States Implementing Health Reform:
Exchanges Part II
Next Topics in the Webinar Series:
Medicaid
Wednesday, January 12th
2:00-3:30 p.m. EST
Primary Care Workforce
Wednesday, January 19th
2:00-3:30 p.m. EST
National Conference of State Legislatures
Wednesday, December 15, 2010
This webinar series is sponsored by these NCSL
projects:
Legislative Health Staff Network (LHSN)
Men’s Health Project
Primary Care Project
Rural Health Project
Minority Health Project
NCSL’S Standing Committee on Health
through grants from
The Robert Wood Johnson Foundation
The Kellogg Foundation
HRSA’s Bureau of Primary Health Care
Office of Rural Health Policy
HHS’s Office of Minority Health
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States Implementing Health Reform:
Exchanges Part II
Session Panelists:
• Joel Ario, Director, Office of Health Insurance Exchanges, Office
of Consumer Information and Insurance Oversight, HHS
• Bob Carey, Senior Advisor, Public Consulting Group (Former
Policy Director for the Massachusetts Connector)
• Sumi Sousa, Special Assistant to the Speaker, Office of the
Assembly Speaker, California State Assembly
• Sandra Shewry, Advisor, Health Care Reform Implementation,
California Health and Human Services Agency
Welcome to the webinar!
We will begin shortly.
Federal Planning & Support
Opportunities for States
Joel Ario
Director, Office of Health Insurance Exchanges,
Office of Consumer Information and Insurance
Oversight
The Health Insurance Exchange:
Key Issues for State Policymakers
National Conference of State Legislatures
December 15, 2010
Agenda
 Key Issues for State Policymakers
1. To Exchange or Not?
2. Governance and Administration
3. Role of the Exchange in the Marketplace
4. Establishing a Continuum of Coverage
5. Basic Health Program
6. Alignment with State Health Reform Efforts
7. Leveraging Existing Resources and Systems
8. Brokers and Navigators
9. Rating and Underwriting Rules
10.State Mandates and Minimum Essential Benefits
 Pitfalls and Opportunities
 What’s Next?
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 7
To Exchange or Not?
Options:
 Establish single, statewide Exchange or regional Exchanges within a state
 Join with other states to establish multi-state Exchange
 Defer to the federal government
Prime Considerations:
 Control/authority over portion of the commercial health insurance market
 Funding and feasibility of establishing and operating an Exchange
 Uncertainty over how the federal government will operate an Exchange
 Ability to collaborate with other states in a timely fashion
 Coordination of benefits across state programs
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 8
Governance and Administration
Options:
 State agency (existing or newly created)
 Quasi-public authority
 Non-profit entity
Prime Considerations:
 Control – executive model (Utah), board (CA and MA), or advisory
 Nimbleness and flexibility to respond to evolving program and changing
circumstances
 Accountability and transparency
 Hybrid commercial/government enterprise
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 9
Role of the Exchange in the Marketplace
Options:
 Market organizer/distribution channel
 Selective contracting agent
 Active purchaser
Prime Considerations:
 Market conditions
 Overall goals and purpose of the Exchange
 State’s approach to the commercial health insurance market
 Potential population served by the Exchange
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 10
Establishing a Continuum of Coverage
Options:
 “Benchmark” benefits for Medicaid expansion population
 Eligibility processes across public and private insurance programs
 Minimizing gaps and lowering cliffs
Prime Considerations:
 Benefits and products in the commercial market
 Medicaid MCOs and commercial insurers
 Streamlining eligibility systems and coordinating enrollment processes
 Rating and underwriting rules in the commercial market/Exchange
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 11
Basic Health Program
Options:
 Separate health benefit plan for 133% - 200% FPL
 Richer benefit package with lower point-of-service cost sharing
 Not part of the commercial market/risk pool
Prime Considerations:
 Can state establish and administer this program (with everything else going on)?
 How will removing this group from commercial insurance pool affect the market?
 How will the Exchange be affected (e.g., membership, sustainability,
attractiveness to commercial carriers)?
 Can state negotiate lower costs and richer benefits, without indirectly shifting
costs to the commercial market?
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 12
Alignment with State Health Reform Efforts
Options:
 Laissez faire approach
 Activist role for the Exchange
 Selective support/promotion of health reform initiatives
Prime Considerations:
 Ability (and willingness) of commercial insurers to participate
 Marketability/attractiveness of commercial products in the Exchange
 Difference between health plans inside and outside the Exchange
 Size of the Exchange market
 Medicaid program and state employees health insurance program also included?
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 13
Leveraging Existing Resources and Systems
Options:
 State (Medicaid) agency systems and processes
 Private sector operations
 Stand-alone Exchange functions
Prime Considerations:
 Ability to modify/upgrade existing public agency systems to support Exchange
