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Health Insurance Exchanges - PowerPoint Presentation

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Health Insurance Exchanges - PPT Presentation

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

exchanges health insurance exchange health exchanges exchange insurance states small state amp enrollment plan deloitte federal plans 2010 eligibility provide grants individual

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Slide1

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