ESTABLISHING CALIFORNIA’S HEALTH INSURANCE EXCHANGE UNDER
THE AFFORDABLE CARE ACT: GOVERNANCE AND OPERATING MODEL
Charlaine Myshelle Hamilton
B.A., California State University, Sacramento, 2004
THESIS
Submitted in partial satisfaction of
the requirements for the degree of
MASTER OF PUBLIC POLICY AND ADMINISTRATION
at
CALIFORNIA STATE UNIVERSITY, SACRAMENTO
SUMMER
2011
© 2011
Charlaine Myshelle Hamilton
ALL RIGHTS RESERVED
ii
ESTABLISHING CALIFORNIA’S HEALTH INSURANCE EXCHANGE UNDER
THE AFFORDABLE CARE ACT: GOVERNANCE AND OPERATING MODEL
A Thesis
by
Charlaine Myshelle Hamilton
Approved by:
, Committee Chair
Mary K. Kirlin, D.P.A.
, Second Reader
Robert Wassmer, Ph.D.
Date
iii
Student: Charlaine Myshelle Hamilton
I certify that this student has met the requirements for format contained in the University
format manual, and that this thesis is suitable for shelving in the Library and credit is to
be awarded for the thesis.
, Department Chair
Robert Wassmer, Ph.D.
Date
Department of Public Policy and Administration
iv
Abstract
of
ESTABLISHING CALIFORNIA’S HEALTH INSURANCE EXCHANGE UNDER
THE AFFORDABLE CARE ACT: GOVERNANCE AND OPERATING MODEL
by
Charlaine Myshelle Hamilton
The Patient Protection and Affordable Care Act (ACA) requires states to establish
health insurance exchanges to facilitate the purchase of qualified health care coverage.
The ACA affords states flexibility in designing these exchanges. This thesis is an
analysis of the alternatives for the governance and operating model of an exchange in
California. Within the parameters of the ACA, I present four alternatives for the
exchange governance and three alternatives for its operating model. I then compare the
alternatives based on how well they avoid adverse selection, facilitate competition, and
provide an enhanced consumer experience. The results showed that establishing an
independent government agency that selectively contracts with participating health
insurers is the optimal choice for California.
, Committee Chair
Mary K. Kirlin, D.P.A.
Date
v
ACKNOWLEDGMENTS
Thank you to Professor Mary Kirlin and Professor Robert Wassmer for their time
and patience. I’d also like to thank my friends and family for their support and keeping
me grounded. I think we can all agree: FINALLY!
vi
TABLE OF CONTENTS
Page
Acknowledgements ............................................................................................................ vi
List of Tables ..................................................................................................................... ix
Chapter
1. INTRODUCTION ...........................................................................................................1
2. HEALTH CARE REFORM IN THE U.S. ......................................................................4
U.S. Health Care Spending and the Uninsured ........................................................4
Health Care Spending and the Uninsured in California...........................................6
Moving Toward Federal Health Care Reform .........................................................7
3. WHAT IS A HEALTH INSURANCE EXCHANGE? .................................................10
Characteristics of Managed Competition...............................................................10
Managed Competition and Exchanges...................................................................12
Core Functions of Exchanges Created by the ACA...............................................14
4. STATE FLEXIBILITY IN DESIGING EXCHANGES ...............................................20
Methodology ..........................................................................................................21
Exchange Governance ...........................................................................................22
Governance Criterion 1: Public Accountability and Transparency .......................23
Governance Criterion 2: Flexibility .......................................................................24
Governance Criterion 3: Interagency Collaboration ..............................................24
Evaluating the Exchange Governance Alternatives ...............................................25
vii
Findings..................................................................................................................31
Exchange Operating Model ...................................................................................32
Operating Model Criterion 1: Avoids Adverse Selection ......................................35
Operating Model Criterion 2: Facilitates Competition among Health
Insurers ...................................................................................................................38
Operating Model Criterion 3: Enhanced Consumer Experience ..........................39
Ranking System .....................................................................................................40
Evaluation of Operating Model Alternatives .........................................................41
Findings..................................................................................................................50
5. THE CALIFORNIA HEALTH BENEFIT EXCHANGE .............................................53
CHBE Governance.................................................................................................53
CHBE Operating Model ........................................................................................55
Conclusion .............................................................................................................57
References ..........................................................................................................................59
viii
LIST OF TABLES
Page
1.
Table 1 U.S. Health Care Expenditures and Per-Capita Spending, 2000-2009 ...........5
2.
Table 2 Qualified Health Plans ..................................................................................15
3.
Table 3 Minimum Requirements of State Exchanges Established Pursuant
to the ACA..................................................................................................................17
4.
Table 4 State Choices in Establishing Exchanges ......................................................20
5.
Table 5 Criteria for Evaluating Governance Alternatives ..........................................25
6.
Table 6 Exchange as a Non-Profit ..............................................................................27
7.
Table 7 Exchange within an Existing Agency ...........................................................28
8.
Table 8 Exchange as a New Government Agency .....................................................30
9.
Table 9 Exchange as a Multi-State or Geographic Subsidiary Exchange ..................31
10. Table 10 Evaluating Governance and Structure .........................................................32
11. Table 11 Criteria for Evaluating Operating Model Alternatives ................................40
12. Table 12 Open Marketplace Model ............................................................................43
13. Table 13 Standardized Marketplace Model ...............................................................46
14. Table 14 Selective Contractor Model .........................................................................49
15. Table 15 Operating Model Alternatives .....................................................................50
ix
1
Chapter 1
INTRODUCTION
In 2010, after literally decades of debate, President Obama signed a controversial
federal law making sweeping changes to the existing health care system. The Patient
Protection and Affordable Care Act (ACA) makes significant health insurance market
reforms to make better health care coverage available to more people at a lower cost.
Much of the burden of implementing these changes will fall to the states, and California
is no exception. In this thesis, I explore the choices provided to states under the new law
and analyze the options available for implementing the ACA. Specifically, I discuss the
establishment of an exchange in California under the ACA and the flexibility afforded
states in designing its governance and operating model. Exchanges are a key component
of the ACA to make health care coverage available to individuals and small employers.
To facilitate the purchase of health care coverage, the ACA requires states to
establish state-operated health insurance marketplaces called American Health Benefit
Exchanges (exchanges) by January 1, 2014 to bring together sellers and buyers of health
insurance so consumers can shop, compare, and purchase health care coverage that meets
the new regulatory standards of the ACA. If, by January 1, 2013, a state does not have
certification from the U.S. Department of Health and Human Services (DHHS) that it is
on track to opening an exchange in 2014, the federal government will step in to operate
the exchange on behalf of the state.
2
States have discretion in determining how the exchanges will operate to
effectively meet consumer needs. The long-term success of a state’s exchange is largely
dependent on how this discretion is used, as well as how the exchange works with the
private insurance market to make health care coverage accessible to consumers. Given
this flexibility, California must establish an exchange that is able to carry out the core
functions required under the ACA to facilitate the purchase of qualified health care
coverage by individuals and small employers. In this thesis, I examine key policy
choices California has in designing an exchange and the implications of those choices.
Though legislation has already been passed to create an exchange in California – the
California Health Benefit Exchange or CHBE – open issues and challenges must still be
addressed as planning and implementation efforts continue.
The remainder of this thesis is laid out as follows. To provide some context
around the passing of this federal legislation, Chapter 2 includes a brief history of the
health care debate and a discussion of current health care coverage rates and spending in
the U.S. and California. I also include a discussion of the major provisions of the ACA.
Chapter 3 is a general discussion of what a health insurance exchange is and the intended
role of such an entity in federal health care reform. I discuss the core functions of
exchanges under the ACA. In Chapter 4, I discuss the options and flexibility afforded
states in designing an exchange’s governance and its operating model, criteria for
evaluating policy alternatives, and the implications of these choices. The alternatives are
evaluated and displayed in a criteria-alternative matrix (CAM). I use the CAM to discuss
3
the optimal choices for California in designing an exchange. Chapter 5 includes a
discussion of the decisions that have already been made in California and the legislation
establishing an exchange, as well as the challenges that remain as decision makers
progress toward a fully operational exchange. The outcome of the ACA and exchanges is
unknown. However, this thesis can provide decision makers with the necessary
background to design and operate an exchange in California.
4
Chapter 2
HEALTH CARE REFORM IN THE U.S.
The health care debate in the U.S. has been a point of controversy since the early
20th century as advances in medical technology coincided with rising costs of health care.
As early as 1932, the Committee on the Costs of Medical Care, commissioned to study
the U.S. health care system, found that health care providers, reform advocates, and other
groups generally believed that some level of affordable health care should be made
available, but there was little consensus about how to deliver it and who should pay for it
(Smith, 1933). This debate continues today.
U.S. Health Care Spending and the Uninsured
In the past 20 years, voters in presidential and congressional elections have named
health care as a key campaign issue and identified rising health care costs as a
contributing factor to their personal economic concerns (Kaiser Family Foundation,
2008b). President Clinton tried and failed to pass comprehensive reform in the 1990s
while states have implemented regulatory policies and strategies with varied results,
including state-administered high-risk pools, purchasing cooperatives, and strict
regulation of the health insurance market. Even with these attempts to reform the U.S.
health care system, the U.S. still spent $2.5 trillion on health care in 2009 (Centers for
Medicare & Medicaid Services, 2010). Table 1 displays U.S. health care spending each
year from 2000 to 2009. These figures are from the National Health Expenditure Data
from the Centers of Medicare & Medicaid Services.
5
Table 1
U.S. Health Care Expenditures and Per-Capita Spending, 2000-2009
Year
Total U.S. Health
Per Capita Spending
Percent of Gross
Expenditures (In Billions)
(In Dollars)
Domestic Product
2000
$1,378.0
$4,878
13.8 %
2001
$1,495.3
$5,240
14.5 %
2002
$1,637.0
$5,682
15.4 %
2003
$1,772.2
$6,098
15.9 %
2004
$1,894.7
$6,458
16.0 %
2005
$2,021.0
$6,827
16.0 %
2006
$2,152.1
$7,198
16.1 %
2007
$2,283.5
$7,561
16.2 %
2008
$2,391.4
$7,845
16.6 %
2009
$2,486.3
$8,086
17.6 %
*Source: Centers for Medicare & Medicaid Services, 2011.
