Thursday, August 12, 2010

Health Care and Health Exchanges

Now that Obamacare has been in place for a few months, and HHS Secretary Kathleen Sebelius has been in charge as the lead person for orchestrating the rollout of the massive new legislation, Americans are learning more and more every day about how the new law will affect consumers, businesses, and the nation at large. According to, the National Association of Insurance Commissioners (NAIC) informed Secretary Sebelius that only half of the states have explicit legal authority to enforce the health reform law, but the remaining states can rely on other means to hold insurers accountable for their compliance with federal laws.

Those powers -- which include form approval, investigative powers and market conduct exam authority -- along with a coordinated effort by the federal regulators, should be sufficient to ensure carriers comply with the new requirements under the health reform law. The NAIC, according to, says it surveyed the states and found that that more than half concluded that they can enforce the law either through explicit state law or via general powers granted to the commissioners. The insurance commissioners say they agree with Sebelius' assertion that enforcing the new health reform mandates will require cooperation and coordination. The experience implementing the Health Insurance Portability and Accountability Act (HIPAA), the Mental Health Parity and Addiction Equity Act and other federal insurance laws shows that a strong partnership is effective and in the best interest of consumers.

Specialty health plans, which offer services ranging from behavioral health and chiropractic to hearing and vision, worry that the health reform law may not allow people to shop for most specialty services through health insurance exchanges. According to, such exchanges will begin in 2014 for individuals and small groups. One main concerns is, with the exception of dental, no other specialty health organizations were listed in the reform bill to be a part of the exchanges. Vision was in there, but it was taken out as one of the last amendments. Specialty health plans furnish specialty services to more than 175 million Americans. Dental is different because it is listed in the law as being a product that can be sold within the exchange. So, you are allowed to purchase a stand-alone dental plan as part of the exchange. But if you want to do that with vision care, you do not have that option. However, as states set up exchanges, states may decide to add various types of coverage, including specialty insurance products. There is also some anticipation of federal legislation in 2011 clarifying what may comprise exchange offerings.

Yet at this point, according to, it seems the states are going to have more leeway than they thought with respect to how exchanges are set up. That could mean significant variation among states with respect to specialty health plans’ role in exchanges, but much will hinge on definitions and ongoing discussions between HHS and the National Association of Insurance Commissioners on how to handle exchanges. And according to USA Today, the main part of the health overhaul law takes effect in 2014, when there's a major expansion of insurance coverage and the creation of new state-based health insurance exchanges, which are marketplaces to make it easier for individuals and small businesses to buy insurance. These exchanges will have their own websites.

According to the Commonwealth Fund, health insurance exchanges are the centerpiece of the private health insurance reforms of the Affordable Care Act of 2010 (ACA). If they function as planned, these exchanges will expand health insurance coverage, improve the quality of such coverage and perhaps of health care itself, and reduce costs. Previous attempts at creating health insurance exchanges, however, enjoyed only mixed results. As part of successfully implementing the new exchanges, the U.S. Department of Health and Human Services (HHS) and the states must address issues that undermined the earlier attempts. These issues are:

