Health Insurance Exchanges:

Provider Intersection

March 20, 2013

Copyright © 2013 Deloitte Development LLC. All rights reserved.

Speaker introductions

Jim HardySpecialist Leader, Medicaid Advisory Lead, Deloitte Consulting, LLP.

Jim is a Specialist Leader in the Seattle office of Deloitte Consulting and leads Medicaid Advisory Services for Deloitte’s State Healthcare Practice

20 years of Medicaid and health care experience Previously served as Pennsylvania’s Medicaid Director and as the Director of Fee-For-

Service Operations where he was responsible for the operation of the Fee-For-Service program’s $500 million pharmacy benefit

Has also consulted with states, managed care organizations and providers on health care reform, new program design and health insurance exchange design and strategies

Education: B.A. from the University of Pennsylvania

Where We are Today

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States will implement exchanges within federal guidelines or defer to the Federal government

Federal role State 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 and data exchange to support eligibility, enrollment, and subsidy administration

• Define criteria for health plans to be “qualified” to offer products through exchanges

• Set standards for plan quality and member satisfaction ratings

• Provide planning, development, and operational grants to states (to 2015)

• Determine if state exchanges will be operational by 2014, and provide a fallback exchange for states that will miss the deadline

• Operate Federal Exchange

• Contract with at least two multistate plans to be offered on each exchange

• Establish and launch individual and small group health insurance exchanges by January 1, 2014

• Define the coverage area for each exchange and determine whether or not to merge the individual and small group exchanges

• Define network adequacy standards

• 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% of the federal poverty level

5

States must elect one of three exchange models, allowing for significant variability

Source: Health Insurance Exchange System-Wide Meeting May 21-23, 2012

http://cciio.cms.gov/resources/files/hie-wtie.pdf

State-based exchange

State operates all Exchange activities; however, State may use Federal government services for the following activities: • Premium tax credit and cost sharing reduction

determination • Exemptions • Risk adjustment program • Reinsurance program

State partnership exchange

State operates activities for:• Plan Management • Consumer assistance • Both

State may elect to perform or can use Federal government services for the following activities: • Reinsurance program • Medicaid and CHIP eligibility: assessment or

determination*

Federally-facilitated exchange

HHS operates; however, State may elect to perform or can use Federal government services for:• Reinsurance program • Medicaid and CHIP eligibility: assessment or

determination* − *Coordinate with Medicaid and CHIP

Services (CMCS) on decisions and protocols

6

Snapshot of States’ Decisions on Exchange Model

RI

WA

OR

CA

NV

UT

AZNM

TX

WY

MT

IDSD

ND

NE

KS

OKAR

LA

MO

IA

MN

WIMI

IL IN OH

KY

TN

MS AL GA

FL

SC

NC

VAWV

VT ME

NH

MA

CT

NJ

DE

MD

HI

AK

NY

PA

CO

Declared State-Based (18, DC)

Default to Federal (25)

Planning for Partnership (7)

Source: Kaiser Family Foundation, “Establishing Health Insurance Exchanges: an Overview of State Efforts” November 2012

Exchange roles and mechanics

8

Exchanges will perform many roles

Manage numerous intra-governmental data and process interactions and dependencies

Product Availability / Specifications Enrollment & Eligibility MaintenanceComparison Shopping Tools

Customer Service Federal / State CoordinationPremium Collection /

Reconciliation

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

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

Respond to inquiries, grievances and appeals

Determine premium obligations and combine with subsidies to ensure

payment for coverage

Advisor / Navigator Eligibility / Subsidy DeterminationMarketing / Public Outreach

9

Role of navigators, brokers & assistors

• Represents the insured in solicitation, negotiation, or procurement of contracts of insurance, and who has a duty to the insured to match the insured's insurance needs with proper insurance products.

Navigators Brokers

• Assist the population with understanding individual and family health insurance needs, making the appropriate coverage decisions, and assisting with Exchange website and other programs/services available to the customer.

• Exchanges are responsible for Navigator certification and payment.