As health care costs continued to increase, 19% of Americans under age 65 (50
million) were uninsured, and another 20% received health care coverage through
Medicaid or some other government funded program (Kaiser Family Foundation, 2010).
Fifty-seven percent of the population under age 65 has employer-sponsored coverage
(Kaiser Family Foundation, 2010). However, from 2000 to 2010, the annual premium for
a family with coverage provided by a small employer increased by 103% and by 120%
for families with coverage provided by large employers (The Kaiser Family Foundation
and Health Research & Educational Trust, 2010).
6
Despite government efforts to make health care coverage more accessible, the
underinsured and uninsured population has continued to grow, and health care costs have
continued to rise. As the cost of health care coverage rises, it becomes more difficult for
individuals to maintain coverage and for businesses to provide coverage to their
employees. Individuals may forgo coverage, particularly health individuals who do not
see an immediate need to pay for expensive comprehensive health care coverage. To
provide some level of coverage, businesses increasingly provide high-deductible health
insurance or other similar products that require the employee to cover more of the costs,
sometimes for fewer benefits (Schoen, Doty, Collins, & Holmgren, 2005). Individuals,
especially those who have low-cost health care needs, may also purchase high-deductible
coverage. This leads to people being underinsured and still unable to afford or access
health care. Schoen, Collins, Kriss, and Doty (2008) classify an individual as
“underinsured” if out-of-pocket medical costs exceed 10% of income (or 5% of income
for low-income individuals), or deductibles were greater than 5% of income. This group
increased 60% in the U.S. from 2003 to 2007 (Schoen et al., 2008).
Health Care Spending and the Uninsured in California
In 2004, personal health care spending was 11% of gross domestic product on
health care, compared to 13.3% for the U.S. as a whole (California HealthCare
Foundation, 2010). Compared to the rest of the nation, California has lower rates of
employer-sponsored coverage and higher rates of uninsured (California HealthCare
Foundation, 2010). Approximately 25% of the California population is uninsured.
7
Employer-sponsored coverage has declined as enrollment in publicly funded programs
like Medi-Cal and Healthy Families has increased.
Moving Toward Federal Health Care Reform
The 2008 Presidential Election pushed health care to the national forefront again
as key campaign issue. The candidates’ proposals varied from providing federal
subsidies and expanding public programs, like the Children’s Health Insurance Program
(CHIP) and Medicaid, to using free market strategies to reduce costs and improve quality
(Kaiser Family Foundation, 2008a). On March 23, 2010, after months of heated debate
across the country, President Obama signed the Patient Protection and Affordable Care
Act and the Health Care and Education Reconciliation Act of 2010, collectively referred
to by the federal government as the Affordable Care Act or ACA. This comprehensive
health care reform legislation is intended to increase access to affordable comprehensive
coverage and to stem the tide of rising health care costs (U.S. Department of Health and
Human Services, n.d.). As a result of the new federal law, there will be significant
changes to the U.S. health care system as the nation moves toward full implementation in
2014. California’s public agencies responsible for administering public health care
programs and regulating health insurance will be tasked with new responsibilities in order
to implement new regulations and programmatic changes to existing health care
programs.
The ACA expands health care coverage in the U.S., in part, by establishing new
health insurance regulations, providing new consumer protections, and requiring most
8
citizens and legal residents to either purchase coverage on their own or obtain coverage
through an employer. This attempts to resolve the issue of “free-riders” that seemingly
can afford to purchase coverage, but choose to do without. Health plans are no longer
allowed to place lifetime limits on the dollar value of coverage and are prohibited from
rescinding coverage when an enrollee gets sick. Additional market reforms, many of
which will become effective in 2014, include guaranteed issue and renewability of
coverage, ending annual limits on the dollar value of benefits, and requiring plans to offer
comprehensive Essential Health Benefit packages. To further expand health care
coverage, families with incomes between 133 and 400% of the federal poverty level
(FPL) will be eligible to receive premium tax credits, and cost sharing subsidies will be
available to families with incomes up to 250% of the FPL. Beginning in 2010, small
businesses providing coverage are eligible for tax credits. Employers with more than 50
employees will be assessed a fee if they fail to offer coverage to their employees, if
employees pay more than 9.5% of their income for health care coverage, or if they have
employees who receive a tax credit.
The final vote for the ACA was almost exclusively along party lines and the
provisions of the act remain extremely controversial. In this thesis, I do not wade into the
discussion of whether this is the appropriate way to resolve health care issues in this
country. I presume that the act will stay largely as is written, and California must make
several decisions about implementation. I realize this is a simplistic perspective. The
level of discussion especially along party lines leaves open the possibility that there will
9
be changes in the future. However, future changes are well outside the scope of this
thesis, and I analyze the options for California given the statutes as currently written.
10
Chapter 3
WHAT IS A HEALTH INSURANCE EXCHANGE?
Health insurance exchanges and similarly organized marketplaces are not a new
concept. Generally, exchanges such as those to be created under the ACA are entities
that pool together individuals or small employers so they are able to shop for health care
coverage in an efficient and transparent market. This system brings the benefits of a
large purchasing pool to individuals and small employers. Managed competition, along
with a large and diverse group of potential enrollees, incentivizes health insurers to
compete and sell products based on price, benefits, and quality rather than on health
status. In this chapter, I discuss the concept of managed competition and its potential role
in exchanges under the ACA.
Characteristics of Managed Competition
Exchanges such as those to be established under the ACA will adopt principles of
the managed competition model, first introduced by Alain Enthoven and further
developed over the 1980s and 1990s (Enthoven, 2011). Exchanges will have some form
of managed competition through the health insurance market reforms of the ACA and the
manner in which states decide to design state exchanges given the parameters of the
ACA. Organizations like the California Public Employees Retirement System
(CalPERS), the Massachusetts’ Commonwealth Health Insurance Connector Authority
(Massachusetts Connector), and the Federal Employees Health Benefits Program
(FEHBP) are examples of organized marketplaces featuring principles of managed
11
competition to make health care coverage choices available to employees and consumers
(Chirba-Martin & Torres, 2008; Enthoven, 2003).
Managed competition refers to an organized health care delivery system in which
a “sponsor” manages the marketplace to stimulate competition among participating health
insurers and to provide choices to consumers. These principles are used to prevent health
insurers from competing based on enrollees’ health statuses rather than price, benefits,
and quality of the health care coverage offered (Enthoven, 1993). Managed competition
also enables consumers to choose coverage based on price and obtaining the highest
value coverage for their dollar (Enthoven, 1993). In the case of exchanges established
under the ACA, the sponsor is a government entity, but a sponsor can also be a large
employer or a cooperative. Key characteristics of managed competition are the provision
of standardized coverage options, consumer information in a standardized format so
people shopping for coverage can easily compare their options (Enthoven, 1993). The
sponsor seeks the maximum value for enrollees’ premium dollars by contracting with
participating health insurers based on benefit, price, quality, and any other factors
negotiated by the sponsor (Enthoven, 1988, 1993). Sponsors also ensure that consumers
are provided with standardized information and data about available health care coverage
options enabling them to make informed choices (Buhmueller, 2009; Enthoven, 1993).
Consumers are encouraged to choose the best value for their own money.
12
Managed Competition and Exchanges
In line with the concept of managed competition, exchanges are intended to
provide individuals and small employers with the same advantages large employers have
when shopping for and purchasing group coverage. “Group coverage” is a single policy
or contract providing coverage for an entire group of people (Henderson, 2002).
Individual coverage is health care coverage not provided by an employer and covers a
single individual or an individual and his/her dependents (Henderson, 2002). The
sponsor of a large group negotiates with health insurers to purchase coverage for all the
employees in the group. Large groups are able to use market leverage to effectively
bargain with health insurers over prices, benefits, and quality of the health care coverage
options offered to their employees or members. Exchanges and similarly organized
purchasing pools are intended to provide individuals and small employers with these
same advantages by bringing them together into the same group, thereby generating
stability, efficiency, and lower administrative costs.
Managed competition also enables large groups to achieve economies of scale
where administrative costs associated with enrollment and claims processing are spread
across the entire large group rather than applying just to an individual. Administrative
costs can vary across health insurers. However, such costs in the individual and small
group markets are approximately 25 to 30% of earned premiums compared to roughly
12% for the large group market (Litow, 2006). By streamlining the enrollment process
13
and reducing administrative costs, more of the premium dollar can be allocated to health
care.
Large groups having a diverse pool of potential enrollees have less chance of
adverse selection, which also encourages health insurers to compete with one another to
win the large group’s business and the most enrollees from the group. Avoidance of
adverse selection is one of the key factors to a successful risk pool or health insurance
product and is one of main reasons previous exchanges have failed (Jost, 2010b). The
traditional definition of adverse selection describes a situation in which there is
information asymmetry in the marketplace and individuals have more information about
their own health and potential level of utilization than the health insurer (Henderson,
2002). This can lead to an insurance product or group having too many high-risk, highutilizing enrollees that drive up premium costs. Healthy, low-risk, individuals are more
likely to drop out as premiums increase. A health insurance product or purchasing pool
will fail if it has a disproportionate number of enrollees with high-cost health care needs,
resulting in too many unhealthy people accessing medical care and not enough healthy
people paying premiums to keep the product or group solvent. Premiums are then
increased to cover enrollees’ claims, in turn making the market less attractive to healthier,
low-risk consumers who are more sensitive to price increases. As low-risk enrollees drop
their health care coverage, the health insurer must increase premiums and other costs
even more to cover claims. Eventually, the health insurance product fails because there
are not enough premium dollars to cover enrollee claims.
14
Core Functions of Exchanges Created by the ACA
The exchange provisions of the ACA, when coupled with health insurance market
reforms, have features of managed competition as described above. The core functions
of exchanges established by the ACA fall under regulatory activities to ensure that only
“qualified health plans (QHP)” and consumer assistance activities are offered so
consumers can compare QHPs and make informed choices based on quality, value, and
price.
Health plans participating in the exchange may only offer QHPs. A QHP must be
certified by an exchange and meet criteria specified in the ACA as well as any additional
requirements established by the exchange or the Secretary of HHS. Table 2 displays the
minimum requirements a health plan must meet to be certified as a QHP.
