Date post: | 20-Aug-2015 |
Category: |
Documents |
Upload: | hmartin920 |
View: | 836 times |
Download: | 0 times |
Implementing Exchanges that Enhance Choice, Affordability and Coverage 1 | P a g e
Gateway to Improved Health Access
Implementing Exchanges that Enhance Choice, Affordability and Coverage
Harold L. Martin II
12/2/2010
The Patient Protection and Affordable Act (ACA) of 2010 provide for the establishment of state-based health insurance exchanges. Beginning in 2014, states will be required to establish new purchasing arrangements to distribute coverage to individuals and small employers. The goal of these exchanges is to expand health insurance coverage, slow the rate of health care inflation, and provide subsidized coverage for modest and low income Americans, and increase choice and competition in the health insurance marketplace. Prior attempts at creating health insurance exchanges have resulted in mixed results. This paper considers the challenges of previous efforts, analyzes the ACA’s key components, identifies relevant aspects for Exchanges and discusses reasonable policy recommendations. The way forward involves a concerted effort from several stakeholders coming together to mitigate the complexities of implementing health care reform.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 2 | P a g e
Abstract
The Patient Protection and Affordable Act (ACA) of 2010 provide
for the establishment of state-based health insurance exchanges.
Beginning in 2014, states will be required to establish new
purchasing arrangements to distribute coverage to individuals and
small employers. The goal of these exchanges is to expand health
insurance coverage, slow the rate of health inflation, provide
subsidized coverage for modest and low income Americans, and
increase competition in the health insurance marketplace. Prior
attempts at creating health insurance exchanges have resulted in
mixed results. This paper considers the challenges of previous
efforts, analyzes the ACA’s key components, identifies relevant
aspects for Exchanges and discusses reasonable policy
recommendations. The way forward involves a concerted effort from
several stakeholders coming together to mitigate the complexities
of implementing health care reform.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 3 | P a g e
Table of Contents
Introduction………………………………………………………………………………………………………………………………4-7
Background of Health Reform………………………………………………………………………………………7-13
The Current Landscape……………………………………………………………………………………………………13-16
Midterm Elections: New Challenges for Health Policy………………….16-19
Scan of Policy Alternatives………………………………………………………………………………….19-22
Analysis and Policy Recommendation……………………………………………………………..22-32
Implementation and Monitoring…………………………………………………………………………….33-35
Conclusion and Recommendations………………………………………………………………………….35-39
References…………………………………………………………………………………………………………………………………40-45
Implementing Exchanges that Enhance Choice, Affordability and Coverage 4 | P a g e
I. Introduction
Health Insurance exchanges are a key element of the
private health insurance reforms of the Patient
Protection and Affordable Care Act (ACA) of 2010. The so
called “Travelocity” of health insurance (Curtis 2010)
may determine the fate of federal health care reform in
meeting its goals to improve access to health coverage,
enhance the value of health insurance and moderate the
cost of health care. The issues facing the American
people are: health insurance is expensive; subsidies
to expand coverage for all citizens is an objective of
the current administration; financing of the delivery
system is dependent on slowing growth without sacrificing
quality; and governance of exchanges must consider both
state and federal institutions. ACA creates broad
guidelines for the exchanges and federal regulations
require the Department of Health and Human Services (HHS)
to provide additional guidance over the coming months to
the states. People who today cannot afford health
insurance or are denied coverage will be able to purchase
Implementing Exchanges that Enhance Choice, Affordability and Coverage 5 | P a g e
insurance. Implementing a health insurance exchange will
be a new responsibility for virtually all states. (Kaiser
Family Foundation 2010) The list of stakeholders is both
long and far reaching. Implementation will impact
representatives of community-based organizations,
insurance commissioners, Medicaid administrators, finance
directors, leaders of health care reform cabinets, health
policy experts, state officials, members of the
legislature, health care professionals, insurance
providers, hospital executives, academics, unions,
employee groups, and trade associations. At a federal
level the following institutions or agencies will play a
role in facilitating exchange development and monitoring
outcomes; HHS, General Accounting Office, Centers for
Medicare and Medicaid Services, the Office of Personnel
Management, The Department of Treasury, Children’s Health
insurance Program(CHIP), Office of the Actuary, National
Health Care Statistics, Congressional Budget Office, The
National Commission on Fiscal Responsibility and Reform,
and a newly created public-private entity the Patient-
Centered Outcomes Research Institute. (Patel 2010) The
act gives broad authority to the state governments to
Implementing Exchanges that Enhance Choice, Affordability and Coverage 6 | P a g e
implement the exchanges with guidance from HHS but must
also consider the following major components: expansion
of the number of people with insurance, reform of the
individual and small group insurance markets, changes to
the health care delivery system, and slowing the rate of
cost increases, tax increases and spending reductions to
finance the reform efforts.(Ginsburg 2009) The enactment
of the legislation is a beginning to the tackling of this
multidimensional, complex and highly charged issue.