• Provide in-person, linguistically and culturally appropriate assistance to those applying for coverage through the Individual Exchange and/or SHOP Exchange

AssistorsDifferent State Approaches

Passed legislation allowing insurance brokers to act as Navigators

Given the higher number of insured individuals, Navigators will focus on member transitions into QHPs rather than first time enrollment

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Multiple Models for Exchanges

Competitive Regulated

Th

inR

ob

ust

• Delivers bare minimum capabilities to meet requirements of ACA

• Impartial aggregator of information

• Provides structure to allow health plan design and price comparisons

• Accountability of the product/service delivered is primarily left to the plan

• Creates a retail shopping experience

• Offers a broad range of products

• Provides education, outreach, and technical assistance for consumers

• Provides information and enrollment assistance

“INFORMATION AGGREGATOR”

“RETAIL-ORIENTED EXCHANGE”

• Limits carriers available on the Exchange

• Products may also be standardized

• More prescriptive mandates and regulatory oversight over the market

• Functions “owned” by the Exchange are minimal

• Likely only an interim model for states

• Creates a robust end-to-end consumer experience

• Limits carriers available on the Exchange through a competitive selection process

• Exchange responsible for selecting the products

• Provides suite of consumer and member management services

“GUIDED EXCHANGE”

“MARKET CURATOR”2

1

4

3

Market Environment

Exc

han

ge

Ch

arac

teri

stic

s

Partnership Model Federal Regional State-based

Consumers and Health Insurance Exchanges

12

Purpose of exchanges

• Foster competition and value-based consumer purchasing decisions

• Improve transparency and consumer understanding of insurance (pricing, benefit design)

• Serve as a central point of information and provide consumers with comparative plan

benefit information in a standardized format

• Provide consumers with quality data and member satisfaction scores to supplement

decision making

One goal of exchanges is to improve consumer purchasing decisions

Exchanges will transform the healthcare marketplace, especially for individual and small

group segments

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Most individual exchange consumers will be previously uninsured and inexperienced

These individuals will have a different set of expectations and needs than previously insured consumers

Source: Kaiser Family Foundation “A Profile of Health Insurance Exchange Enrollees” March 2011; “Uninsured but Not Yet Informed” August 2011

67%Previously Uninsured

21%Previously Insured through Employer

Sponsored Insurance

Previously Insured in Individual Market

Previously Insured with Medicaid

8%

4%

Individual Exchange Consumers

Previously UninsuredPreviously InsuredTotal Consumers = 27M

• Pre-conceived expectations about how the system does/ does not work

• Likely has experience with one or more providers

• May have experience navigating the system (if previously insured through Individual)

• Largely uninformed• Approximately 47% do not think ACA

will have much impact on them• Likely has little to no experience

using the health care system• Likely to need navigation support

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Premium and cost-sharing subsidies, along with consumer protection mechanisms tied to exchanges, will be the primary forces driving purchase through the exchanges

Why will individuals go to the exchange?

Tax credits and cost-sharing subsidies

• The ACA will provide premium tax credits to those below 400% Federal Poverty Level (FPL) and cost sharing subsidies for individuals with incomes at or below 250% of FPL

• Premium tax credits are aimed to decrease the cost of insurance and will be calculated based on the second lowest priced Silver plan

• Federal cost-sharing subsidies are available for individuals who qualify for federal premium credits and are enrolled in a Silver tier plan

Source: The Kaiser Initiative on Health Reform and Private Insurance

Year Individual penalty (Greater of the two)

2014 $95/Adult/Yr.$47.50/Child/Yr.$285/Family/Yr.

Or 1.0% of applicable income, whichever is greater

• Plans featured on exchanges meet specified quality requirements

• Features only plans meeting all minimum essential health benefits

• Allows individuals/families to objectively compare plan options

Penalty avoidance Consumer protection mechanisms

• Beginning in 2014, the Individual Mandate applies penalties to those who do not obtain health insurance coverage

Individual Income $17K-$32K

Individual Income $32K-$51K

Individual Income $51K+

0%

20%

40%

60%

80%

100%

$1,289

$3,450$4,656

$3,367

$1,206

Consumers’ Net Premium and Government Premium Tax Credit (illustrative)

Net Silver Premium Premium Tax Credit

Health Insurance Exchanges and Carriers

16

HIX market entry approaches

“RELUCTANT PARTICIPANTS”