15
Table 2
Qualified Health Plans
General Provisions
Certification
Certification from an exchange that
it meets the criteria in Section
1311(c) of the ACA
Description
Section 1311(c) requires the Secretary of HHS to develop
regulations establishing criteria requires QHP to meets
requirements related to the following:
 Marketing,
 Network adequacy,
 Accreditation for performance measures,
 Quality improvement,
 Enrollment procedures,
 Standardized consumer information, and
 Reporting requirements and public disclosure
Essential Health Benefits
Section 1302(b) requires HHS to define essential health
Minimum benefit requirements
benefits in the following categories:
Includes the essential health benefits
 Ambulatory patient services,
described in Section 1302(b) of the
 Emergency services,
ACA
 Hospitalization,
 Maternity and newborn care,
 Mental health and substance use disorder services,
 Prescription drugs,
 Rehabilitative and habilitative services and devices,
 Laboratory services,
 Preventive and wellness services and chronic disease
management, and
 Pediatric services
Lifetime and Annual Limits
 Beginning September 23, 2010, the ACA prohibits
Eliminates lifetime and annual limits
lifetime limits on most benefits.
on essential health benefits and
 Beginning January 1, 2014, the ACA prohibits annual
limits cost-sharing according to
dollar limits
Section 1302(c) of the ACA
 QHPs must include specified limits on out-of-pocket
costs, including deductibles, coinsurance, and
copayments.
Levels of Coverage
The level of coverage is determined by actuarial value or the
Provides at least one of the required
percentage of average costs the QHP will cover. The ACA
coverage levels.
defines the following coverage levels:
 Bronze Level: The QHP covers 60% of the costs for
covered benefits.
 Silver Level: The QHP covers 70% of the costs for
covered benefits.
 Gold Level: The QHP covers 80% of the costs for
covered benefits.
 Platinum Level: The QHP covers 90% of the costs
for covered benefits.
Source: Affordable Care Act; U.S. Department of Health and Human Services, 2010
16
In addition to the items in Table 2, the exchange must rate QHPs using a system
based on price and quality, to be developed by HHS. The exchange must certify,
recertify, and decertify plans based on these criteria, but may opt to require participating
health plans to meet additional criteria (U.S. Department of Health and Human Services,
2010). For example, an exchange may require a QHP to offer benefits in addition to the
essential health benefits; however, the state is required to cover the cost of those
additional benefits.
Managed competition features sponsors that take an active role in the enrollment
process and in ensuring consumers have adequate information about the quality of the
coverage options offered. Exchanges under the ACA are required to provide consumer
assistance for individuals and small employers shopping for health care coverage and
provide the standardized information to compare coverage offered by participating health
insurers. This includes operating a toll-free hotline and Internet website for consumers.
In addition to providing assistance to individuals and small employers shopping for
coverage, the exchange is also required to screen for applicants eligible for Medicaid, the
Children’s Health Insurance Program (CHIP), and other public programs. The exchange
must also determine eligibility for tax credits or cost sharing subsidies and exemptions
for the individual requirement to purchase coverage. The ACA also allows for exchanges
to enroll people in public programs. Exchanges are required to establish a Navigator
program to award grants to “Navigators” who will carry out public education and
outreach activities and facilitate enrollment in QHPs. These entities will also be
17
responsible for providing referrals to state consumer assistance entities or the appropriate
state agency when an enrollee has a complaint, grievance, or questions regarding his/her
coverage.
Table 3
Minimum Requirements of State Exchanges Established Pursuant to the ACA
Exchanges must carry out the following core functions:
Core Functions
Oversight Functions
 Certification of qualified health plans
 Operations of a toll-free hotline
 Maintenance of a website for providing information on plans
to current and prospective enrollees
 Assignment of a price and quality rating to plans
 Presentation of plan benefit options in a standardized format
 Provision of information on Medicaid and CHIP eligibility
and determination of eligibility for individuals in these
programs
 Provision of an electronic calculator to determine the actual
cost of coverage, accounting for premium tax credits and cost
sharing reductions
 Certification of individuals exempt from the individual
mandate requirement
 Establishment of a Navigator program that provided grants to
entities providing consumer assistance
 Consultation with stakeholders
 Provision of open enrollment periods
Exchanges must ensure that participating health insurers meet
regulatory standards in the following areas:
 Marketing
 Network adequacy
 Accreditation for performance measures
 Quality improvement and reporting
 Uniform enrollment procedures
18
Table 3 continued
Exchanges must consider the following regulatory standards, yet to
be established by the U.S. Department of Health and Human
Services:

Oversight Functions
continued




Adequate information on in-network and out-of-network
providers, provider directories, and availability of
community providers.
Premium trends and plans’ justifications of premium
increases.
Public disclosure of health plan data, including claims,
denials financial disclosures, and enrollment/disenrollment
data.
Timely consumer assistance, including information on costsharing when requested by consumers.
Information on quality improvement efforts.
Source: U.S. Department of Health and Human Services (2010)
The ACA includes specific deadlines with which states must comply as they
establish and implement an operating exchange. State-operated exchanges are required to
begin operating by January 1, 2014, and must have certification from HHS by January 1,
2013 that reasonable progress toward this goal has been made. In addition, exchanges are
required to be financially self-sustaining within one year of operation. To meet these
goals, California will need to move quickly to carry out planning and implementation
activities across several agencies. This includes working with the agencies that
administer public health care programs, streamlining these agencies’ current consumer
assistance functions, and collaborating with the state’s regulatory agencies.
With higher rates of the population uninsured and lower rates of employersponsored coverage, compared to the rest of the country, California decision makers must
quickly, but carefully, decide how it will create its exchange. California’s large diverse
19
population and complex needs do not leave an optimal situation for the federal
government to operate the exchange. Compounding this fact is the high rate of
undocumented persons residing in California who are not eligible to purchase coverage
through the exchange. The manner in which California designs its exchange to work
with health insurers and other state agencies to carry out these core functions will
determine the success of the exchange as it makes health care coverage available to
individuals and small businesses.
20
Chapter 4
STATE FLEXIBILITY IN DESIGING EXCHANGES
In this chapter, I discuss the relevant provisions of the ACA where states must
make choices in organizing and designing health insurance exchanges, criteria for
evaluating alternatives, and the implications of these choices using a CAM. According to
the initial guidance released by the U.S. Department of Health and Human Services
(2010), a state must make decisions on the exchange’s governance and operating model
as it makes health care coverage options available to individuals and small employers.
California must give careful consideration to how it will use this flexibility, as the
decisions made over the next three years will drive the long-term success of exchanges.
Table 4 below lays out the choices the State must make in regard to exchange governance
and operating model.
Table 4
State Choices in Establishing Exchanges

Governance


Operating Model


Should the exchange be established as an independent
government agency, within an existing government
agency, or as a non-profit agency?
Should the state form a single exchange, several
regional exchanges within the state, or a multi-state
exchange?
Should the exchange require health plans to
competitively bid to participate in the exchange?
Should the exchange selectively contract with health
insurers?
Should health insurers be required to offer benefits
beyond the Essential Health Benefits required?
Source: U.S. Department of Health and Human Services, 2010
21
Methodology
To evaluate the options California has for designing its exchange governance and
operating model, I use a CAM or Criteria Alternative Matrix. The alternatives are
displayed in rows, and the criteria are displayed in columns. Each cell contains some
evaluation or indicator of how well the given alternative satisfies the criteria in the
column.
I first discuss the flexibility and specific options the state has under the ACA for
exchange governance. The alternatives are based on the provisions of the ACA
specifying that the exchange must be a nonprofit entity or a government agency. I then
discuss the three criteria used to evaluate the alternatives for exchange governance.
These criteria were derived from “principles and priorities” described in the Initial
Guidance to States on Exchanges (U.S. Department of Health and Human Services,
2010). I then provide an analysis of each possible alternative as provided by the ACA.
The evaluation for each alternative was displayed in the CAM as a
the alternative satisfied the criterion in the column, and a “--” indicating it did not
adequately satisfy the criterion. In this case, the alternative either satisfied the criterion
or it did not, so a numerical rank was not necessary.
Next, I evaluated the alternatives for the exchange operating model. I began this
evaluation with a discussion of the range of alternatives available to states for an
operating model. As with the criteria used to evaluate the exchange governance
alternatives, the criteria were selected based on the Initial Guidance to States on
22
Exchanges (U.S. Department of Health and Human Services, 2010), as well as the
characteristics of managed competition. Some criteria are more critical to the success of
the exchange and have been ranked appropriately. Because there is a range or continuum
of alternatives for the exchange operating model, these alternatives were evaluated using
a weighted rank to measure the degree to which the alternative satisfies the given
criterion. For each alternative, the weighted ranks assigned to the criteria were added to
yield a total score.
Exchange Governance
Governance refers to the organizational design, administration, and oversight of
the exchange (U.S. Department of Health and Human Services, 2010; Weil, Shafir, &
Zemel, 2011). Exchange governance also includes issues such as how exchange officials
are selected and establishing personnel, contracting, and procurement procedures (Van de
Water & Nathan, 2011). Under the ACA, California is permitted to create the exchange
as a nonprofit entity or as a government agency. If established as a government agency,
the exchange can be housed within an existing agency such as the California Department
of Health Care Services or as a new government agency. Alternatively, an exchange as a
new government agency could be established as a state board or commission, or a
department under the Governor’s executive branch. California may also opt to establish a
single exchange to serve the entire state, several subsidiary exchanges that serve
geographic areas within the state, or a multi-state exchange that provides services to a
specific U.S. region (U.S. Department of Health and Human Services, 2010). Each of
23
these alternatives has implications for how the exchange operates and how it interacts
with other government agencies (Jost, 2010a; Van de Water & Nathan, 2011). Though
California has moved forward with establishing the CHBE governance as an independent
state board, this section presents the tradeoffs for each alternative available and addresses
the challenges the new exchange board faces.
Based on the Initial Guidance released by the U.S. Department of Health and
Human Services (2010), decision makers must consider accountability and transparency
to the public, avoidance of conflict of interest, and the exchange’s ability to move quickly
with establishment activities as well as flexibility to react to changes in the health care
market. In addition, the exchange should be able to collaborate with other agencies
involved with administering health care programs and implementing the ACA in
California (Jost, 2010b). These considerations serve as the criteria by which the
alternatives for governance and structure were evaluated.