operations (e.g., eligibility, enrollment broker)
 Use of private sector to provide key functions and services
 Competing priorities of existing programs/entities
 Buy, rent or build?
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 14
Brokers and Navigators
Options:
 Determine role for Navigators
 Brokers as active (and willing) sales force or not
 Reimbursement structure for brokers
Prime Considerations:
 Existing resources/entities and their role in the marketplace (e.g., communitybased outreach efforts, non-profit agencies, human service contractors)
 Licensure and regulatory authority over Navigators vis-à-vis brokers
 Brokers role in the individual and small group markets
 Compensation model for brokers and Navigators
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 15
Rating and Underwriting Rules
Options:
 Establish standard rating and underwriting rules
 Allow carriers to apply different rating and underwriting rules inside and outside
the Exchange
 Apply base rating and underwriting rules, with some flexibility
Prime Considerations:
 Differences among carriers in the existing commercial market
 Potential impact on premiums
 Comparability of rules inside and outside the Exchange
 Willingness of carriers to participate
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 16
State Mandates and Minimum Essential Benefits
Options:
 Adjust/revise state mandates to reflect minimum essential benefits
 Maintain existing state mandates that exceed minimum essential benefits and pay
for those benefits for individuals and families purchasing coverage through the
Exchange
 Maintain mandates outside the Exchange, but eliminate mandates for policies
purchased inside the Exchange
Prime Considerations:
 Cost of mandates that exceed minimum essential benefits
 Political realities and influence of advocacy community
 Market realities and impact of modifying mandates
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 17
Pitfalls and Opportunities
 Outreach is critical to ensure broad risk
pool, stabilize premiums, and attract
sufficient volume
 Administrative efficiencies are
contingent upon economies of scale
 Opportunity to streamline, consolidate or
eliminate existing public subsidy programs
 Strategic contracting with carriers and
vendors can help lower costs
 Inventory existing resources – public and
private – to identify and leverage
available infrastructure
 Learned behavior can be difficult to
overcome
 Continuous open enrollment in
guaranteed issue, modified community
rated individual market can create adverse
selection problems for carriers
 Carrier underwriting rules (e.g.,
contribution and participation
requirements) can affect small group
coverage through the Exchange
 Capitalize on health reform to promote
other state priorities
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 18
What’s Next?
 States developing strategic plans for Exchange design and implementation
 Additional federal guidance expected in early 2011
 “Innovator” grants to jump-start technology and establish prototypes to be
awarded in early 2011
 Eligibility
 Enrollment
 Premium tax credits administration
 Cost-sharing assistance administration
 Exchange implementation grants available in Spring 2011
 Impact of Congressional changes and altered political landscape TBD
 Progress throughout 2011 will ultimately determine states’ ability to establish a
fully-functioning Exchange
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 19
Bob Carey
Bob Carey is a senior advisor at Public Consulting
Group (PCG). Prior to joining PCG, Mr. Carey was the
Director of Planning and Development for the
Commonwealth Health Insurance Connector Authority,
an independent authority established pursuant to
Massachusetts’ landmark health reform law of 2006.
In this role, Mr. Carey worked closely with the
Executive Director and the Board of the Connector
Authority to design and implement new health
insurance programs, including establishing publiclysubsidized and commercial health benefit plans, as well
as developing health care financing arrangements and
coordinating activities across state agencies.
Contact info:
Bob Carey
Senior Advisor
Public Consulting Group
rcarey@pcgus.com
617-717-1345 (office)
617-470-3614 (cell)
Mr. Carey has experience setting up and managing a
statewide Health Insurance Exchange, and has firsthand knowledge of the myriad issues – and choices –
that states will confront in establishing and operating an
Exchange under federal health reform.
CONFIDENTIAL
© PCG 2010
ALL RIGHTS RESERVED
Page 20
Creating the California
Health Benefit Exchange
Sumi Sousa
Special Assistant to the Speaker
Office of the California Assembly Speaker
December 15, 2010
21
Overview
• Goals/Concerns in establishing the
exchange
• How the legislation addresses these
issues
22
Key Goals in Establishing the
CA Health Benefit Exchange
1. Define the exchange’s role in overall
market
2. Promote value, quality, transparency
3. Reduce potential for adverse selection
4. Establish a solid governance and
financing structure
5. Meet the 2014 timeline
23
Major Considerations and Unknowns
•
Timeline: Legislation needed to be done in 2010 in order to
meet 2014.
•
Unknown size other than “big”- estimates ranged from 1.25M –
8M potential enrollees.
•
Concerns with adverse selection and exchange viability relative
to outside market.
•
