Steve Wander Principal Deloitte Consulting LLP Sally Fingar Sr Manager Deloitte Consulting LLP February 15 2011 Overview of h ealth insuranc e exchanges Implementing health insurance exchanges ID: 335749
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Health Insurance Exchanges
Steve Wander, Principal, Deloitte Consulting LLP
Sally Fingar, Sr. Manager, Deloitte Consulting, LLPFebruary 15, 2011Slide2
Overview of health insuranc
e exchangesImplementing health insurance exchangesConcluding thoughtsQuestion & answer
AgendaCopyright © 2011 Deloitte Development LLC. All rights reserved.Slide3
Overview of Health Insurance ExchangesSlide4
Administered by States within Federal guidelines
Targeting individual consumers and small groups up to 100 employees in 2014
Expanding to groups over 100 in 2017 at State discretionDetermine eligibility for Medicaid and CHIP and enroll individuals in those programs when appropriate Administer Federal subsidies to individuals below 400% of the Federal poverty limit Offering comparable products, pricing and consumer informationOperating at State, sub-state or regional levelThe Affordable Care Act establishes State health insurance exchanges (HIX) as regulated, online marketplaces for individual and small group coverageExchanges are a lynchpin of reformSlide5
Exchanges must fulfill a broad range of roles and responsibilities
Product Availability / Specifications
Enrollment & Eligibility MaintenanceComparison Shopping Tools Customer ServiceFederal / State CoordinationPremium Collection / ReconciliationProvide assistance in navigating the shopping and enrollment processPromote the Exchange and regulate marketing of products and servicesDetermine 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
Manage numerous intra-governmental data and process interactions and dependencies
Advisor / Navigator
Eligibility / Subsidy Determination
Marketing / Public OutreachSlide6
HIX
Health Plan A
Health Plan BHealth Plan CElectronic InterfacesSubsidy AdministrationRisk AdjustmentCoordination with Medicaid / CHIP
Online Enrollment
Rating/pricing
Plan Designs
Quality & Patient Satisfaction Ratings
CHIP/Medicaid Enrollment
Exchanges
aim to provide and enable consumer choice and affordability
Health Plan D
Exchanges will offer more standardized products, distribution and administration
Product Design
Pricing / Underwriting
Sales &
Distribution
Enrollment & Eligibility
Minimum essential benefits coverage
Actuarially-equivalent
benefit packages
Bronze:
60%
Silver:
70%
Gold:
80%,
Platinum:
90%
Catastrophic for under 30’s
Out-of-pocket limits
No annual or lifetime limits
Guarantee issue
and renewability
Limited underwriting
Geography
Family status
Age (3:1)
Smoking (1.5:1)
No pre-existing conditions
Risk adjustment
Standard
marketing requirements
Roles of brokers and rules for on
versus off exchange products
Standard quality, price, and satisfaction ratings
Standardized enrollment
Online, mail , over the phone and in-person
Subsidy eligibility management
Coordination with Medicaid and CHIP
Health Plan ESlide7
Exchanges will develop over time
States establish an American Health Benefit Exchange and a Small Business Health Options Program (SHOP) Exchange
States may merge the two exchanges2017+Interim solutions: National web portal to compare plan options (Healthcare.gov) and Preexisting Condition Insurance Plan (PCIP) offerings
Federal
grants
available to sates to establish exchanges
2010
2011
2012
2013
2014
2015
2016
Exchanges must be financially self-sustaining
States may allow groups (100+) to participate in Exchanges
Although not required until 2014, early work on defining exchanges has begun
The Federal government will provide a fall-back exchange for states that are not ready, willing or ableSlide8
States will implement Exchanges within Federal guidelines (or defer to Feds)
Federal Role
State RoleEstablish and launch individual and small group health insurance exchanges by January 1, 2014 (including passing any required legislation , issuing required regulations, establishing enrollment processes, etc.)Define the coverage area for each exchange and determine whether or not to merge the individual and small group exchangesDetermine whether to offer a State Basic planDefine state-level market rules for sales on versus off the exchanges and the role of brokers/agents in the processCertify plans to participate on exchanges and provide quality and member satisfaction ratings for each planDevelop single eligibility and enrollment process for Medicaid/CHIP and exchange subsidies Administer premium subsidies for individuals up to 400% FPLDefine 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 & data exchange to support eligibility, enrollment & subsidy administration