Governance Criterion 1: Public Accountability and Transparency
As one of the principles and priorities outlined in the Initial Guidance (U.S.
Department of Health and Human Services, 2010), public accountability and
transparency will be one of the key factors in determining federal support and funding for
state planning and establishment activities. Exchanges will be required to publicly
disclose information related to licensing and regulatory fees and administrative costs
[§1311(d)(7)]. In addition, the exchange will need to avoid conflict of interest so
24
executive leadership does not have a financial or personal interest in exchange activities
and decisions.
Governance Criterion 2: Flexibility
The exchange should be able to react quickly to changes in the overall health care
market to ensure health plan competition and consumer choice (U.S. Department of
Health and Human Services, 2010). Over time, it may be necessary for the exchange to
adjust its operational model. In addition, the exchange must have enough flexibility to
work effectively with private health insurers, stakeholders, and other government
agencies. Given the short time period to create an operating exchange, this flexibility and
ability to make decisions quickly is essential.
Governance Criterion 3: Interagency Collaboration
Establishment of an exchange in California necessitates collaboration among state
agencies, including the Department of Finance, Department of Health Care Services,
Office of Systems Integration, the Department of Managed Health Care, and the
Department of Insurance (California Health and Human Services Agency, 2010). These
agencies will need to work quickly and efficiently in order to have a fully operational
exchange by January 1, 2014. In addition to state agencies, the exchange will also have
to work with local agencies and counties providing direct services to the public. Not only
will these state and local agencies need to work together to establish the exchange,
interagency collaboration is fundamental to a successful exchange.
25
Table 5 is a summary of the criteria for evaluating exchange governance
alternatives. These criteria carry equal weight as flexibility and interagency collaboration
are critical to the success of the exchange, and accountability and transparency are
required under the ACA.
Table 5
Criteria for Evaluating Governance Alternatives
Accountability and Transparency
Flexibility
Interagency Collaboration
The exchange is accountable to
the public, and exchange
activities, operations, and
finances are transparent. The
exchange governance and state
statutes should prohibit conflict of
interest.
The exchange should
operate efficiently. It
should be able to quickly
move forward with
establishment activities.
It should be flexible
enough to respond to
changes in the overall
health care market.
The ease with which the exchange
is able to collaborate with existing
state agencies that carry out one or
more activities related to the
exchange’s core functions,
including regulating health
insurance, administration of public
health programs, and state
information technology
infrastructure.
Evaluating the Exchange Governance Alternatives
Governance Alternative 1: The Exchange as a Nonprofit
An exchange as a nonprofit entity established by the state would have the benefit
of being subject to fewer state administration laws related to personnel, contracting, and
procurement allowing it to be more flexible in responding to changes in the health care
market (Jost, 2010b; National Association of Insurance Commissioners, 2010). In
general, such an entity would be able to make decisions and carry them out quickly. On
the other hand, state administrative laws are in place to ensure accountability and
transparency. The relative independence of a nonprofit entity could hinder accountability
and state oversight efforts as well as impede coordination with other state agencies
26
(National Association of Insurance Commissioners, 2010). Though not specifically
related to health care, California’s system of private, nonprofit regional centers that
contract with the State to provide services to individuals with developmental disabilities
can serve as an example of the difficulties arising with accountability and transparency of
a nonprofit entity. The California Bureau of State Audits has found that the Department
of Developmental Services did not provide enough oversight for the regional centers’
fiscal operations, and expenditures did not always appear to be reasonable (California
State Auditor, 2010). There is the potential for similar disadvantages and lack of
oversight with several geographic subsidiary exchanges. The State would need to ensure
there are laws and regulations in place to confirm adequate oversight, transparency, and
public disclosure of financial activity as required by the ACA.
A nonprofit entity may be at a disadvantage compared to a governmental agency
when working with other state agencies and external entities like counties and local
agencies. A nonprofit exchange is less likely to have established relationships with the
other state agencies carrying out health care reform implementation activities (National
Association of Insurance Commissioners, 2010). According to Jost (2010a), oversight
functions like certifying qualified health plans are governmental functions and may not
be appropriate activities under the purview of a nonprofit entity.
27
Table 6
Exchange as a Non-Profit
Accountability and
Transparency
Nonprofit status may hinder
state oversight activities. May
be subject to fewer
administrative state laws. State
law could be implemented to
prevent conflict of interest.
Flexibility
Interagency Collaboration
May be subject to fewer state
administration laws allowing for
greater flexibility. However,
there may be less transparency
and accountability to the public.
Unlikely to have established
working relationships with
other state agencies.
Independence may hinder
interagency collaboration.
Governance Alternative 2: The Exchange as an Existing Agency
An exchange housed within an existing agency would already have administrative
procedures and regulations in place, which may enable the state to establish an exchange
more quickly than by creating a new agency (National Association of Insurance
Commissioners, 2010; Van de Water & Nathan, 2011). In addition, existing agencies
already have interagency relationships established and may carry out one or more of the
required functions of an exchange under the ACA (National Association of Insurance
Commissioners, 2010). Existing state agencies responsible for administering public
health care programs or health insurance regulation have the experience and expertise to
carry out one or more functions of the exchange. In California, such agencies include the
Department of Health Care Services as the State’s Medicaid agency, the California
Department of Insurance, and the Department of Managed Health Care. The State also
has the Department of Insurance and the Department of Managed Health Care, two health
insurance regulatory agencies that could feasibly house the exchange. In addition to
regulating health maintenance organizations (HMOs), the Department of Managed Health
28
Care also operates a Help Center that helps resolve enrollee complaints about their health
care coverage. However, it may not be appropriate to establish an exchange that makes
health care coverage available to consumers within a regulatory agency as issues of
conflict of interest may arise (Jost, 2010b; Van de Water & Nathan, 2011). Van de Water
and Nathan (2011) also suggest possibly establishing the exchange with an agency
responsible for collecting taxes or administering health care coverage for public
employees. Any of these agencies could be suitable for housing the exchange, and they
will be required to work closely with the exchange regardless of its governance and
organizational form.
While an exchange within an existing agency would have the advantage of
established administrative procedures and experience with one or more required
functions, an existing agency may not have the capacity to carry out all the new functions
related to the exchange (Van de Water & Nathan, 2011). This could hinder its ability to
adjust to the health care market place.
Table 7
Exchange within an Existing Agency
Accountability and
Transparency
Subject to state
administration laws. Subject
to state laws related to
conflict of interest.
Flexibility
Interagency Collaboration
May not have the capacity to
carry out new functions and
adapt quickly to changes in
the market.
Existing agency would
already have established
relationships with other
state agencies, and is able to
navigate state processes.
29
Governance Alternative 3: The Exchange as a New Agency
The State has the option of establishing the exchange as a new governmental
agency. This could be an independent state agency like the Massachusetts’ Connector or
CalPERS or a state agency accountable to the Governor’s Office. An exchange as a new
independent agency may have the advantage of being able to create a new organizational
culture and structure without the bureaucratic hurdles that may exist within a larger, older
public organization. This could also be an advantage for the exchange in establishing
new relationships with other state agencies. A new state agency would also be able to
focus on establishing and operating the exchange rather than on carrying out exchange
functions in addition to existing mandates (Van de Water & Nathan, 2011).
An exchange could be structured as a department, board, or commission.
According to Jost (2010a), states will most likely establish the new exchange as a board,
as is the case with California. A board’s membership can be determined so relevant
experience and expertise can be selected to ensure all stakeholder interests are
represented. Board members can represent a variety of interests, including consumer
advocates, small businesses, regulators, and other state agencies related to health care.
The state should be careful that representation by health insurers and health care
providers does not present a conflict of interest (Jost, 2010a).
An exchange housed within as a department in the Executive Branch would be
accountable to the Governor. Such an exchange may be more vulnerable to political
influence than the other alternatives. Additionally, the same administrative laws and
30
requirements intended to promote accountability and transparency may delay the
exchange’s ability to move quickly with hiring key personnel and contracting and
procurement. Whether the exchange is a department or board, state law and statutes
could be implemented to ensure public accountability as well as maintain the flexibility
and efficiency.
Table 8
Exchange as a New Government Agency
Accountability and Transparency
Subject to state administration
laws Subject to state laws related
to conflict of interest. However,
issues may arise is the exchange is
housed in a regulatory agency.
Flexibility
Legislation establishing
the agency can exempt
the agency from state
administration laws
allowing for increased
flexibility.
Interagency Collaboration
New working relationships
with other state agencies
must be established.
These roles can be
established by mandate.
Governance Alternative 4: An Exchange as a Multi-state Exchange or Subsidiary
Exchanges
The ACA allows the state to establish a multi-state exchange or several
geographic subsidiary exchanges within the state. A multi-state exchange may be
appropriate for small states or metropolitan areas that cross state lines like the NY-NJ-CT
tri-state area (Blumberg & Pollitz, 2009; Jost, 2010a; Van de Water & Nathan, 2011).
However, such an arrangement may present challenges when navigating a regulatory
scheme under multiple states. States would have to align statutes and regulations related
to the exchange. Additionally, exchange operations may become more complex when
coordinating activities among more than one Medicaid agency, insurance regulator, and
agencies involved in carrying out health care reform implementation (Van de Water &
31
Nathan, 2011). Similarly, it may be difficult to coordinate activities among several
geographic subsidiary exchanges.
Table 9
Exchange as a Multi-State or Geographic Subsidiary Exchange
Accountability and Transparency
Oversight may be hampered due to
several participating states in
multi-state exchange or
subsidiaries in a single state.
Flexibility
Operations across
several states or
subsidiaries could
become complex and
hinder flexibility.
Interagency Collaboration
Difficult to collaborate
across multiple state
agencies or several small
exchange entities within the
state.
Findings
Table 10 is a summary of the governance alternatives available to California.
Decision makers will need to consider the tradeoffs in determining the best approach for
the state. A “ ” means the alternative for exchange governance would meet the criterion
indicated. A dash means the alternative may not adequately satisfy the criterion.