Major differences in value of the federal subsidy between
individual and small group, and concerns with merged markets.
•
Need to provide choice, fair competition, transparency, value.
•
Need to coordinate systems with existing Medi-Cal, Healthy
Families, county-based administrative structure, while at same
time, make transitions between coverage easier.
24
Role of Exchange in Insurance
Market
OPTIONS CONSIDERED:
• Exchange as the entire market
• Exchange as simple pass through for subsidy
(Craigslist with tax credits)
• Exchange operates with outside market but
drives value, quality and choice in part
through selective contracting
25
How Does Legislation Address These
Concerns?
•
Approach: Exchange operates with outside markets but
adds value through, among other things, ability to
standardize, selectively contract.
•
Individual and small group market kept separate for now.
•
Sets clear rules for participation in the Exchange to
enable choice, fair competition, drive value and quality,
and promote transparency.
• Exchange must offer in each region of the state a
choice of qualified health plans in each of the 5 levels.
• Exchange can standardize products
• Exchange can selectively contract, based on choice,
quality, value and service.
26
How Does Legislation Address These
Concerns? (cont.)
•
Rules for participation in the Exchange to reduce adverse
selection, promote competition and transparency
•
•
•
Carriers participating in the Exchange must offer at least one
product within each of the 5 levels of coverage inside and
outside Exchange
Carriers not participating in the Exchange are barred from
selling the catastrophic plan.
If Exchange board standardizes products, carriers not
participating in the Exchange are required to sell at least one
standardized product in each of the four precious metal
coverage levels
•
Exchange must coordinate with Medi-Cal, HFP and
counties, but also try to reduce coverage and network
disruption.
•
Exchange is not a third regulator.
27
Governance & Financing
Federal Exchange, State Exchange, or Exchange Operated by NonProfit?
• Scope and import of the changes pointed towards need for the
openness and transparency of government vs. non-profit
•
Ability of state to meet CA needs was preferable to federal
exchange
Significant Trade-Offs
• If Exchange is be competitive with an outside market, needs to be
agile, flexible, and responsive.
•
Board and staff structure must support this type of decision
making.
•
State government provides transparency, but can be slower than
outside private market.
28
Governance & Financing cont.
• Exchange funds need to be protected from bad state
budget cycles.
• No state GF available and Exchange must be self-
supporting by 2015.
• Other Concerns with Exchange Authority
•
•
•
Limits on Plan Assessments
Limit ability to increase Medi-Cal or HFP costs
Responsiveness to legislative and executive
branch
29
Governance & Financing cont.
How Do the Bills Resolve These Trade-offs?
•
Independent, 5 member Exchange governing board
within state government and members must have
significant demonstrated expertise in various Exchangerelated health care areas, such as the individual and
small group markets.
•
Significant conflict of interest provisions that generally bar
anyone working for insurers, agents or brokers, health
care facilities and health care providers.
•
Staff will generally be civil service, but limited number of
executive staff positions exempt from civil service.
•
Board members are unpaid.
30
Governance & Financing cont.
•
Subject to state open meeting and public record act, laws
with an ability to meet in closed session regarding issues
such as rate negotiations. Contracts are available 1 year
after commencement.
•
Must issue regulations but for first 2 years, can issue
emergency regulations.
•
Exchange must determine sufficient financial resources exist
prior to commencing operations and report to the Joint
Legislative Budget Committee and Dept. of Finance.
•
Annual report to the Legislature and Governor on expenses,
performance, operations, and progress. This report is also
posted on the Exchange website.
•
Budget, including staff salaries, must be posted publicly on
website.
31
Governance & Financing cont.
• No state GF and establishes a plan assessment to
fund Exchange operations.
• CA Health Trust Fund is continuously appropriated
but can only consist of non-GF (federal funds,
assessments, CHFFA loan funds, etc.)
• Plan assessment limited to 1 year’s approved
operating budget – Exchange must reduce the
charges in the following fiscal year if the
assessments equal or exceed that amount.
32
Questions?
Sumi Sousa
sumi.sousa@asm.ca.gov
Office of California Assembly Speaker
John A. Pérez
33
California
Health Benefit Exchange
Early Implementation Tasks
Sandra Shewry
Advisor, Health Care Reform Implementation
CA Health & Human Services Agency
December 2010
Getting to 2014: Board Tasks
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Board Appointments & Hiring Key Staff
Infrastructure & Administration
Eligibility & Enrollment
Coordination with other public & private
purchasers
Essential Benefits
Marketing, Outreach & Distribution
Criteria for Qualified Health Plans
Self financing by 2015: assessments on plans
Testing of Systems
Early Enrollments
Board Appointments & Key
Staff
Appointment of Board
2 Governor; 2 Legislature; 1 Secretary of Health &
Human Services

