This article appears in the February 2013 issue of HealthLeaders Media's Medicine on the Net newsletter.
One of cornerstones of federal healthcare reform is the health insurance exchange, an online marketplace where consumers will be able to shop for health insurance plans and apply for federal subsidies to help pay for monthly premiums. But with the arrival of healthcare reform less than one year away, the federal government is scrambling to ensure that every state has an exchange ready to launch by October.
As of January, only 18 states and the District of Columbia had committed to building and operating their own health insurance exchanges. The rest will either partner with the federal government to build an exchange or exercise a provision of the Patient Protection and Affordable Care Act (PPACA) and let the federal government build and operate one for them.
The deadline for states to announce whether they plan to build their own health insurance exchanges or partner with the federal government is February 15.
Most states opting out
Constructing exchanges for 32 states in less than a year could be a daunting task but federal officials say they'll be ready to go.
"All exchanges will be open for enrollment in October 2013," said Gary Cohen, director of the Center for Consumer Information and Insurance Oversight (CCIIO).
The 18 states that have opted to build their own exchanges are California, Hawaii, Idaho, Minnesota, Mississippi, Nevada, New Mexico, Rhode Island, Vermont, Utah, Kentucky, Colorado, New York, Connecticut, Massachusetts, Maryland, Oregon and Washington.
Other states are opting out, with governors from many of those states citing the ongoing expense of operating and maintaining the exchanges as a key reason. Arizona Gov. Jan Brewer said her state would be saddled with up to $40 million in annual expenses to operate an exchange after federal subsidies expire in 2015.
Delaware is one of only seven states to have committed to a federal partnership as of late January. The head of the state agency overseeing that partnership spoke with HealthLeaders Media about the benefits and challenges of the new insurance model.
After the February 15 deadline, the federal government will set up exchanges for the states. While it's not clear how the federal option will work, it seems likely they'll operate through a single portal where consumers can log on, choose their state, and browse through a list of insurers and health plans available in their area.
Political issue
The question of states establishing or not establishing a health insurance exchange has become a political issue. Most states that oppose the PPACA have rejected them outright while states like California began preparing their exchange plans a few months after the PPACA was passed in 2010.
"Unfortunately, the issue has become politicized and that's made the job of establishing exchanges more difficult," said Sam Karp, vice president of programs for the California HealthCare Foundation (CHCF).
The CHCF and several major non-profit groups - including the Robert Wood Johnson Foundation and the New York State Health Foundation - pooled their resources in a $3 million project to create Enroll UX 2014, a template that state and federal officials are using to create their own exchanges. The CHCF contributed $1.5 million to the project and served as managing partner in a major undertaking that included input from 11 states, the Centers for Medicare and Medicaid Services (CMS), and the Office of the National Coordinator for Health Information Technology. The CHCF unveiled the free Enroll UX 2014 template in June 2012.
"It was a bi-partisan effort that included states like Alabama and Tennessee, which have decided not to set up their own exchanges but will leverage some of the design elements of Enroll UX to improve their online Medicaid websites," said Karp. "And that's the goal of the program; to provide states with a starting point and some ideas about how an exchange can work."
Giving states a roadmap
Designed by Palo-Alto based technology firm IDEO, Enroll UX 2014 is designed to provide consumers with a website that's user-friendly and intuitive, with simple, direct questions posed in chronological order.
"To get started, consumers will be asked a number of questions starting with, 'Who is your current doctor'?" said Karp. "And once they answer that question, they'll be given a list of insurance plans their doctor accepts starting with plans that are the most affordable."
The exchanges will also need to be secure, since consumers will be providing financial information in order to qualify for federal subsidies. The subsidies will be available to individuals and families with annual incomes of up to 400% of the federal poverty level.
According to an analysis from the Kaiser Family Foundation, subsidies will be available in six separate increments ranging from 2% to 9.5% of premiums as a percentage of income. The subsidies will be based on the cost of second-lowest priced 'silver plan' available, which is defined as "a plan that provides essential benefits and has an actuarial value of 70."
As an example, the Kaiser Foundation said a 45-year-old woman with an annual income of $28,735 would pay $5,733 per year for the second-lowest cost plan but would receive a tax credit of $3,420 at the end of the year, leaving her with an annual premium of $2,313.
Since all health insurance exchanges are required to follow the same guidelines outlined by the PPACA, most will share a similar infrastructure. And many are being designed by the same technology firms. IBM, CGI Technologies and Solutions, and Accenture are involved in insurance exchange projects in more than a half-dozen states.
While technology firms work on building the information pipelines, health officials in each state are recruiting insurers to sell their products on the exchange and crafting plans to set rates. In California, which will operate the largest exchange in the nation, state health officials have received bids from 33 different health plans interested in selling insurance plans on its Covered California exchange.
No wrong door
The goal all states share in building their exchange is to make them easy to use. Like any business, the price consumers pay for a health plan will be based on economies of scale and making the exchange easy to use will presumable attract more customers and help drive down rates.
Most states are also incorporating their Medicaid enrollment plans into the exchange to create a single destination for all enrollees. Starting in 2014, Medicaid expansion will make people with annual incomes of up to 138% of the federal poverty level eligible for Medicaid, an increase from the current level of 100%. The Kaiser Family Foundation estimates an additional 21.3 million people will become eligible for Medicaid under Medicaid expansion by 2022 if all states participate.
Maryland is taking the single destination approach as it builds the Maryland Health Connection with the help of IBM. The exchange will provide a single point of connection for state residents enrolling for private plans, Medicaid, and the Maryland Children's Health Program. Craig Hayman, general manager for industry solutions at IBM, said the goal is to create an online venue "where citizens can manage all aspects of finding insurance, from determining eligibility and shopping for plans to calculating tax credits."
Danielle Davis, director of communications and outreach for the Maryland Health Benefit Exchange, said the goal is to create a simple enrollment process where residents can enter their personal information and let the website do the rest.
"From the beginning, we've taken a 'no wrong door approach' to make the consumer experience as simple as possible," said Davis. "It's all about creating a user-friendly design that makes the exchange accessible to everyone."
This article appears in the February 2013 issue of HealthLeaders' Media's Medicine on the Net newsletter.