Preparing for Health Reform: The Role of the Health Insurance Exchange

1. Preparing for Health Reform:The Role of the Health Insurance Exchange Bob Carey RLCarey Consulting March 11, 2010

2. Agenda Level setting Developing a baseline Types of Exchanges Funding and operating an Exchange Subsidizing health insurance Importance of outreach and enrollment Mitigating risk of adverse selection Conclusions/Recommendations

3. Level Setting State-based exchanges Federal guidance, but state flexibility Oversight/enforcement handled (initially) by the states

4. Developing a Baseline Uninsured Current publicly-subsidized health coverage programs Insured

5. Uninsured Size of the population Demographics Geographic/regional variations Family income Employment status and ESI availability Eligibility for publicly-subsidized health coverage programs

6. Public Health Coverage Programs Types of programs available Eligibility criteria Take-up rates Distribution methods Capacity Potential impact of Exchange on existing programs Particular focus on premium subsidy programs for “non-traditional” groups

7. Insured Demographics Geographic/regional variations Employment status Types of coverage Distribution methods Carriers and market share ESI premiums and % paid by employees Take up rate of ESI Role of brokers/intermediaries, by market segment

8. Why the Baseline? Identify potential for program consolidation or elimination Highlight areas to focus “crowd out” efforts Leverage existing infrastructure Optimize capacity and avoid duplication Inform outreach and marketing strategy

9. What Type of Exchange? Three basic models Weak (Range of government involvement in commercial market) Strong Ultimate Goal – shift the individual and small group markets from competition based on avoiding risk into competition based on price and quality.

10. Market Organizer & Distribution Channel Sets standards of quality and soundness for insurers’ participation Offers all plans and all carriers that satisfy quality and soundness criteria Serves as impartial source of information Facilitates plan/carrier comparisons Streamlines administration and simplifies enrollment Brokers insurance

11. Selective Contracting Agent Offers “structured choice” of health plans and carriers Promotes competition among insurers, but does not “negotiate” premiums Serves as impartial source of information Facilitates plan/carrier comparisons Streamlines administration and simplifies enrollment Brokers insurance

12. Active Purchaser Sets benefits package and procures health insurance on behalf of enrollees Negotiates premiums with carriers Limits choice of plans/carriers Attempts to act like large employer Viability contingent on covering large – and “risk neutral” or better – pool of members

13. Funding and Operating an Exchange Model selected will impact: Roles and responsibilities Administrative structure/governance Staffing Resource needs affected by model selected AND capabilities of existing public and private entities

14. Building or Renting Administrative Capacity Medicaid agency to process eligibility for premium subsidy? Private sector intermediaries (third party administrators) to provide administrative services? Quoting Enrollment Customer service Premium billing, collection, remittance Account management, etc…

15. Revenues to Support Operations Retention of a portion of the premiums Typically 3% - 5% of premium Add-on fee to premiums Annual Appropriation

16. Subsidizing Health Insurance Two main options Stand-alone Medicaid-like health coverage Commonwealth Care Texas’ CHIP and Medicaid Buy-In programs Premium subsidies for commercial insurance Maryland’s Health Insurance Partnership Insure Oklahoma

17. Outreach and Enrollment O&E efforts will likely determine success and sustainability of the Exchange Will impact risk selection and potential for administrative efficiencies Use of health insurance brokers may be key, particularly for small group market Need to leverage multiple sources of information to reach consumers

18. Mitigating Risk of Adverse Selection Learn from past mistakes Need to attract large risk pool Exchange as sole source distribution channel for SG/NG? If not, rating rules and underwriting guidelines must be comparable inside and outside of Exchange Brokers have significant influence

19. Conclusions/Recommendations “First do no harm” Each market – and each state – is different Need for consumer information that is understandable, meaningful and actionable Leverage existing infrastructure Focus on end goal – shifting competition from one based on avoiding risk into one based on price and quality

20. Questions?

21. Contact SCI for Technical Assistance: sci@academyhealth.org