Hire Executive Officer, Chief Counsel, & other
key staff
 Statute:
 Permits Board to hire outside of civil
service
 Permits Board to set salary
 Requires independent salary survey
Infrastructure & Administration
 Establish
an office
 Communications & Data Systems
 Website
 Business plan for 2011-2014
 Buy it or make it decisions
 Public Meeting calendar
Eligibility & Enrollment
Enrollment portal for Exchange, Medicaid, CHIP
and other health and social programs
 Linkages to federal data bases – Homeland
Security, Treasury, Social Security
 MAGI rules engine
 Rules for application, enrollment, disenrollment,
re-enrollment, transfers, appeals
 Exemptions from individual mandate
 Flow of premiums; processes for free choice
vouchers
 Variance: individual v SHOP components of
Exchange

Coordination with other public
& private purchasers
 Advance






goals of
Health status improvement
Health systems improvement
Safety & quality
Cultural competence
Accessibility: hours, linguistic, physical
Efficiency
Essential Benefits


Compare federal essential minimum benefits to state
mandates. States to bear the cost of benefit in excess of
federal essential benefits
Options for state-mandated benefits that exceed the
federal definition of essential benefits: (statute may be
needed)






Conform state benefit mandates to the federal essential
benefits.
Determine the revenue source to cover additional costs for
state mandated benefits
Provide an exception in state law from state mandates for
products being sold through the Exchange.
Application to large group market (>100 ees)
Variance: individual v SHOP components of Exchange
Degree of standardization
Marketing, Outreach &
Distribution
 Branding





of Exchange
Alignment with public and private purchasers
One-stop shop
Driver of market reforms
Price leader
Maintain safety net
 Navigators,
community groups, agents,
brokers – who, training, how reimbursed
Criteria for Qualified Health
Plans



Governing board to develop standards and
criteria

based on “best interests of” individuals and
small employers purchasing through the
Exchange

“optimal combination of choice, value, quality,
and service”
Relationship to plan licensure standards
Collaboration with other purchasers: public &
private
Self financing by 2015:
assessments on plans
 Assess
a charge on plans that is
“reasonable and necessary to support the
development, operations and prudent cash
management of the Exchange.”
 How much; how to collect; process to
reconcile
Testing of Systems
 2013
– DHHS to conduct readiness
assessment of state systems

Eligibility and enrollment
 User
expectations: families, employers,
distribution network
Transition Populations
Non-mandatory Medicaid eligible groups above
new Medicaid “bright line” (medically needy)
 Medicaid waiver population: coverage initiative
 Parents of CHIP enrollees
 PCIP members
 Persons enrolled in limited scope state
programs – breast cancer; family planning;
HIV/AIDS
 HIPAA, COBRA

Unknowns: Externalities
 Harmonizing
group size laws (<50; <100)
 Basic Health Program
 Public support for reform
 State fiscal context
 Legal Challenges
2014 is tomorrow!
Contact info:
sshewry@chhs.ca.gov
916 653-2902
Submitting Questions
Questions may be submitted at any time
during the presentation. To submit a
question:
Click on the Question Mark icon (?) on the
floating toolbar (as shown at the right).
This will open the Q&A window on
your system only.
Type your question into the small
dialog box and click the Send Button.
Questions will remain anonymous.
Q&A
icon