, 2011
Agenda
Overview of health insurance exchanges
Implementing health insurance exchanges
Concluding thoughts
Question & answer
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Overview of Health Insurance
Exchanges
Exchanges are a lynchpin of reform
The Affordable Care Act establishes State health insurance
exchanges (HIX) as regulated, online marketplaces for individual
and small group coverage
• Administered by States within Federal guidelines
• Targeting individual consumers and small groups
up to 100 employees in 2014
• Expanding to groups over 100 in 2017 at State
discretion
• Determine eligibility for Medicaid and CHIP and
enroll individuals in those programs when
appropriate
• Administer Federal subsidies to individuals below
400% of the Federal poverty limit
• Offering comparable products, pricing and
consumer information
• Operating at State, sub-state or regional level
3
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Exchanges must fulfill a broad range of
roles and responsibilities
Advisor / Navigator
Marketing / Public Outreach
Eligibility / Subsidy Determination
Provide assistance in navigating
the shopping and enrollment
process
Promote the Exchange and regulate
marketing of products and services
Determine who may participate and
who is eligible for subsidies
Product Availability / Specifications
Comparison Shopping Tools
Decide which carriers and products
will be available and what
information is required
Provide tools that consumers and small
businesses can use to identify, review
and select products and prices
Support standard enrollment
processes and ongoing
maintenance
Customer Service
Premium Collection / Reconciliation
Federal / State Coordination
Respond to inquiries, grievances
and appeals
Determine premium obligations and
combine with subsidies to ensure
payment for coverage
Manage numerous intragovernmental data and process
interactions and dependencies
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Enrollment & Eligibility Maintenance
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Exchanges aim to provide and enable
consumer choice and affordability
Exchanges will offer more standardized products, distribution and
administration
• Online Enrollment
• Electronic
Interfaces
• Rating/pricing
• Plan Designs
• Quality & Patient
Satisfaction Ratings
HIX
• CHIP/Medicaid
Enrollment
Product Design
Pricing / Underwriting
• Subsidy
Administration
• Risk Adjustment
• Coordination with
Medicaid / CHIP
Sales & Distribution
• Minimum essential benefits
coverage
• Guarantee issue and
renewability
• Standard marketing
requirements
• Actuarially-equivalent benefit
packages
 Bronze: 60%
 Silver: 70%
 Gold: 80%,
 Platinum: 90%
• Catastrophic for under 30’s
• Limited underwriting
 Geography
 Family status
 Age (3:1)
 Smoking (1.5:1)
• Roles of brokers and
rules for on versus off
exchange products
• Out-of-pocket limits
• No pre-existing
conditions
• Standard quality, price,
and satisfaction ratings
Health Plan A
Health Plan B
Health Plan C
Health Plan D
Health Plan E
Enrollment & Eligibility
• Standardized enrollment
• Online, mail , over the
phone and in-person
• Subsidy eligibility
management
• Coordination with
Medicaid and CHIP
• Risk adjustment
• No annual or lifetime limits
5
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Exchanges will develop over time
Although not required until 2014, early work on defining exchanges
has begun
• Interim solutions: National web
portal to compare plan options
(Healthcare.gov) and Preexisting
Condition Insurance Plan (PCIP)
offerings
2010
2011
2012
• Federal grants available
to sates to establish
exchanges
6
• States establish an American Health Benefit
Exchange and a Small Business Health Options
Program (SHOP) Exchange
• States may merge the two exchanges
2013
2014
2015
• Exchanges must be
financially self-sustaining
2016
2017+
• States may allow groups
(100+) to participate in
Exchanges
• The Federal government will
provide a fall-back exchange
for states that are not ready,
willing or able
Copyright © 2011 Deloitte Development LLC. All rights reserved.
States will implement Exchanges within
Federal guidelines (or defer to Feds)
Federal Role
• Define broad rules for exchanges (definitions,
enrollment periods, participation requirements, etc.)
• Define essential benefits package, underwriting rules,
standard enrollment/eligibility forms
• Create standards and guidelines for reinsurance and
risk adjustment
• Define standard process & data exchange to support
eligibility, enrollment & subsidy administration
• Define criteria for health plans to be “qualified” to
offer products through exchanges
• Set standards for quality & member satisfaction
ratings of plans
• Provide planning, development and operational
grants to states (to 2015)
• Determine if state exchanges will be operational by
2014, and provide a fall-back exchange for states that
will miss the deadline
• Contract with at least two multi-state plans to be
offered on each exchange
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State Role
• Establish and launch individual and small group
health insurance exchanges by January 1, 2014
(including passing any required legislation ,
issuing required regulations, establishing
enrollment processes, etc.)