Define criteria for health plans to be “qualified” to offer products through exchanges
Set standards for quality & member satisfaction ratings of plans
Provide planning, development and operational grants to states (to 2015)
Determine if state exchanges will be operational by 2014, and provide a fall-back exchange for states that will miss the deadline
Contract with at least two multi-state plans to be offered on each exchangeSlide9
Many stakeholders play key roles in Exchanges
Health Insurance Exchange Business
Processes and SystemsIndividual CustomersScreenCompare plans & enrollChange plansRequest mandate exemptions Brokers, Navigators,Community PartnersSmall
Employers
Employees of
Small Businesses
Help customers enroll
Provide
information
Role will likely vary by State
Select
plan level(s)
Pay premiums
Track fines
Screen
Compare plans
Enroll
Change plans
Exchange
Governing Body
Customer Service
,
Operations, Vendors
Federal and State
Agencies / Systems
Set exchange business policy
Certify & rate plans
Approve exemptions
Make vendor / carrier selection
Create rules
Send/receive
tax, premium,
& other information
used for verification, enrollment,
& risk
adjustment
Support phone
& mail
enrollments
Help customers
Manage
grievances
May aggregate
premium payments
Health Plans
Submit
plans
for listing
Maintain
plan
info, benefits, quality,
cost & providers
Receive enrollments and premiums
Social Services Programs
Receive eligibility referralsSlide10
Implementing Health Insurance ExchangesSlide11
There are existing examples of health insurance exchanges which provide insight into:
Key design choices and potential modelsPossible challenges/hurdles
They have been a topic of discussion for almost 20 yearsExchanges are not a new conceptSlide12
Overview of statewide attempts to create Health Insurance Exchanges
State
Program Name
Description
Texas
Texas Purchasing Alliance
An insurance purchasing pool for small employers
Established in 1994, disbanded in 1999
Massachusetts
Health Insurance Connector
A link between funding sources and health plans to establish one simplified market
Part of Massachusetts’ 2006 health care reform legislation
190,000 members in 2010
North Carolina
Caroliance
A regional alliance of small groups, with voluntary membership, to gain access to health insurance
Established in 1992, disbanded in 1997
California
Health Insurance Plan of California / PacAdvantage
Exchange was privatized and renamed in 1999
Peak enrollment: 150,000 members, 10,000 small businesses
Closed in 2006 when one of the three insurers pulled out due to financial losses
Utah
Utah Health Exchange
An exchange without an employer or individual coverage mandate
Piloted to 100 small businesses in August 2009, large employers in April 2010. 433 members in 2010.
Connecticut
Connecticut Business and Industry Association (CBIA) Health Connections
Provides choices of group health insurance to employees of small businesses
Established in 1995 and has 75,000 member in 2010
Washington
Washington Health Insurance Partnership (HIP)
Improves access to employer-sponsored coverage for small employers
Enrollment began in September of 2010 and coverage began in January of 2011Slide13
Description of Challenge
State Examples
Inability to Gain Adequate Market ShareMarket share often remained too small to exert purchasing power, achieve economies of scale, and attract and retain health plans
Texas, North Carolina, California, Massachusetts (
for small group
)
Inability to Command Lower Prices
Price disparities arose between coverage
offered inside and outside the exchange. Exchanges competing with regular market for the same customers were challenged in obtaining lower prices
California, Utah
Adverse Selection
Insurers pushed high-risk individuals toward the exchange,
which increased premiums and led to the departure of many employers
Texas, North Carolina, California
Failure to Reduce Administrative Costs
Increased
costs of serving small employers were not eliminated by centralizing the administration. Cost savings
required large enrollment to achieve economies of scale.
