States, insurers grapple with exchanges

The looming deadline for launching state-based and federally facilitated exchanges (FFEs) is making a lot of people very nervous. Insurers especially are worried that premium subsidies will fail to attract enough healthy people to form viable risk pools.

Partisan politics continues to plague the process. Republicans are blocking funds needed for smooth implementation and ratcheting up criticism. A report from the House Energy & Commerce Committee predicts “premium rate shock” in at least 45 states due to requirements to cover more services and benefits.

HHS officials say the system will provide immediate eligibility determinations for consumers who enroll online for coverage, but there will be a lot of geographic variation in the process. Only 17 states and the District of Columbia are operating their own exchanges; seven states are “partnering” with HHS, and 26 states are defaulting to the FFE.

Utah will run an exchange for small businesses, but leave the individual market to the feds. In Montana, an FFE state, officials are examining plan quality and rates as part of its oversight responsibilities, said general counsel Christina Goe at an exchange summit last month.

Insurers had to file plan applications with states in May, which have to submit recommendations to HHS by July 31, so that the feds can determine the “qualified health plans” (QHPs) by the end of August. That will give carriers and exchange operators a month to get options posted and systems up and running. HHS is deferring to states on many oversight issues, and some states may assume a larger role in exchange operations by 2016.

How much competition?

A broad question is how to balance plan choice. Too many options on exchanges can be confusing , but too few plans may lead to higher premiums.

The FFE initially is operating as “clearinghouse” that accepts all insurers meeting minimum standards, explained Joel Ario of Manett Health Solutions. Oregon received applications from 16 insurers, plus two not-for-profit consumer operated CO-OP plans. Illinois officials announced that six insurers filed applications for 165 plans-much less than earlier predictions of 260 plans from 16 insurers, but “encouraging” to the governor.

Plans are working round the clock to comply with exchange filing requirements and formats, many different from company legacy systems, according to Kim Holland, director of state affairs at the Blue Cross Blue Shield Assn. Bonnie Washington of Avalere Health said that most insurers consider exchanges “a worthwhile endeavor,” but are nervous about risks from uncertain utilization, costs and adverse selection. 

Regional carriers and Blues feel it’s important to maintain their positions in long-served communities, including those where they’re dominant. This is a logical step for Rocky Mountain Health Plans, said president Steve ErkenBrack, who expects to be an active player in Colorado’s state-based exchange.

But large national carriers are not rushing into all markets, said Washington. Instead they are limiting participation to those states where they already have a strong presence. Added options may come from some Medicaid-only plans, which are looking at exchanges as opportunities to expand coverage of low-income populations.

 “2014 will be messy,” said MIT professor Jonathan Gruber, “but ultimately exchanges will work well to provide consumers more choices.”