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AIS's Health Business Daily
Featured Story, June 21, 2010 Existing Insurance Exchanges Jockey for Position as Linchpins of Health Coverage Reform Reprinted from AIS's HEALTH REFORM WEEK, a new newsletter designed to help savvy business leaders in health care understand what the enormous changes mean to them ... and what they can do about it. By Judy Packer-Tursman, Contributing Editor Existing health insurance exchanges tell HRW they are starting to jockey for position under a reformed marketplace in which the Obama administration expects 16.9 million Americans to choose coverage options through newly created exchanges in 2014, their first year of operation. By 2019, the national enrollment in these individual and small-employer-group exchanges is expected to climb to 31.6 million Americans.
Under the federal health reform law, individuals and small businesses with up to 100 employees will be able to pool their buying power through the new exchanges. Each state must set up at least one American Health Benefit Exchange for individuals and a Small Business Health Options Program (SHOP) exchange by Jan. 1, 2014. Starting in 2017, states may allow employers of any size to participate in the exchanges.
“We’re talking with everybody about what we do [in order] to position ourselves to be part of the solution for New York when [reform] happens,” Vince Ashton, executive director of HealthPass New York, a private nonprofit insurance exchange for small employers, told HRW June 1. “We can handle SHOP exchange duties” for New York City and downstate New York, he said.
HealthPass New York, which began in 1999, now has about 4,100 small-business members covering approximately 35,000 lives in New York City, Long Island and several surrounding counties, Ashton said. The exchange works with several carriers, including HIP Health Plan of New York and Oxford Health Plans, and has grown from its original five benefit designs to offer about 20 options now.
Nationwide, only a handful of other health insurance exchanges are up and running, including the Massachusetts Connector, the Connecticut Business and Industry Association’s Health Connections, and the Utah Health Exchange. Some are government-run, while others are privately run nonprofit or for-profit entities. Some are much more established than others: CaliforniaChoice, a private exchange, was launched in 1996, while the state-run Utah exchange is only several months old.
The reform statute requires the new exchanges to certify that health plans meet minimum benefit standards that the federal government will set. Exchanges must facilitate the purchase of certified plans by individuals and employers; help consumers evaluate and enroll in plans, using a standardized format to present benefit options; and assist eligible individuals and small businesses in obtaining premium and cost-sharing subsidies.
“I think the individual exchange will be electronic-based, while the SHOP exchange will be more complex to administer,” Ashton said, adding that HealthPass New York also has the infrastructure in place for eventually handling individual accounts.
Under the reform law, states may opt to create exchanges or allow the federal government to do so. The feds may step in if the state fails to make sufficient progress to be ready by 2014. Exchanges may be set up like the Massachusetts exchange, which is governed by an independent, quasi-governmental body, or like Utah’s state-run exchange, which is housed within the Governor’s Office of Economic Development. Alternatively, a nonprofit organization may run it. Health insurance exchanges for individual and small-group markets may be run as separate entities or consolidated by the state.
“There’s a very good chance that we could actually run the defined-contribution market alongside the individual and small-group market,” Cheryl Smith, the Utah Health Exchange’s strategy and policy director, told HRW June 2. Employers participating in Utah’s exchange make a defined contribution instead of defining the benefit, and allow employees to choose among options within the exchange. While the federal reform law doesn’t mention the defined-contribution market, she said, the statute doesn’t prohibit it either.
Utah Exchange Started Small, Has Waiting List
The Utah exchange had a limited launch at the end of 2009 with 11 small-employer groups covering about 430 lives, Smith said, noting its size was purposely kept small to make it manageable. But expansion is underway. A pilot program with eight large employers representing about 50,000 covered lives will begin later this year for coverage to start Jan. 1, 2011 — a year earlier than originally anticipated due to high demand.
Also, 500-plus employers are on a “waiting list” for when the Utah exchange reopens for small-business enrollment, Smith said. Last fall the exchange offered 67 benefit options through Select Health, Humana Inc. and Regence BlueCross BlueShield, she said. This will expand in the fall to encompass 100-plus options and two more carriers: UnitedHealthcare and a subsidiary of Coventry Health Care, Inc.
Although the federal reform law specifies that new exchanges must be run by states or nonprofit organizations, a private health-insurance exchange called CaliforniaChoice — though it is for-profit — also anticipates a role in the reformed market.
“We still believe there will be a place for a private exchange at the end of the day, because not every employer will qualify for a subsidy…and we believe the broker will still be part of the equation,” Ron Goldstein, president of CHOICE Administrators, which operates CaliforniaChoice, told HRW June 1.
“There’s a lot of dust in the air, nothing is settled yet, but there will be state exchanges in 2014,” Goldstein said. “How the exchanges will operate is a little fuzzy…and the state of California might bid different pieces out, like a quote engine and administrative engine. Ultimately, it would be nice if we could be [involved in] the exchange” for other states as well.
CaliforniaChoice, which was launched in 1996, has 10,000-plus small-employer groups of two to 50 lives for total membership of about 150,000, Goldstein said. The exchange works with WellPoint, Inc. unit Anthem Blue Cross, Health Net, Inc., Kaiser Permanente, regional carriers Sharp Health Plan and Western Health Advantage, two dental carriers, a vision carrier and a life insurance carrier. Anthem began offering HMO and PPO options to the exchange’s small-employer groups as of June 1. Goldstein described CaliforniaChoice as being profitable, but declined to provide specifics.
Boosting Buying Power
While federal rules aren’t out yet, it is “clear that everybody with a tax credit [i.e., individuals between 133% and 400% of the federal poverty limit] will go to an exchange for health insurance coverage options,” said Rick Curtis, president of the Institute for Health Policy Solutions, a nonpartisan organization that offers technical assistance to states on coverage matters. Thus, he said, exchanges created under reform will represent “a very significant share of the individual market even if no one else participates besides the tax-credit recipients.”
For small-employer health insurance exchanges to succeed, Curtis said, “they’ve got to make it simple for employers to offer choice: doing what HealthPass [New York] and Connecticut do now. So for the small-employer side, where there are private organizations offering choice and [they are] already well set up, it seems very sensible for the state to consider one of those existing entities” to run the new SHOP exchange.
In huge states such as New York or California, it makes sense to keep individual and employer exchanges separate, Curtis added. He said he thinks small employers in many states worry about their premium rates going up if individual and small-group rates are combined. “My guess is there won’t be a lot of states deciding to combine individual and small-group markets right away,” he said. |
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