32
Table 10
Evaluating Governance and Structure
Accountability and
Flexibility
Transparency
Exchange as a Non-Profit
Interagency
Collaboration
--
Exchange Within an
Existing Government
Agency
---
Exchange as an
Independent Government
Agency
Exchange as Several
Geographic Subsidiaries or
a Multi-state Exchange
--
--
--
Based on this analysis, the exchange as an independent government agency is
likely the optimal choice for exchange governance in California. This form of exchange
governance remains accountable and transparent to the public as would any public or
government agency. Additionally, as a government agency, the exchange would be in a
better position to carry out activities that require coordination with existing agencies. A
new independent agency, particularly one exempt from California’s civil service
requirements or hiring freezes will be flexible enough to implement exchange legislation
and adapt to the health insurance marketplace over the life of the exchange.
Exchange Operating Model
Moving forward, the CHBE Board must design the operating model that will be
used to successfully make QHPs available to consumers. The ACA permits exchanges to
certify any health plan that meets the ACA’s minimum criteria as a QHP and best serves
33
the interests of individuals and small employers. The goal is to attract a large, diverse
purchasing pool and incentivize health insurers to compete for business by offering high
quality coverage options for low prices so consumers can compare and select coverage
based on quality, price, and benefits offered (Jost, 2010b). If the exchange is able to
draw a large and diverse enough pool of potential enrollees, it will be able to use market
leverage to encourage health insurers to offer higher value coverage through the
exchange.
Alternatives for the exchange operating model can be represented on a continuum.
The range of alternatives can be used to increase competition among health plans and
bring higher quality coverage options to the exchange marketplace. On one end, the
exchange can act as a clearinghouse that provides individuals using premium subsidies
with information about any QHP that meets the ACA’s minimum criteria with market
forces generating product availability (Merlis, 2009; Morgan, 2011; U.S. Department of
Health and Human Services, 2010). The initial federal guidance to states on exchanges
refers to this as an “open marketplace” model (U.S. Department of Health and Human
Services, 2010). This type of exchange would carry out few activities beyond the core
functions required by the ACA.
As we move along the continuum, the exchange plays an increasingly active role
using tools of managed competition to stimulate competition among health insurers based
on quality, benefits covered, and price rather than on risk selection. The exchange may
choose to operate as a “standardized” marketplace that limits variation among the
34
coverage options made available to consumers, and options are standardized based on
features like covered benefits and cost-sharing structure (National Academy of Social
Insurance, 2011). Furthermore, the exchange may bargain with health insurers to offer
higher levels of coverage or develop additional certification standards for health insurers
in order to participate in the exchange. The exchange, as a sponsor, can enhance the
market rules and protections already required under the ACA by selecting health insurers
to participate.
Moving further along the continuum, the exchange is an active purchaser or
selective contractor that requires health insurers to competitively bid to participate in the
exchange. The exchange would then contract with health insurers offering coverage in
the best interest of consumers. Because there is a range of options available, I examine
three operating model alternatives with the understanding that it is possible to choose a
model that blends characteristics of multiple operating models. The alternatives are as
follows: 1) The “Clearinghouse” Marketplace, 2) The “Standardized” Marketplace, and
3) The Selective Contractor.
In determining the operating model, it is critical the exchange avoids adverse
selection or a disproportionate number of high-risk consumers (Jost, 2010b; National
Association of Insurance Commissioners, 2011; U.S. Health and Human Services, 2010).
“Avoidance of adverse selection” served as one of the key criterion for evaluating the
operating model alternatives. States are also encouraged to create exchanges that
facilitate competition based on quality and price. Competition and consumer choice
35
based on quality and value will create a more efficient market (Jost, 2010b). Decision
makers should consider the exchange’s ability to generate competition so the coverage
options made available are in the best interest of consumers. The ACA requires the
exchanges to carry out a number of consumer assistance activities intended to enhance
the individual and small employer experience when shopping for health care coverage.
Exchanges should be designed to promote an enhanced, consumer-friendly experience
that encourages individuals and small employers to voluntarily seek coverage through the
exchange. The exchange should be easy to navigate, and consumers should be able to
easily shop, compare, and choose their coverage. In line with managed competition,
consumers should be encouraged to select the coverage that is the best value for their
money (Enthoven, 1993). Additionally, consumers should have a range of available
options when seeking coverage without so many choices that shopping becomes too
cumbersome (Kingsdale & Bertko, 2010).
Operating Model Criterion 1: Avoids Adverse Selection (Weighted 40%)
Adverse selection is identified as the most significant reason exchange-like
entities have failed in the past (Jost, 2010b). To emphasize the importance of this
criterion, “avoidance of adverse selection” is weighted 40% in evaluating alternatives.
This gives the “avoids adverse selection” criterion slightly more importance without
overwhelming the other two criteria.
The exchange will be at risk for adverse selection if it is unable to attract enough
low-risk healthy individuals and has a disproportionate number of consumers with high
36
health care costs (Jost, 2010b; National Academy of Social Insurance, 2011). Though the
ACA includes provisions that serve to prevent adverse selection, the exchange operating
model can be designed to further prevent adverse selection. An exchange that attracts a
large diverse risk pool, for example, has a reduced chance of adverse selection (Jost,
2010b).
The existence of a traditional health insurance market outside the exchange
increases risk for adverse selection (National Association of Insurance Commissioners,
2011). The exchange will have to compete with the outside market, and low-risk healthy
individuals can opt to purchase insurance in the traditional health insurance market if
they are not using cost-sharing subsidies (Jost, 2010a). If the rules for the traditional
health insurance market are too different from the exchange, health insurers can sell
coverage outside the exchange that disproportionately attracts low-risk consumers. This
can result in the exchange becoming a high-risk pool that attracts individuals with a high
demand for comprehensive coverage (Jost, 2010b). The exchange then becomes
unattractive and too expensive. On the other hand, if coverage offered in the exchange is
too limited, consumers may turn to the outside market for better options (National
Association of Insurance Commissioners, 2010). There is also risk for adverse selection
among products within the exchange if participating health insurers are able to design
products that disproportionately attract low-risk individuals (Jost, 2010a).
Self-insured plans also put exchanges at risk for adverse selection. These types of
plans typically feature a larger business that collects premiums and pays medical claims
37
for employees and their dependents (U.S. Department of Health and Human Services,
2010). Self-insured plans are subject to regulations under the Employment Retirement
Income Security Act of 1974 and are generally exempt from state law and many of the
provisions of the ACA (Chaikind, 2003; Jost, 2010a). An employer may continue to
maintain a self-insured plan until it is more affordable to shift employees to the exchange,
creating what is essentially a high-risk pool. States may expand exchanges to allow
participation by large employers beginning in 2017. The exchange operating model
should be such that employers find coverage through the exchange to be a better deal, not
just when employees become too expensive to cover.
There are provisions of the ACA and California’s legislation establishing the
CHBE that will help prevent adverse selection within and against exchanges. The
individual mandate requiring most individuals to have health care coverage will prevent
health low-cost individuals from forgoing coverage (Jost, 2010b). The ACA requires
individuals with tax credits and cost-sharing subsidies to obtain coverage through the
exchange. This will ensure the exchange captures at least some segment of the individual
market. While the ACA permits only QHPs to be offered in the exchange, it also requires
health insurers to include essential health benefits and to comply with new market
reforms. This will serve to create some standardization across products offered within
and outside the exchange. Further, the ACA implements risk adjustment programs where
those health insurers that disproportionately attract low-risk healthy enrollees must
38
reimburse health insurers that disproportionately enroll high-risk individuals. This will
help prevent adverse selection against the exchange (Jost, 2010b).
The State legislation implementing the ACA and establishing the CHBE takes
further action to prevent adverse selection. Health insurers in the traditional market and
those participating in the CHBE are required to offer all levels of coverage. California
also grants the CHBE Board flexibility by permitting it to standardize coverage options.
Operating Model Criterion 2: Facilitates Competition among Health Insurers (Weighted
35%)
According to the Initial Guidance (U.S. Department of Health and Human
Services, 2010) and in line with the concept of managed competition, the exchange
should facilitate competition among health insurers to obtain the highest value for
consumers seeking health care coverage. Consumers will have access to coverage
options regardless of the operating model chosen due to the minimum functions
exchanges are required to carry out under the ACA. However, the exchange can be
designed to increase the level of competition among participating health insurers. For
example, an exchange with sufficient market leverage can negotiate with participating
health insurers in a similar fashion as large employers do to provide coverage options to
employees.
According to Enthoven (1993), managed competition stimulates competition
based on price. Specifically, a sponsor, or the exchange in this case, achieves priceelasticity of demand when an increase in the price of coverage results in a decreased
demand (Enthoven, 1993). The ACA contributes to this by requiring exchanges to
39
provide consumers with standardized information on available coverage options.
Exchanges will also give ratings to coverage options based on price and quality, enabling
consumers to choose coverage that is the best value for their money. Because the
primary goal of exchanges under the ACA is to create a new competitive marketplace,
this criterion will be weighted 35% to give it slightly higher significance than “enhanced
consumer experience.”
Operating Model Criterion 3: Enhanced Consumer Experience (Weighted 25%)
The Initial Guidance (U.S. Department of Health and Human Services, 2010)
encourages exchanges to perform outreach activities and provide streamlined access to
health care coverage as well as access to coverage available through the state’s publicly
funded programs like Medi-Cal and the Healthy Families Program. A key role of the
exchange is to ensure that exchanges are able to compare coverage options based on price
and benefits (Kingsdale & Bertko, 2010). Additionally, the ACA requires exchanges to
assist individuals and small employers as they shop, compare, and enroll in the health
care coverage of their choice (U.S. Health and Human Services, 2010). Federal funding
will be made available to assist states in establishing Navigator programs to provide
assistance to consumers. The goal is to make this process easier for consumers and
support consumer choice.
Given the required consumer assistance activities the exchange is required to
carry out, the exchange operating model can be designed to further enhance the consumer
experience. For example, the number of health insurers allowed to participate and the
40
amount and types of coverage options available can affect consumer experience. A
narrower range of coverage options enables the exchange to present consumers with
options easy to compare and prevents adverse selection. However, this may hinder health
insurers’ ability to develop attractive coverage options (Kingsdale & Bertko, 2010).
