Exchanges open up the market

June 1, 2011

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WITH A JANUARY 2014 DATE looming for states to launch health exchanges, many have yet to begin substantive work. Politics aside, the clock is ticking, say health policy experts.

The federal government can step in after Jan. 1, 2013, and set up exchanges in states where it believes the infrastructure won't be ready in time for the 2014 launch. States will need to integrate their public enrollment and streamline their technology systems in a hurry. Only a few states have taken any practical measures, says Cindy Gillespie, managing director in McKenna Long & Aldridge's Public Policy and Regulatory Affairs Practice and head of its healthcare policy team.

"It's a complex matter to design an exchange," says Gillespie. "There are questions about who is uninsured, income level, age and health-data that does not exist in most states."

State exchanges in Utah and Massachusetts and a number of private exchanges, such as HealthPass in New York, can provide some insight.

Utah

UTAH HAS MORE than 67,000 employers with between two and 50 employees, so it was logical that early health exchange efforts focused on this underserved group. Launched in limited fashion in 2009 for the 2010 plan year, the exchange has about 100 employer members and 2,800 covered lives. Employers establish a defined contribution amount they are willing to pay, then employees can choose from more than 140 plans, with pricing based on the company risk pool.

The state offers no subsidies for coverage, and employers have complained about high prices from insurers participating in the exchange and a laborious application process that discourages some business owners from signing up. Utah's rate of uninsured residents rose from 13.2% in 2008 to 14.8% in 2009 when the exchange began operating, according to a comparison of the Utah and Massachusetts exchanges prepared by the Georgetown University Health Policy Institute.

Despite these early blips, the Utah Health Exchange is poised to grow to 1,000 employers with up to 30,000 covered lives by the end of 2011, says Norman Thurston, healthcare reform coordinator with the Utah Department of Health.

"I know those numbers are ambitious, but I think we can make it," Thurston says.

Exchange facilitates enrollment

Employers interested in providing insurance fill out an initial application, then employees complete a health survey, which has been simplified in response to early criticism. Once the applications go through underwriting, the business owner is given a price for coverage and can then determine how much of the coverage he is willing to pay for.

Prices for insurance within the exchange often are higher than those in the outside market, according to the Georgetown study, so many employers who go through underwriting opt to not purchase insurance. However, federal healthcare reform legislation would call for compliance in Utah's exchange-something the state is expected to push back on, asking for exemptions to certain federal provisions.

Once an employer chooses to provide insurance and sets the amount he is willing to pay, employees can compare more than 100 plans by using the shopping tool on the exchange Web site. Plans are determined by ZIP code and can be further filtered by benefit type, projected usage and medical and pharmacy benefits, specific doctors and hospitals, then ranked on price from low to high and compared side-by-side.

"Feedback from participating groups indicates that they like the defined-contribution method because it's a flat amount they can budget; it uses pre-tax dollars; and employees have freedom of choice," says Patty Conner, director of the Utah Health Exchange.

While the first priority was the smallest employers, the exchange plans to open up enrollment to business owners with up to 100 employees soon. Within three years, Thurston would like to see a consumer portal where people could access their personal health records, find information about how to manage their chronic conditions, compare the cost and quality of physicians, hospitals and insurance companies and perhaps find out whether they qualify for federal health programs.

"Everything has to be as simple as possible for the employer and employee," Thurston says. "If they don't understand, then it just won't work."