8 HIE Implementation Barriers Detailed

Policymakers must address adverse selection, eligibility determination, administrative costs and other critical issues if they are to make health insurance exchanges work, according to a report released last week by the Commonwealth Fund.

State health insurance exchanges, mandated by the Patient Protection and Affordable Care Act, become operational in 2014; in 2017, states will be permitted to open them to large employers. The report, Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues, identifies eight of the most difficult issues state and federal policymakers will face as they implement these exchanges and offers recommendations for addressing them.

The author, Timothy Stoltzfus Jost, a Washington and Lee University School of Law professor, explores ways exchanges can make insurance more available to consumers (including employers) and how to help consumers make better choices.  The Commonwealth Fund is aprivate foundation supporting independent research and promoting a high performance health system that achieves better access, improved quality, and greater efficiency, especially for the underserved.  

The impact on hospitals is indirect but nevertheless significant. “Obviously, if exchanges can be made to work, hospitals will have more insured and fewer uninsured patients. More active competition among insurers, however, is likely to encourage insurers to drive better bargains with providers, including hospitals,” he tells HealthLeaders.

The eight challenges and some of the recommendations:

1. Governance: In each state, the exchange should be placed within an independent agency. Management should be apolitical and professional.
2. Adverse selection: To discourage adverse selection both against and within the exchange, U.S. Department of Health and Human Services should design a sophisticated, practical risk-adjustment system allowing states to adjust risk among participating and nonparticipating insurers.
3. Making self-funded plans compatible with exchanges: The risk is that only large employers with unhealthy or older workforces will opt to come into the exchanges. To counteract this possibility, states should consider extending the requirements of the PPACA to large plans and to grandfathered plans that qualify for exchange coverage, and provide strong incentives for all firms of a given size to obtain coverage through the exchange.
4. Making exchanges attractive to employers: Exchanges should offer employers the option of a single bill for the premiums of all employees; the exchange could then allocate premiums among the various insurers and plans.
5. Regulatory authority: Exchanges must use their certification power to ensure that health plans meet the statutory requirements for qualification and that plans do not impose unreasonable premium increases on their members. Legislation authorizing state exchanges should not require exchanges to admit all insurers into the market.
6. Determining the information exchanges must make available: Exchanges should make information describing the benefits and limitations of available plans readily and easily accessible, and plans should be contractually bound by information they disclose on their Web sites.
7. Eligibility determinations and their relationship to public insurance programs: The exchange and public programs should facilitate electronic applications. Individuals should be permitted to apply initially either to the exchange or to the state Medicaid agency, with either agency ensuring the individual is signed up for the appropriate program. (Despite extensive provisions for determining eligibility, the allocation of responsibility remains unclear and contradictory, the report warns.)
8. Reducing administrative costs: Exchanges should develop a variety of revenue sources, including an assessment on all insurers in the market. Exchanges should seek opportunities to lower administrative costs both for insurers and for employers. Use of agents and brokers should be neither encouraged nor barred, but their commissions should be rationalized, and commission should be consistent regardless of which health plan is being sold.

The Department of Health and Human Services has awarded funds to help individual states develop and implement install health insurance exchanges. Last week HHS announced  $49 million to be used toward state-based exchanges that will provide consumers and businesses with "one-stop-shopping" to compare and buy health insurance.

If HIE implementation can be done right, Jost says, the entire healthcare system will benefit. As he wrote in the Commonwealth Fund blog, “If careful consideration goes into developing policies that address these challenges, the exchanges will be able to accomplish what they are intended to do: expand access to affordable health insurance coverage, improve the quality of coverage, and reduce costs. These are outcomes that will benefit the health system overall.”