• Define the coverage area for each exchange and
determine whether or not to merge the individual
and small group exchanges
• Determine whether to offer a State Basic plan
• Define state-level market rules for sales on versus
off the exchanges and the role of brokers/agents
in the process
• Certify plans to participate on exchanges and
provide quality and member satisfaction ratings for
each plan
• Develop single eligibility and enrollment process
for Medicaid/CHIP and exchange subsidies
• Administer premium subsidies for individuals up to
400% FPL
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Many stakeholders play key roles in Exchanges
Small
Employers
Individual
Customers
Brokers, Navigators,
Community Partners
• Select plan
level(s)
• Pay premiums
• Track fines
•
•
•
•
• Help customers enroll
• Provide information
• Role will likely vary by
State
Employees of
Small Businesses
Screen
Compare plans & enroll
Change plans
Request mandate
exemptions
•
•
•
•
Screen
Compare plans
Enroll
Change plans
Health Insurance Exchange Business Processes and Systems
• Submit plans for
listing
• Maintain plan info,
benefits, quality,
cost & providers
• Receive enrollments
and premiums
Health Plans
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• Support phone & mail
enrollments
• Help customers
• Manage grievances
• May aggregate
premium payments
Customer Service,
Operations,
Vendors
• Receive
eligibility
referrals
Social Services
Programs
• Set exchange
business policy
• Certify & rate plans
• Approve
exemptions
• Make vendor /
carrier selection
Exchange
Governing Body
• Create rules
• Send/receive tax,
premium, & other
information used
for verification,
enrollment, & risk
adjustment
Federal and State
Agencies / Systems
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Implementing Health
Insurance Exchanges
Exchanges are not a new concept
They have been a topic of discussion for almost 20
years
There are existing examples of health insurance
exchanges which provide insight into:
• Key design choices and potential models
• Possible challenges/hurdles
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Copyright © 2011 Deloitte Development LLC. All rights reserved.
Overview of statewide attempts to create
Health Insurance Exchanges
State
Program Name
Description
Texas Purchasing Alliance
• An insurance purchasing pool for small employers
• Established in 1994, disbanded in 1999
Health Insurance Connector
• A link between funding sources and health plans to
establish one simplified market
• Part of Massachusetts’ 2006 health care reform legislation
• 190,000 members in 2010
Caroliance
• A regional alliance of small groups, with voluntary
membership, to gain access to health insurance
• Established in 1992, disbanded in 1997
Health Insurance Plan of
California / PacAdvantage
• Exchange was privatized and renamed in 1999
• Peak enrollment: 150,000 members, 10,000 small
businesses
• Closed in 2006 when one of the three insurers pulled out
due to financial losses
Utah
Utah Health Exchange
• An exchange without an employer or individual coverage
mandate
• Piloted to 100 small businesses in August 2009, large
employers in April 2010. 433 members in 2010.
Connecticut
Connecticut Business and
• Provides choices of group health insurance to employees
Industry Association (CBIA) Health
of small businesses
Connections
• Established in 1995 and has 75,000 member in 2010
Washington
Washington Health Insurance
Partnership (HIP)
Texas
Massachusetts
North Carolina
California
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• Improves access to employer-sponsored coverage for
small employers
• Enrollment began in September of 2010 and coverage
began in January of 2011
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Exchanges: Key challenges in past attempts
Description of Challenge
Inability to Gain
Adequate Market
Share
State Examples
 Market share often remained too small to exert purchasing power,
achieve economies of scale, and attract and retain health plans
Texas, North Carolina, California,
Massachusetts (for small group)
Inability to Command
Lower Prices
 Price disparities arose between coverage offered inside and
outside the exchange. Exchanges competing with regular market
for the same customers were challenged in obtaining lower prices
California, Utah
Adverse Selection
 Insurers pushed high-risk individuals toward the exchange, which
increased premiums and led to the departure of many employers
Failure to Reduce
Administrative Costs
Low Agent
Participation
IT Deficiencies
Challenges of State
Sponsorship
Challenges of Third
Party Administration
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 Increased costs of serving small employers were not eliminated by
centralizing the administration. Cost savings required large
enrollment to achieve economies of scale. In some cases, health
plans’ costs rose further due to inflexibility in administrative
procedures of the exchange
 Lower commissions or threat to bypass agents generated hostility
and an inability to successfully market products
Texas, North Carolina, California
Texas, North Carolina, California
Texas, North Carolina, Massachusetts
 Lack of system capabilities, including IT compatibility and
connectivity, can limit administrative simplification, health plan
participation, and ability to deliver innovative offerings
Utah, Massachusetts
 Association with government can hurt more than help, as small
businesses, and especially insurance agents, tend to be suspicious
of government. In addition, a public organization is less likely to
easily test out and adopt new strategies
Texas
 Introducing an administrator with a vested interested in the
competitive environment can prevent participation of plans
Texas
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Marketplace design is driven by several
considerations
States may adopt one of a range of models – the design will be primarily driven by each State’s respective
Strategy, Environment, Markets and ability to leverage existing assets
Capability Model
Environment/Market
• Law mandates that a core set of capabilities/processes must
be present (i.e., eligibility verification, plan comparison, etc.)