According to Jost (2010b), exchanges tend to be successful in increasing coverage
options for consumers without making it too complex. The degree to which the operating
model enhances the consumer experience will be weighted 25%.
Table 11 briefly summarizes each of the criteria used to evaluate the alternatives
for the exchange operating model.
Table 11
Criteria for Evaluating Operating Model Alternatives
Avoids Adverse Selection
(Weighted 40%)
The exchange attracts a
large diverse group of
consumers. The exchange
operating model avoids
attracting a disproportionate
number of high-cost
consumers, as well as
avoiding adverse selection
within the exchange.
Facilitates Competition Based
on Price, Value, and Quality
(Weighted 35%)
The exchange facilitates
competition among health
insurers based on factors such
as price, value, quality and
service.
Enhanced Consumer Experience
(Weighted 25%)
Consumers are able to easily
compare the available coverage
options. There should not be so
many options that shopping becomes
confusing. Coverage options should
not be so limited that consumers seek
coverage outside the exchange and
insurers have no incentive to develop
innovative products.
Ranking System
To evaluate the alternatives, I used a numerical ranking system. Each criterion
was assigned a number on a scale of 1 to 3, depending on how well the alternative
satisfied the criterion. The assigned rank was then appropriately weighted to elevate the
importance of how well the alternative avoids adverse selection. A rank of “1” indicates
41
the alternative is unlikely to adequately satisfy the criterion. A rank of “2” indicates the
alternative moderately satisfies the criterion. An alternative was assigned a “2” for a
given criterion if it will meet the criterion goal but may not be the best choice given the
other operating model alternatives available. A rank of “3” means the alternative is the
best to satisfy the criterion. For each alternative, the criterion rank was multiplied by the
assigned weight. The weighted rank for each criterion was added, resulting in a number
between 1 and 3 for each criterion. The total score represents, on scale from 1 to 3, the
degree to which the alternative meets the goals of the ACA’s goals and objectives for
exchanges.
The ACA implements unprecedented federal health care reform, including health
insurance exchanges and market reforms. There is no certainty whether any particular
operating model will lead to a successful exchange that achieves the goals of the ACA.
Any of the operating models could meet the minimum requirements of the ACA;
however, one model over the others will have a greater likelihood of succeeding in the
long run. As the alternative’s total score approaches 3, the better chance it has for longterm success in California.
Evaluation of Operating Model Alternatives
Operating Model Alternative #1: Open Marketplace Model
The open marketplace model operates as a pass-through organization for
consumers using subsidies as well as any individuals and small employers that
voluntarily purchase coverage through the exchange. The exchange using this operating
42
model certifies any qualified health plan that meets the requirements outlined in the ACA
and any additional requirements the exchange may impose.
The open marketplace model in California may not be the best option to avoid
adverse selection as it could result in variation among coverage offered in the traditional
health insurance market and inside the exchange. There is little disincentive for health
insurers to offer coverage inside the exchange and in the outside market that
disproportionately attracts low-risk individuals. Further, such a model may not be
enough to attract individuals and small businesses voluntarily seeking coverage through
the exchange.
The open marketplace exchange does not go beyond what is required in the ACA
to encourage competition. Participating health insurers may opt to compete based on
price or offer coverage that goes beyond the minimum requirements, but the exchange
does not play an active role in stimulating this competition. Such an operating model
may be sufficient in states that have few health insurers in the market, but California has
over 100 health care service plans and health insurers regulated by the Department of
Managed Health Care and the California Department of Insurance, respectively. The
open marketplace model that allows any QHP to be offered through the exchange has the
potential to become overwhelming and unmanageable due to numerous and varied
product offerings (Jost, 2010b; Merlis, 2009). While consumers may potentially have
more options from which to choose, this may hinder the exchange’s ability to provide an
enhanced consumer experience
43
By allowing any QHP to offer coverage in the exchange, health insurers would
compete with one another to gain enrollees. However, beyond the market reform
provisions of the ACA, the exchange would not take an active role to facilitate
competition based on price, value, and quality. Additionally, health insurers may not
have an interest in seeing an exchange that has enough market leverage to negotiate better
rates and higher quality coverage for consumers (Wicks, 2002).
Table 12
Open Marketplace Model
Avoids Adverse Selection
(Weighted 40%)
Open marketplace may not attract
individuals not using subsidies or
if self-funded employer plans
shift high-risk employees to the
exchange.
There is no disincentive for health
insurers to offer coverage inside
and outside the exchange that
disproportionately attracts lowrisk individuals
Raw Score = 1
Weight = 40%
Weighted Score = 0.40
Facilitates Competition
Based on Price, Value, and
Quality (Weighted 35%)
Health insurers may
compete to offer coverage
based on price, value, and
quality if the risk pool is
large and diverse, but the
exchange does not play an
active role in stimulating
that competition.
Enhanced Consumer Experience
(Weighted 25%)
Raw Score = 1
Weight = 35%
Weighted Score = 0.35
Raw Score = 1
Weight = 25%
Weighted Score = 0.25
Permitting any QHP to participate
could result in too many options
and may become overly complex
and overwhelming for consumers.
The exchange does not perform
any consumer assistance activities
beyond those required under the
ACA.
Open Marketplace Rank = 1.0
Operating Model Alternative #2: Standardized Marketplace Model
In a standardized marketplace, the exchange exerts greater control by requiring
some degree of standardization among the coverage options offered in the exchange. The
exchange may opt to only permit QHPs that meet certain quality and service standards.
These additional standards would be determined by the exchange to ensure that certified
QHPs are in the best interest of individuals and consumers shopping for coverage. Any
44
additional QHP requirements can focus on price, quality, or value enabling consumers to
understand and compare coverage options based on these features. While the ACA
provides for tiered coverage levels, the exchange can standardize the out-of-pocket costsharing structure (Kaiser Family Foundation, 2011). The exchange may require health
insurers to offer benefits beyond the required essential health benefits (Jost, 2010b;
Merlis, 2009).
In line with managed competition, standardization limits variation among
coverage options offered in the exchange. This helps prevent adverse selection within the
exchange, as health insurers are less able to design products that disproportionately
attract low-risk enrollees. In addition, consumers are able to focus on price instead of
just what benefits are offered (Enthoven, 1993; Jost, 2010b). Standardized coverage
options inside the exchange, however, leaves the health insurers in the outside market
with the ability to design coverage that attracts low-risk consumers (Wicks & Hall,
2000). Standardizing the coverage options made available may reduce the chance of
adverse selection among products within the exchange, as health insurers would be
limited in offering coverage options that disproportionately attract low-risk consumers.
However, depending on whether additional regulations create similar markets inside and
outside the exchange, low-risk individuals may still seek less comprehensive but more
affordable coverage in the traditional health insurance market. Compared to an open
marketplace in which any QHP can be offered, the standardized exchange is better able to
45
control adverse selection. However, this may not be the best option to address adverse
selection against the exchange.
An exchange using this operating model alternative would use its ability to
standardize coverage options to facilitate competition, as well as consumer choice, based
on price, value, and quality instead of on risk selection (Jost, 2010b). Health insurers
must offer similar coverage options, so the focus is on designing high value coverage
options rather than coverage that attracts the low-risk enrollees. Exchanges have been
successful in offering consumers a variety of coverage options, and standardization
supports “choice without complexity” (Jost, 2010b, p. 12). However, too many choices
may become overwhelming for the consumer and may be counter to providing choice
based on a price and value. In addition, this model does not necessarily negotiate with
insurers to offer the highest value and may also stifle health insurers’ abilities to offer
new product designs.
The exchange using a Standardized Marketplace is better able to provide an
enhanced consumer experience than the one in the Open Marketplace model.
Standardizing plans may make is easier for consumers to compare benefit designs based
on price, but the availability of several plans by several health insurers may be
overwhelming if the exchange only permits any QHP that meets its standards (Jost,
2010b). This operating model, combined with the requirements of the ACA, enables
consumers to compare options and make rational choices.
46
At this point on the operating continuum, the exchange is better able to control
health insurers’ abilities to offer products within the exchange that attract a
disproportionate number of low-risk enrollees. It also gains greater ability to facilitate
competition based on price, value, and quality depending on how the exchange
standardizes the products.
Table 13
Standardized Marketplace Model
Avoids Adverse Selection
(Weighted 40%)
Standardizing options inside
the exchange may enhance
existing protections by limiting
adverse selection among
products within the exchange,
but not outside the exchange.
State legislation would be
needed to ensure the outside
market is comparable to the
exchange.
Raw Score = 2
Weight = 40%
Weighted Score = 0.80
Facilitates Competition Based on
Price, Value, and Quality
(Weighted 35%)
In line with managed competition,
health insurers would be required
to offer standardized coverage.
Competition and consumer choice
are focused on features like price,
quality, and value.
Enhanced Consumer
Experience
(Weighted 25%)
Consumers would be better
able to compare standardized
options, but may become
overwhelmed when there are
too many coverage options to
compare.
Raw Score = 2.5
Weight = 35%
Weighted Score = 0.88
Raw Score = 2
Weight = 25%
Weighted Score = 0.50
Standardized Marketplace Rank = 2.18
Operating Model Alternative #3: Selective Contractor Model
The exchange that operates as a Selective Contractor, or active purchaser, requires
health insurers to competitively bid and selects participating health insurers that can offer
the best deal for consumers based on factors such as choice, value, and quality. An
operating model at this end of the continuum is the most closely aligned with managed
competition, and the exchange uses its market leverage to negotiate with health insurers
47
to get highest value coverage for consumers. The exchange is required to consider
premium trends when considering whether to allow a health insurer to participate in the
exchange but may also consider other features like cost-sharing structure, network
adequacy, and quality. The model also affords the exchange more control over the
number and types of coverage options offered. The Massachusetts Connector is an
example of a purchasing cooperative that acts as a selective contractor (Merlis, 2009).
The California Public Employees’ Retirement System (CalPERS) is another example of a
selective contractor that offers over 1 million employees and retirees a choice among
standardized products with cost sharing and benefits negotiated by the CalPERS Board
(Merlis, 2009).
As with the standardized exchange, the Selective Contractor is better able to limit
health insurers’ abilities to offer products within the exchange that disproportionately
attract low-risk enrollees. Health insurers will be more willing to participate or compete
for enrollees if there is less chance they will experience adverse selection. The health
insurance market reforms in the ACA and state legislation implementing federal health
care reform will limit some of the potential for adverse selection against the exchange.
