Industry Insiders Answer Key Questions about Health Insurance Exchanges
Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans.
By Steve Davis, Managing Editor (), September 17, 2010
On Sept. 1, small employers (with 50 or fewer employees) in Utah were able to provide funds to employees that they can use to purchase coverage through an insurance exchange. Utah — which piloted the program last year — and Massachusetts are the only states that have an insurance exchange. But other states are scrambling to define how their exchanges will operate so that they will be able to have them up and running by the Jan. 1, 2014 deadline.
During a panel discussion sponsored by AIS, four industry observers offered their perspectives on how the insurance exchanges will impact the small-group and individual markets. Here’s a look at four key questions about the exchanges:
(1) Which health insurers will participate? Exchanges must certify that health insurers meet its requirements and must determine if a plan’s participation “is in the interest of” participating individuals, according to the provision. Panelists agreed that health insurers that offer managed Medicaid products might be seen as attractive exchange participants if they can serve Medicaid and subsidized populations. Moreover, some families will have children enrolled in the state Children’s Health Insurance Program (CHIP) while the parents have coverage through the exchange, predicted Timothy Stoltzfus Jost, a health law professor at the Washington and Lee University School of Law in Virginia. Bruce Caswell, president and general manager of the health services segment at MAXIMUS, agreed and added that states will want their exchanges to offer a “seamless experience” that allows members to keep their providers even if they switch programs. “States will look for [insurers] that offer a Medicaid product and have overlapping provider networks, which will minimize the opportunity for someone to fall out of coverage.” Among other things, Maximus provides program administration for Medicaid and CHIP.
(2) Will rate hikes come under increased scrutiny? Health plans will need to publicly explain the rationale behind their rate hikes. Although the exchanges will be tasked with identifying “unjustified” rate increases, they won’t regulate them. However, a pattern of unjustified rate hikes could prompt an exchange to exclude an insurer. Another key function for exchanges will be to provide consumers with detailed information about their health coverage options. The exchanges also will make eligibility decisions, qualify members for federal subsidies or Medicaid, rate each plan using performance measures, and conduct member satisfaction surveys. “Nowhere in the statute does it say that the exchanges are supposed to sell insurance…but the anticipation is they will have a role in enrolling people,” Jost added.
(3) Will participating health plans face adverse selection? Risk adjustment, which will be required for insurance products offered inside and outside the exchanges (for similar products), will also help mitigate the risk of adverse selection, says Jost. However, a health insurer that offers “gold” and “silver” plans inside an exchange could opt to offer only lower-cost “bronze” and “catastrophic” coverage outside. “That could trend toward favorable selection,” Jost warns. As a result, some states might regulate plans inside and outside the exchange to ensure a level playing field. Having defined open-enrollment periods — once or twice a year — for individuals within the exchange “is paramount” and could protect against some adverse selection, said Vince Ashton, executive director of the New York Health Purchasing Alliance (HealthPass New York), an 11-year-old commercial health insurance exchange for employers. Such enrollment periods, he adds, would protect against individuals who enroll in coverage only when they are in dire need of services.
(4) What will the exchanges look like? While states will be able to define their own model for the exchange, Jost predicts most of them will operate as quasi-government entities similar to the Connector in Massachusetts. Along with providing information about coverage options and enrolling applicants, exchanges will need to coordinate with state insurance commissioners on regulation and qualify some enrollees for state Medicaid programs.
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