• However, there appears to be significant flexibility in how
robust these capabilities need to be in the exchange itself
Robust
Capabilities
“Thin”
Capabilities
Driver
Funding
Thin Capabilities
Budget Deficit
Robust Capabilities
Budget Surplus
• States have considerable leeway in the degree by which
they balance competition with appropriate regulation
Competitive
Driver
Regulated
Competitive
Regulated
Political
Landscape
Republican Majority
Democratic Majority
Regulatory
Environment
Limited regulatory
oversight. State
reinforces competition
and growth
Extensive regulatory
oversight and limits
competitive forces
State
Infrastructure
Long and stringent
procurement
Flexible procurement
cycles
Population
Demographics
Fewer uninsured;
healthier population
Larger state, high
population of uninsured
individuals; less healthy
population
Broader Reform
Policy Goals
Exchange is not viewed
as a mechanism to
promote broader health
policy
Exchange is viewed as
a vehicle to promote
broader health policy
Limited enrollment
Majority of health
insurance purchased
through insurance
exchange
Risk and
Selection
Exchange may attract
consumers with greater
healthcare needs
Regulations could help
create a level playing
field inside and outside
the exchange
Exchange Goals
13
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Purpose
Federal Funding
Planning Grants
Early Innovator Grant Program
Establishment Grants
• Support early development
& implementation planning
• Assist states with design and
implementation of exchange IT
infrastructure
• Support costs & activities
associated with Exchange
implementation
• Covers planning costs,
including
• IT system assessments
• Performance metrics
Development
Timing
• July 2010
Awards
• RFP released Oct. 29, 2010
• Announced Jan 20, 2011
• Proposals due Dec. 22, 2010
• States choose when & for
which type of grant to
apply
• Awards (up to 2 years) in Feb.
2011
• $49 million
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• Create re-usable tools encourage multi-state
cooperation
• $1 million grants to each
of 48 states and the
District of Columbia
• Alaska and Minnesota did
not accept grants
• Cooperative agreements, not
grants
• No match required, no specified
award size limit
• Up to 5 awards to individual
states or consortium of states
• Level 1: up to one year of
funding to states that have
made planning progress.
States may apply for an
additional year of funding.
• Level 2: funding through
December 2014 to states
that are further along in
their planning process and
that meet specific criteria
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Concluding Thoughts
Concluding Thoughts
Although we know that Exchanges will be transformational, we’re not quite
sure what they will actually look like
•
Health insurance exchanges are the lynchpin of expanding access
under Federal health care reform
•
There is no perfect model – different models will work in different
markets. Flexibility in standards will be critical
•
States have to start building the house, even before the blueprints are
complete
•
Successful implementation will require extensive collaboration
between plans, the Federal government and the states
•
States have the experience and a track record of innovating and
implementing complex programs….exchanges will be no different
•
2014 might seem like a long way away, but it is just around the corner
16
Copyright © 2011 Deloitte Development LLC. All rights reserved.
Question and Answer
Contact info
Steve Wander
Principal
Deloitte Consulting LLP
[email protected]
612-397-4312
18
Sally Fingar
Sr. Manager
Deloitte Consulting LLP
[email protected]
612-659-2627
Copyright © 2011 Deloitte Development LLC. All rights reserved.
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