However, if the exchange negotiates coverage that includes more robust benefits, it could
lead to coverage options that are more expensive than those offered in the outside market
(Jost, 2010b). This could contribute to adverse selection against the exchange where less
expensive coverage attracts the low-risk consumers.
48
The selective contractor also gains a better ability to offer a range of high-quality
coverage options for consumers to compare. Similar to CalPERS or other large
employers, the exchange will be able to bargain with insurers and select the products to
be offered. The exchange can use its ability to select participating insurers to ensure that
consumer choice is structured around the price of the products offered (Jost, 2010b). It is
difficult to know whether it is the large purchasing pool that attracts insurers offering
quality coverage or if the availability to quality coverage attracts the large, diverse
purchasing pool (Wicks, 2002). However, a Selective Contractor able to make highquality coverage available is more likely to attract and retain a large purchasing pool in
the long run.
49
Table 14
Selective Contractor Model
Avoids Adverse Selection
(Weighted 40%)
Requiring health insurers to
competitively bid allows the
exchange to select a range of
coverage options that may limit
adverse selection among products
within the exchange, but not
necessarily outside the exchange.
State legislation would be needed
to ensure that outside market is
comparable to the exchange.
Raw Score = 2
Weight = 40%
Weighted Score = 0.80
Selective Contractor Rank = 2.60
Facilitates Competition Based
on Price, Value, and Quality
(Weighted 35%)
Health insurers are
encouraged to compete and
competitively bid based on
price value, and quality.
Exchange risk pool should be
large and diverse to be
attractive to health insurers.
Enhanced Consumer
Experience
(Weighted 25%)
Consumers would be better
able to compare a range of
high-qualitycoverage options
selected by the exchange. The
exchange can bargain for
higher value coverage for
consumers.
Raw Score = 3
Weight = 35%
Weighted Score = 1.05
Raw Score = 3
Weight = 25%
Weighted Score = 0.75
50
Findings
Table 15 displays the operating model alternatives and their respective weighted
ranks.
Table 15
Operating Model Alternatives
Avoids Adverse
Selection
Open
Marketplace
Model
Standardized
Marketplace
Model
Selective
Contractor
Model
Enhanced Consumer
Experience
(Weighted 40%)
Facilitates Competition
Based on Price, Value,
and Quality
(Weighted 35%)
Raw Score = 1
Weight = 40%
Weighted Score = 0.40
Raw Score = 1
Weight = 35%
Weighted Score = 0.35
Raw Score = 1
Weight = 25%
Weighted Score = 0.25
Raw Score = 2
Weight = 40%
Weighted Score = 0.80
Raw Score = 2.5
Weight = 35%
Weighted Score = 0.88
Raw Score = 2
Weight = 25%
Weighted Score = 0.50
Raw Score = 2
Weight = 40%
Weighted Score = 0.80
Raw Score = 3
Weight = 35%
Weighted Score = 1.05
Raw Score = 3
Weight = 25%
Weighted Score = 0.75
Rank
(Weighted 25%)
1.0
2.18
2.60
The final ranks for each alternative suggest that California will be more successful
with an exchange operating model like the Selective Contractor, which adopts features of
managed competition. An exchange that plays an active role in ensuring the coverage
options offered are standardized reduces the chances of adverse selection within the
exchange. When coupled with the market reforms of the ACA and state legislation
leveling the playing field, adverse selection against the exchange will be limited as well.
The Standardized Marketplace and the Selective Contractor carry out these key activities.
According to Corlette and Volk (2011), some may argue the Open Marketplace is a most
51
effective way to make a variety of coverage choices available to individuals and small
employers. However, such a model does not take additional actions to prevent adverse
selection inside the exchange, especially in a state like California where there is a large
population and many health insurance carriers. This is a disincentive for insurers to offer
the high-quality products that may be susceptible to failure in the exchange.
The Standardized Marketplace and the Selective Contractor are able to facilitate
competition based on price, value, and quality. Product standardization is key to focusing
competition and choice on more pertinent features like price and value. It limits insurers’
abilities to design products based on risk selection and gives consumers the tolls to make
more rational choices. However, too much standardization, or standardization that makes
coverage in the exchange more expensive, creates the potential for adverse selection
(Jost, 2010b). Additionally, standardization can limit health insurers’ abilities to innovate
and offer different types of coverage to meet a variety of consumer needs. When the
exchange acts as a Selective Contractor, it is able to actively negotiate with health
insurers on price and quality. This strategy works best in a market with a diverse health
insurance market with many carriers (Corlette & Volk, 2011).
In addition to competition, the exchange must support rational consumer choice to
create an efficient marketplace and drive down costs (Jost, 2010b). While the Open
Marketplace could result in an increased availability of coverage for individuals and
small employers, this type of exchange would not actively provide consumers with
coverage options standardized based on features that support rational choice. Increased
52
use of managed competition, particularly standardization of coverage options, ensures
consumers can easily compare price, quality, value, and any other features the exchange
decides to highlight in coverage standards.
The results of the CAM analysis show the Selective Contractor as the ideal
operating model for California’s exchange. The weights assigned to each criterion can be
adjusted to give equal or greater significance to the other criteria, depending on the
priorities of decision makers. For example, a state’s decision makers might place greater
value on ensuring its exchange facilitates competition. As such, the degree to which an
operating model alternative is expected to facilitate competition might be weighted at
50%. To gauge whether variation of the assigned weights changes the results, I
recalculated the results with different weights and with all the criteria weighted equally.
The Selective Contractor operating model was the optimal choice each time.
53
Chapter 5
THE CALIFORNIA HEALTH BENEFIT EXCHANGE
Given the discretion granted to states under the ACA and the alternatives
discussed above, California moved forward as the first state to enact legislation creating
an exchange. Senate Bill (SB) 900 was signed by then-Governor Arnold
Schwarzenegger in September 2010 to establish the California Health Benefit Exchange
(CHBE) within state government as a new agency to be governed by an executive board,
herein after referred to as the CHBE Board. Enacted in conjunction with SB 900,
Assembly Bill (AB) 1602 lays out the powers of the CHBE Board as it makes health care
coverage available to individuals and small employers.
CHBE Governance
SB 900 establishes the CHBE as a new government agency. The CHBE Board is
made up of five members, including the Secretary of the California Health and Human
Services Agency, two members appointed by the Governor, and two members appointed
by the Legislature. Members are required to have diverse expertise in areas related to
individual and small employer health care coverage, health care finance, purchasing
health care coverage, or administration of health care delivery systems.
This is likely the best option for California, as the CHBE Board will be entirely
focused on creating a fully operational exchange in the coming years. The CHBE Board
will have relative flexibility to be expedient in carrying out establishment and planning
activities than if the exchange were housed with an existing agency that is already
54
carrying out other functions. There will be no existing responsibilities to distract from
this primary goal. California legislation enhances the CHBE Board’s flexibility by
granting exemption from civil service rules related to hiring personnel for executive
positions. To ensure transparency and accountability, the CHBE Board is subject to
California open-meeting laws. There may still be a slight tradeoff in the CHBE’s ability
to be flexible and move quickly compared to a non-profit exchange. However, a nonprofit exchange may not have the established relationships with the other state agencies
involved in implementing health care reform. Further, given California’s size and large
population, it is not efficient to create a multi-regional exchange with neighboring states.
Though establishing the CHBE as a new government agency with a five-person
executive board will likely satisfy the criteria I used to evaluate the alternatives for
exchange governance, there are still challenges to be addressed. The California Health
and Human Services Agency (CHHS) was awarded a $1 million Exchange Planning and
Establishment Grant to assist with planning efforts for one year. The CHBE Board is
also pursuing additional funding of over $40 million in grant funds to support
establishment activities as the state moves toward full implementation of the CBHE. The
CHBE Board is required to establish a fully operational exchange by 2014, which also
includes coordination with other state agencies and streamlining publicly funded health
care programs.
Given a very short implementation time, the CHBE Board will need to move
quickly with implementation efforts and establish the CHBE operating model. The
55
CHBE moves forward with the motto, “2014 is tomorrow.” This illustrates the
significant effort that must take place to establish a fully functional exchange in a short
time frame.
CHBE Operating Model
AB 1602 enacts the California Patient Protection and Affordable Care Act that
creates the CHBE and lays out the required duties and powers of the governing board.
The CHBE Board has moved forward with establishing an exchange to operate as a
selective contractor or active purchaser. Based on my findings, an exchange in California
will have greater likelihood of success if it acts as a Selective Contractor. The Selective
Contractor model ranks only slightly higher than the Standardized Marketplace,
indicating that an exchange that uses tools of managed competition can best satisfy the
criteria used to evaluate the operating model alternatives. This exchange operating model
actively promotes competition based on price and supports rational consumer choice,
which will create efficiency in the exchange marketplace. Further, California has
experience in operating “active purchaser” exchange-like entities, including the Health
Insurance Plan of California (HIPC) in the 1990s for small employers, CalPERS, and the
children’s health insurance program (Corlette & Volk, 2011).
In addition to activities required by the ACA, AB 1602 requires the CHBE Board
to establish minimum standards a health insurer must meet to be eligible to participate in
the exchange, and health insurers will competitively bid. The CHBE Board is also
required to selectively contract with health insurers that offer the best coverage options
56
based on choice, value, quality, and service. This is in line with Alternative 3, the
Selective Contractor Model, or active purchaser.
The CHBE should have less chance for adverse selection within the exchange,
especially when coupled with market reforms and protections already required by the
ACA. The CHBE is permitted to standardize the health insurance products offered
through the exchange allowing the exchange to further control variation among products
offered.
The CHBE is expected to attract a large number of consumers seeking coverage.