“MEASURED PLAYERS”

“PROSPECTORS”

View 2014 market as inherently risky

Planning conservative participation in 2014, with no pricing concessions,

Likely focused largely on internal fundamentals of achieving low cost

Pricing responsibly to mitigate risk of unknowns

Target goal of capturing “fair share” of exchange market

See new 2014 market as a unique growth opportunity

Plan on making pricing investments to capture significant market share, then capitalize on risk adjustment to mitigate losses

Geography: Current markets or a subset

Products: Limited products

Networks: Current networks or Narrow / ACO networks

Pricing: Conservative

Infrastructure: Focused on fundamental admin and healthcare cost efficiency projects

Geography: Current markets, or possibly a calculated subset

Products: Limited, risk-averse portfolio

Networks: Narrow / ACO

Pricing: Competitive but responsible

Infrastructure: Focused on fundamental cost efficiency as well as medical cost management

Geography: New market entry likely

Products: Broad, something for everyone

Networks: Narrow and broad options

Pricing: Investments planned

Infrastructure: Focused on developing sales and marketing capabilities

Corresponding Market Characteristics

Health plans are approaching the HIX market with a variety of perspectives

Spectrum of Market Entry Approaches

Health Insurance Exchanges and Medicaid

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The Exchange sits at the intersection of two insurance markets – commercial and public – each with separate mechanisms for outreach/marketing, enrollment and other consumer assistance functions.

• Federal Regulations outline Exchange role in Medicaid Eligibility Determination – Exchanges may execute all eligibility functions

directly or enter into contracts with state Medicaid agencies

Provisions of ACA

Exchange

Commercial Insurance

Medicaid

– Exchanges must apply MAGI-based income standards and immigration and citizen status consistent with federal Medicaid/CHIP regulations • MAGI and attestation rules will reduce short term “churning” on and off Medicaid

• Federal regulations permit States to require the Navigator Program to also provide Medicaid/CHIP eligibility/enrollment functions. – Addressed in preamble but not regulatory text. The discussion relates to Navigator

Program financing and the ability to request Medicaid support of the Navigator program to the extent the state “permits or requires” Navigators to address Medicaid and CHIP.

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• Under ACA, if all 50 states expanded Medicaid approximately 11 million individuals under age 65 could enroll in by 2021

• Universal coverage and HIX create an intersection between Medicaid and the individual market– Consumers coming to the exchange will be screened for Medicaid eligibility– 50% of the uninsured will be eligible for Medicaid– Changes in economic status will cause churn between Medicaid and commercial

insurance• Consumers losing Medicaid eligibility will be eligible for subsidized insurance on the HIX• Consumers whose economic situation worsens will shift from the individual market to

Medicaid

• Potential impact on State Programs– States may require Medicaid managed care organizations to offer individual products

on the exchange so that the consumer has carrier and network continuity– States may encourage or potentially require insurers selling on the HIX to participate

in Medicaid managed care– States may send Medicaid consumers to the HIX to purchase coverage

How will Health Insurance Exchanges impact Medicaid?

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Enrollee is referred to State

Medicaid

Exchange cannot

determineMedicaid Eligibility

How states and Plans handle churn will be dictated, in part, by how Exchanges determine eligibility

Exchange hasreal-time Medicaid eligibility

determination

Sta

te E

xch

ange

MedicaidBelow

138% FPL

ExchangeAbove

138% FPL

Approximately 50% of individuals may shift between Medicaid and the Exchange annually, 24% may shift at

least twice per year1

Apply for Coverage at Exchange

Medicaid Market

Individual Market

Enrollee enters Medicaid market

through traditional channel

Enrollee enters Medicaid market

through the Exchange

Questions for states:

Will Exchanges determine Medicaid eligibility in real time?

Will Bridge plans be allowed in the bidding process in Exchanges?

Will some QHPs be allowed to bid on one metal category only?

Questions for plans:

Is capturing churn an objective? What kind of presence is necessary to capture the

slice of churn that is desirable? How will the presence or absence of real-time eligibility

determination affect the decision to participate in an Exchange?

Health Insurance Exchanges and Healthcare Providers

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Possible HIX implications for health care providersC

ost

Pe

rfo

rman

ceR

even

ue/

Gro

wth

New distribution channel

New source of patients

New service offerings

Mitigation of uncompensated

care

Value based (risk) models

Realize proprietary product (ACO)

New payor and market alliances

New market/product entry (Carrier Network pull)

New capabilities Cost performance

pressure

Quality , cost and service

transparency

Capital and Resource demand

23

HIX Considerations for Health Systems

• Get involved as early as possible – Policy decisions made at an Exchange’s inception will have broad consequences– plan entry limitations in the exchange – adequate rates to sustain participation levels on a long term basis– State’s role as an “active purchaser,” empowered to negotiate with carriers directly, or

an “active regulator” empowered to set terms and conditions

• Determine your health systems' role – Consider the hospital’s role in outreach, education and the Exchange Navigator program

• Assess payment models - Consider reimbursement /payment transformation models consistent with an outcomes based managed care delivery system

• Assess the impact – Greater coverage results in an increased demand for services. – Administrators can project the impact on inpatient, ED, outpatient and physician

components of today's health systems. – Minimize patient disruption for those insured whose eligibility status fluctuates, e.g.,

transition from commercial to Medicaid

• Evaluate quality improvement reporting requirements – Ensure quality improvement measurement and processes are transparent and reportable

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Essential Community Providers

Qualified Health Plans

(QHP)

Essential Community Providers

• Simply stated the ACA requires Exchanges to include “essential community providers” that serve predominantly low income and medically underserved individuals [Section 1311(c)(1)(C)].

– Final rule does not prescribe a definition for ECPs; States are provided flexibility

– ECPs include Federally Qualified Health Clinics, Tribal Health Programs, Title V Urban Indian Health Programs, Mental Health and Substance Abuse providers to name a few.

– Require plan issuers to contract with Essential Community Providers in Medically Underserved Areas (MUAs) unless they are exempted by criteria established in the final rule.

The Road Ahead

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The final throes of exchange readiness are upon us

Launch Distribution & Marketing

PublicExchange

Health Insurer

Exchanges must be fully operational(1/1/2014)

2012 2013 2014

Exchange Open Enrollment Begins(10/1)

Latest likely date for QHP selection2

(7/31)

HHS conditionally approves State Based Exchanges for: 18 states and DC1

Full Business Go-Live (1/1/2014)

Open Enrollment Begins (10/1)

Acquire Exchange Capabilities

CCIIO releases bulletin on actuarial value (2/24) and first final rule (3/27) State deadline to

apply to operate a State Based

Exchange (12/14)

State deadline to apply for a Partnership Exchange, else default to the Federal Exchange (2/15)

CCIIO-suggested start to QHP certification 2 (4/1)

Develop & Launch Strategy

Business & System Testing

SCOTUS upholds

individual mandate / ACA

provisions (6/28)

Election results confirm ACA

implementation (11/6)

1 MS’s approval is outstanding as of 1/7/13, given the unresolved dispute between the State’s Insurance Commissioner and Governor2 Significant variation on these dates exist between State’s pursuing a State Based Exchange or a Partnership Exchange or a Federally Facilitated Exchange. April 2013 is the suggested CCIIO date to begin the QHP submission process for States seeking to conduct Plan Management under a Partnership Exchange.. State Based Exchange’s may select their own dates and several have already released their QHP application (CA, OR, MD, VT, DE, CT) and set QHP application deadlines as early as 12/13/2013 (OR), 1/8/2013 (VT) and 1/15/2013 (CA).

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Closing thoughts

• Health systems will need strategies to maximize the conversion of their uninsured

population to coverage

• States that do not expand Medicaid will create a “donut hole” that will confront many of

a health system’s uninsured patients

• Providers need to be well versed on topics such as advanced premium tax credits and

the products offered in their state even if State’s opt to Federally Facilitated Exchange

since they are the “front line” for their members

• It will most likely be bumpy in the early months of the HIXs – think Medicare Part D

implementation!

• No one really knows what impact the Exchange will have on total cost of health care

delivery…stay tuned