--Adverse selection. It is absolutely necessary that exchanges be protected against adverse selection (the disproportionate purchase of health insurance by the least healthy individuals)—especially because, under the ACA, small-group and nongroup insurance options remain available outside the exchanges. However, a number of provisions of the ACA level the playing field inside and outside the exchange, and weaken incentives for adverse selection. These protections can also be enhanced by the states.
--Numbers of participants. Exchanges that include large numbers of enrollees, as well as a high percentage of the total number of enrollees who are participating in the entire insurance market, offer greater market power, economies of scale, more stable risk pools, and stronger protection against adverse selection. The ACA offers opportunities for expanding risk pools, which should be fully exploited.
--Market coverage and structure. The ACA permits both the combination and separation of small-group and nongroup risk pools and exchanges. It also allows the creation of regional or subsidiary exchanges. The advantages and disadvantages of pursuing these options must be carefully weighed.
--Choice without complexity. The exchange model created by the ACA presents consumers with structured choices. An important implementation decision will be whether to further structure choices or, alternatively, to offer maximum choice and flexibility within the constraints of the ACA.
--Transparency and disclosure. The ACA contains numerous provisions designed to maximize transparency and disclosure. Putting these requirements into operation will be one of the Act’s most important implementation tasks.
--Competition. The exchanges are intended to increase competition among insurers and focus that competition on value and price. A number of provisions of the ACA should help to facilitate this objective.
--Administrative costs. The ACA requires exchanges to fulfill a number of administrative functions that will add to their costs. Exchanges must find ways to reduce such internal costs, as well as the administrative costs to insurers and employers, if they are to offer better value to enrollees.
--Market or regulator? The ACA delegates to exchanges a number of regulatory responsibilities. Exchanges must certify health plans for participation and can exercise regulatory authority through this power. An important implementation choice will be whether exchanges should, on the one hand, maximize plan participation by minimizing certification requirements or, on the other hand, use their certification authority to limit exchange participation to high-value plans.
--Administering subsidies and mandates. The exchanges will play important roles in establishing insurance affordability, administering cost-sharing subsidies, and serving as a gateway to other public programs. It is particularly important that exchanges coordinate seamlessly with other public programs because participants will often move back and forth between an exchange, Medicaid, and the Children's Health Insurance Program (CHIP).
--State, regional, or national exchanges? Although the ACA favors the creation of state exchanges, it also confers authority to create a federal exchange as well as a multistate insurance program, and it provides for the possibility of regional exchanges. Important policy choices will need to be made concerning which avenues particular states should pursue and how the federal government should react to state action—or inaction.
--Governance. The ACA provides very little guidance as to how exchanges should be governed. HHS and the states must carefully consider how the entities that govern exchanges should be structured and how they relate to other state and to federal institutions.
--Relationships with employers. Although exchanges must be employer-friendly if they are to succeed, the ACA offers little guidance in this regard. Such relationships nevertheless need to be a major focus of implementation efforts.
--Cost control. Exchanges have been sold as a mechanism for moderating the growth of health insurance costs. Achieving this objective will only be possible if exchanges are implemented so as to maximize competition, choice, and participation and to minimize administrative cost and adverse selection.

According to, regulators hope that the exchanges will to be Web-based, one-stop shops for consumers to compare and purchase health insurance coverage. HHS' Office of Consumer Information and Insurance Oversight is seeking views on a number of issues related to insurance exchanges, including factors that states will consider when determining whether to build an insurance exchange or use an alternate federal solution; implementation timeframes; and aspects of exchanges that should be uniform across the states. For employers that plan to interact with state-level health exchanges under PPACA, federal regulators want to know the following:
--What exchange design features are likely to be most important for employer participation, including the participation of large employers in the future? What are some relevant best practices?
--What factors are important for consideration in determining the employer size limit (e.g., 50 versus 100) for participation in a given state’s exchange?
--What considerations are important in facilitating coordination between employers and exchanges? What key issues will require collaboration?
--What other issues are there of interest to employers with respect to their participation in exchanges?

According to AIS Health, the statute language regarding specialty care recognizes the importance of stand-alone dental providers by allowing individuals and small groups seeking coverage through exchanges to purchase their children’s dental benefits separately from dental carriers experienced in dental benefit plan design and administration. Insurance and discount plans could qualify for this option. The vast majority of Americans with dental coverage obtain it apart from their medical insurance and through stand-alone dental providers, and they can still do so under exchanges. But when people begin making coverage decisions through exchanges, and dental is bundled within some medical plans, it would be helpful to know how much of the bundled cost applies to dental coverage in order to make apples-to-apples comparisons with separate dental products. A section on nondiscrimination in health care states that no plan or insurer may discriminate against any provider acting within the scope of that provider’s license or certification under state law.

According to, the state healthcare exchanges that will be created as part of the Patient Protection and Affordable Care Act are intended to bring buyers and sellers together in a single marketplace for qualified health insurance. While the idea of a single marketplace is relatively straightforward, there are numerous underlying complexities, including plan cost, affordability, access, group size, participant age, marketing and education, eligibility, plan qualification, and risk adjustment. States that plan to establish exchanges should be well aware of these issues and should determine the best course of action depending on their specific circumstances.

The jury is still out, and in three years the landscape for health care in America will be drastically different than it is today. Insurance companies, states, regulators, employers, and all consumers will need to study hard to get ready. No more business as usual. Granted there will be more twists and turns along the way until the exchanges are in place. And there is still a huge amount of regulatory issues that are not yet resolved. Those stakeholders who do not get up to speed before the transition will be lost in the shuffle. Then it might be too late if you are behind the eight ball. Best as much money as you can til then because the price to be insured is gonna get expensive.

Until next time. Let me know what you think.

1 comment:

Tony Gates said...
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