Approximately 15% of California’s population (5 million people) already obtains health
care coverage in the individual and small group markets (California HealthCare
Foundation, 2011). Assuming these numbers remain the same over the next three years,
40%, or 2 million, would qualify for cost-sharing subsidies under the ACA. The ACA
requires cost-sharing subsidies to be used in exchanges. According to the California
HealthCare Foundation’s (2011) snapshot of the individual and small group markets, the
exchange pool would be further increased by another 3.4 million who are currently
uninsured but will be eligible beginning 2014 for cost-sharing subsidies to purchase
coverage in the exchange. Not even including potential small employers seeking
coverage, this creates a large pool of people seeking coverage. A large diverse risk pool
helps reduce chances of adverse selection. Further, by requiring the CHBE Board to use
the competitive bid process and selective contracting, the CHBE actively facilitates
competition among health insurers seeking access to a large pool of consumers.
57
AB 1602 requires the CHBE to set standards and criteria for selecting QHPs that
meet the best interests of qualified California consumers. The CHBE should be able to
provide consumers with a variety of coverage options as it is permitted to standardize
coverage options and selectively contract with insurers, and health insurers are required
to offer all actuarial levels of coverage. The CHBE will also determine appropriate costsharing provisions for coverage offered and the criteria and process for enrollment and
disenrollment. The CHBE will also assist those seeking coverage in a publicly funded
program. Acting as a selective contractor and providing consumers with the tools they
need to understand coverage options will further drive rational consumer choice.
Conclusion
The ultimate success of the CHBE and any state’s exchange remains to be seen.
The ACA represents unprecedented health care reform on a national level, and California
has taken the lead as the first state to establish an exchange under the ACA. Significant
challenges remain as the CHBE moves forward. The CHBE must be operational by
2014 leaving a narrow window for planning and implementation. The state must carry
out activities to establish an information technology infrastructure to support eligibility
determination across programs and enrollment in both CHBE coverage and publicly
funded health care coverage. In addition to a short time frame, the CHBE must also plan
with many “unknowns” as the DHHS has yet to publicly release official regulations or
guidance for exchanges under the ACA (as of July 1, 2011). Other ACA guidance or
58
regulations that will affect the CHBE include those regarding Essential Health Benefits
and risk adjustment.
Though these challenges remain moving forward, California remains at the
forefront of the nation in exchange planning and development under the ACA. Planning,
design, and how the CHBE increases availability of affordable coverage options will
determine the success of the CHBE. Whether it succeeds or not will serve as a lesson for
other states.
59
REFERENCES
Blumberg, L. J., & Pollitz, K. (2009, April). Health insurance exchanges: Organizing
health insurance marketplaces to promote health reform goals. Retrieved from
Urban Institute:
http://www.urban.org/UploadedPDF/411875_health_insurance_marketplaces.pdf
Buhmueller, T. C. (2009). Consumer-oriented health care reform strategies: A review of
the evidence on managed competition and consumer-directed health insurance.
The Milbank Quarterly, 87(4), 820-841.
California Health and Human Services Agency. (2010, October 4). California's response
to the federal request for comments on exchange-related provisions in the
Affordable Care Act. Retrieved from California Health Benefit Exchange website:
http://www.healthexchange.ca.gov/Documents/California%27s%20Response%20
to%20the%20Federal%20Request%20for%20Comments%20on%20Exchangerelated%20Provisions%20in%20the%20Affordable%20Care%20Act.pdf
California HealthCare Foundation. (2010a). California health care spending. Retrieved
from Health Care Costs 101:
http://www.chcf.org/~/media/Files/PDF/Q/PDF%20QuickReferenceGuideCA10.
pdf
Kaiser Family Foundation. (2010, December). The uninsured: A primer. Retrieved from
Kaiser Family Foundation: http://www.kff.org/uninsured/7451.cfm
60
California HealthCare Foundation. (2011). California's individual and small group
markets on the eve of reform. Retrieved from California HealthCare Foundation:
http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/C/PDF%20C
aIndividualSmallGroupEveReform.pdf
California State Auditor. (2010, August). Department of Developmental Services: Report
2009-118. Retrieved from http://www.bsa.ca.gov/pdfs/reports/2009-118.pdf
Centers for Medicare & Medicaid Services. (2010). NHE fact sheet. Retrieved from
National Health Expenditure Data:
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp#TopO
fPage
Centers for Medicare & Medicaid Services. (2011, January). NHE web tables. Retrieved
from National Health Expenditure Data:
http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf
Chaikind, H. R. (2003, March). ERISA regulation of health plans: Fact sheet. Retrieved
from http://www.allhealth.org/briefingmaterials/erisaregulationofhealthplans114.pdf
Chirba-Martin, M. A., & Torres, A. (2008, June 4). Universal health care in
Massachusetts: Setting the standard for national reform. Retrieved from
http://law2.fordham.edu/publications/articles/400flspub13418.pdf
61
Corlette, S., & Volk, J. (2011, June). Active purchasing for health insurance exchanges:
An analysis of options. Retrieved from Robert Wood Johnson Foundation:
http://www.rwjf.org/files/research/72457healthexchange201106.pdf
Enthoven, A. C. (2011, January 11). A few cautions about exchanges. Retrieved from
Kaiser Permanente Institute for Health Policy:
http://www.kpihp.org/kpihp/frmContent.aspx?CMS_Entry_Id=309&Content_Typ
e=H
Enthoven, A. C. (2003, May 28). Employment-based health insurance is failing: Now
what? Retrieved from Health Affairs - Web Exclusive:
http://content.healthaffairs.org/content/early/2003/05/28/hlthaff.w3.237.citation
Enthoven, A. C. (1988, May). Managed competition: An agenda for action. Retrieved
from Health Affairs: http://content.healthaffairs.org/content/7/3/25.citation
Enthoven, A. C. (1993). The history and principles of managed competition. Health
Affairs, 12, 24-48.
Henderson, J. W. (2002). Health economics and policy (2nd ed.). Mason, OH: SouthWestern.
Jost, T. S. (2010b). Health insurance exchanges and the Affodable Care Act: Key policy
issues. Retrieved from The Commonwealth Fund:
http://www.commonwealthfund.org/Content/Publications/FundReports/2010/Jul/Health-Insurance-Exchanges-and-the-Affordable-Care-Act.aspx
62
Jost, T. S. (2010a). Health insurance exchanges and the Affordable Care Act: Eight
difficult issues. Retrieved from The Commonwealth Fund:
http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/
2010/Sep/1444_Jost_hlt_ins_exchanges_ACA_eight_difficult_issues_v2.pdf
Kaiser Family Foundation and Health Research & Educational Trust. (2010). Employer
health benefits 2010 annual survey. Retrieved from Kaiser Family Foundation:
http://ehbs.kff.org/
Kaiser Family Foundation. (2008b, June 11). Former 2008 presidential candidate health
care proposals: Side-by-side summary. Retrieved from
http://www.health08.org/Side-By-Side%20DROP%20OUTS%2006.11.08.pdf
Kaiser Family Foundation. (2008a, April). Health care and elections. Retrieved from
Kaiser Public Opinion Spotlight: http://www.kff.org/spotlight/election/index.cfm
Kaiser Family Foundation. (2011, April). What the actuarial values in the Affordable
Care Act mean. Retrieved from Health Reform Source:
http://www.kff.org/healthreform/upload/8177.pdf
Kingsdale, J., & Bertko, J. (2010). Insurance exchanges under health reform: Six design
issues for the states. Health Affairs, 29(6), 1158-1163.
Litow, M. E. (2006, January 6). Medicare versus private health insurance: The cost of
administration. Retrieved from Council for Affordable Health Insurance:
http://www.cahi.org/cahi_contents/resources/pdf/CAHIMedicareTechnicalPaper.p
df
63
Merlis, M. (2009, June 5). A Health insurance exchange: Prototypes and design issues.
Retrieved from National Health Policy Forum:
http://www.nhpf.org/library/details.cfm/2742
National Academy of Social Insurance. (2011, January). Designing an exchange: A
toolkit for state policymakers. Retrieved from National Academy of Social
Insurance:
http://www.nasi.org/sites/default/files/research/Designing%20an%20Exchange_A
%20Toolkit%20for%20State%20Policymakers.pdf
National Association of Insurance Commissioners. (2010, November 22). American
Health Benefit Exchange Model Act. Retrieved from NAIC:
http://www.naic.org/documents/committees_b_exchanges_adopted_health_benefi
t_exchanges.pdf
Schoen, C., Collins, S. R., Kriss, J. L., & Doty, M. M. (2008, July). How many are
underinsured? Trends among U.S. adults, 2003 and 2007. Retrieved from Health
Affairs: http://content.healthaffairs.org/content/27/4/w298.full
Schoen, C., Doty, M. M., Collins, S. R., & Holmgren, A. L. (2005, June 14). Insured but
not protected: How many adults are underinsured? Retrieved from Health
Affairs:
http://content.healthaffairs.org/content/early/2005/06/14/hlthaff.w5.289.short
Smith, W. H. (1933, February). The report of the Committee on the Cost of Medical
Care. The Canadian Medical Association Journal, 198-199.
64
U.S. Department of Health and Human Services. (2010, November 18). Initial guidance
to states on exchanges. Retrieved from Regulations and Guidance:
http://www.hhs.gov/ociio/regulations/guidance_to_states_on_exchanges.html
U.S. Department of Health and Human Services. (n.d.). Transform health care. Retrieved
from Strategic Plan & Priorities:
http://www.hhs.gov/secretary/about/transform.html
Van de Water, P. N., & Nathan, R. P. (2011, January). Governance issues for health
insurance exchanges. Retrieved from National Academy of Social Insurance:
http://www.nasi.org/research/2011/governance-issues-health-insurance-exchanges
Weil, A., Shafir, A., & Zemel, S. (2011, February). Health insurance exchange basics.
Retrieved from The National Academy for State Health Policy:
http://www.nashp.org/sites/default/files/health.insurance.exchange.basics.pdf
Morgan, R. (2011, February). The 2011 state legislators' check list for health reform
implementation. Retrieved from National Conference of State Legislatures:
http://www.ncsl.org/documents/health/State_Legislators_Checkdec20.pdf
Wicks, E. K. (2002, November). Health insurance purchasing cooperatives. Retrieved
from The Commonwealth Fund:
http://www.commonwealthfund.org/Content/Publications/IssueBriefs/2002/Nov/Health-Insurance-Purchasing-Cooperatives.aspx
Wicks, E. K., & Hall, M. A. (2000). Purchasing coopoeratives for small employers:
Performance and prospects. The Milbank Quarterly, 78(4), 511-546.