In some cases, health plans’ costs rose further due to inflexibility in administrative procedures of the exchange
Texas, North Carolina, California
Low Agent Participation
Lower commissions or threat to bypass agents generated hostility and an inability to successfully market products
Texas, North Carolina, Massachusetts
IT Deficiencies
Lack of system capabilities, including IT compatibility and connectivity, can limit administrative simplification, health plan participation, and ability to deliver innovative offerings
Utah, Massachusetts
Challenges of State Sponsorship
Association with government
can hurt more than help, as small businesses, and especially insurance agents, tend to be suspicious of government. In addition, a public organization is less likely to easily test out and adopt new strategies
Texas
Challenges of Third Party Administration
Introducing an administrator with a vested interested in the competitive environment can prevent participation of plans
Texas
Exchanges: Key challenges in past attemptsSlide14
Marketplace design is driven by several considerations
States may adopt one of a range of models – the design will be primarily driven by each State’s respective Strategy, Environment, Markets and ability to leverage existing assets
Capability Model “Thin” CapabilitiesRobust CapabilitiesDriver
Thin Capabilities
Robust Capabilities
Funding
Budget Deficit
Budget Surplus
State Infrastructure
Long and stringent procurement
Flexible procurement cycles
Population
Demographics
Fewer
uninsured; healthier population
Larger state, high population of uninsured individuals; less healthy population
Exchange
Goals
Limited enrollment
Majority of health insurance purchased through insurance exchange
Environment/Market
Competitive
Regulated
Driver
Competitive
Regulated
Political Landscape
Republican Majority
Democratic Majority
Regulatory Environment
Limited regulatory oversight. State reinforces competition and growth
Extensive
regulatory
oversight and limits competitive forces
Broader Reform Policy Goals
Exchange
is
not
viewed as a mechanism to promote broader health policy
Exchange
is viewed as a vehicle to promote broader health policy
Risk and Selection
Exchange may attract consumers with greater healthcare needs
Regulations could help create a level playing field inside and outside the exchange
Law mandates that a core set of capabilities/processes must be present (i.e., eligibility verification, plan comparison, etc.)
However, there appears to be significant flexibility
in how
robust these capabilities need to be in the exchange itself
States have considerable leeway in the degree by which they balance competition with appropriate
regulationSlide15
Federal Funding
Planning Grants
Early Innovator Grant ProgramEstablishment GrantsPurposeSupport early development & implementation planning Covers planning costs, includingIT system assessmentsPerformance metrics DevelopmentAssist states with design and implementation of exchange IT infrastructureCreate re-usable tools - encourage multi-state cooperationSupport costs & activities associated with Exchange implementationTiming
July 2010
RFP released Oct. 29, 2010
Proposals due Dec. 22, 2010
Awards (up to 2 years) in Feb. 2011
Announced Jan 20, 2011
States choose when & for which type of grant to apply
Awards
$49 million
$1 million grants to each of 48 states and the District of Columbia
Alaska and Minnesota did not accept grants
Cooperative agreements, not grants
No match required, no specified award size limit
Up to 5 awards to individual states or consortium of states
Level 1: up to one year of funding to states that have made planning progress. States may apply for an additional year of funding.
Level 2: funding through December 2014 to states that are further along in their planning process and that meet specific criteria Slide16
Concluding ThoughtsSlide17
Although we know that Exchanges will be transformational, we’re not quite sure what they will actually look like
Health insurance exchanges are the lynchpin of expanding access under Federal health care reform
There is no perfect model – different models will work in different markets. Flexibility in standards will be criticalStates have to start building the house, even before the blueprints are complete Successful implementation will require extensive collaboration between plans, the Federal government and the statesStates have the experience and a track record of innovating and implementing complex programs….exchanges will be no different2014 might seem like a long way away, but it is just around the cornerConcluding ThoughtsSlide18
Question and AnswerSlide19
Steve Wander
Principal
Deloitte Consulting LLPswander@delotite.com612-397-4312Contact infoSally FingarSr. ManagerDeloitte Consulting LLPsfingar@deloitte.com 612-659-2627Slide20
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiariesSlide21