Preparing for Health Reform:The Role of the Health Insurance

Exchange

Bob Carey

RLCarey Consulting

March 11, 2010

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

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Level Setting

State-based exchanges

Federal guidance, but state flexibility

Oversight/enforcement handled (initially) by the states

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Developing a Baseline

Uninsured

Current publicly-subsidized health coverage programs

Insured

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Uninsured

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

programs

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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

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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

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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

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What Type of Exchange? Three basic models

Weak Strong(Range of government involvement in commercial market)

Ultimate Goal – shift the individual and small group markets from competition based on avoiding risk into competition based on price and quality.

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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

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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

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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

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Funding and Operating an Exchange

Model selected will impact:Roles and responsibilitiesAdministrative structure/governanceStaffing

Resource needs affected by model selected AND capabilities of existing public and private entities

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Building or Renting Administrative Capacity

Medicaid agency to process eligibility for premium subsidy?

Private sector intermediaries (third party administrators) to provide administrative services?QuotingEnrollmentCustomer servicePremium billing, collection, remittanceAccount management, etc…

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Revenues to Support Operations

Retention of a portion of the premiumsTypically 3% - 5% of premium

Add-on fee to premiums

Annual Appropriation

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Subsidizing Health Insurance Two main options

Stand-alone Medicaid-like health coverageo Commonwealth Careo Texas’ CHIP and Medicaid Buy-In programs

Premium subsidies for commercial insuranceo Maryland’s Health Insurance Partnershipo Insure Oklahoma

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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

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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

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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

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Questions?

Contact SCI for Technical Assistance:

sci@academyhealth.org