Let’s now examine some of the key concerns associated
with the “centerpiece” of the private health insurance
reforms.(Stolzfus 2010) As such, the exchanges present
each state with an opportunity to improve the
inefficiencies in the small group and individual
insurance markets, to provide coverage and choice to more
people, to minimize the adverse selection concern from
past purchasing arrangements, to impact favorably the
cost side of the equation, and to provide a model of how
state and federal government can work together. The
issues are: 1.How should exchanges be governed? 2. What
should be done to avoid adverse selection?
3. What must exchanges consider to reduce health costs?
Implementing Exchanges that Enhance Choice, Affordability and Coverage 7 | P a g e
4. What information should exchanges make available to
consumers or employers?
5. How can administrative costs be managed to make
exchanges self sustaining entities over time?
Perhaps the biggest hurdles are: each state’s political
environment, the economic constraints of operating in a
recession, and the political uncertainty of expected
leadership transitions created by the mid-term elections.
II. Background of Health Reform
The health care reform that President Obama signed into
law earlier this year is seventy-five years in the
making. Beginning with Franklin D. Roosevelt, U. S.
presidents have struggled to pass health care reform
legislation; most have failed.(Morone 2010) This paper
does not set out to provide exhaustive detail on each of
the failed attempts to change the health care system, but
rather examines the “public option” as background for
framing the discussion. The “public option” for health
insurance grew from roots planted in California in 2001.
(Halpin and Herbage 2010) Generally speaking,
progressives supported it as a voluntary transition
Implementing Exchanges that Enhance Choice, Affordability and Coverage 8 | P a g e
toward single-payer insurance while conservatives opposed
it as government takeover of health care. The public
option language did not make into the final packages
passed by both houses of government in March, 2010.
Today we have public health insurance programs like
Medicare, Medicaid, the Federal Employees Health Benefit
Plan (FEHBP), and the Children’s Health Insurance Program
(CHIP) that have operated for years. The notion of a
“public option” to compete directly with the private
health insurance industry that reduces health care costs
and premiums has been proposed. Proponents argue a
public option would have significant impact on the U. S.
health care market by creating a more competitive playing
field particularly in select states where few insurance
options exist. It was advocated that such a “public
option” would keep insurers honest by giving consumers an
option to choose the “public option”. Opponents feared
that private plans could not compete against it and that,
over time, it would cause erosion in the risk selection
of both the individual and group health insurance
markets. A fundamental question arises do government
sponsored health insurance purchasing entities reduce
Implementing Exchanges that Enhance Choice, Affordability and Coverage 9 | P a g e
costs or expand coverage for individuals and small
employers? Let’s examine four prior policy imperatives
that address this issue while providing insights into the
actual results of these efforts.(Bender and Fritchen
2008) Policymakers have previously considered alternative
purchasing mechanisms to facilitate the purchase of
insurance coverage while delivering lower cost
alternatives for individuals and small employers.
Insurance Purchasing Cooperatives (HIPCS)
Several states established state-sponsored purchasing
arrangements commonly called Health Insurance Purchasing
Cooperatives during the 1990’s. Supporters reasoned that
that they would provide “lower-cost” health insurance and
offered up the following rationale: (1) collective
purchasing power would increase competition;(2)purchasing
insurance through a single entity would provide economies
of scale reducing administrative costs; and (3)
competition would be introduced by allowing employees to
select from a menu of options offered by several health
plans. These state-sponsored entities failed to deliver
on these promises because they failed to offer better
value for those electing the option. Most were
Implementing Exchanges that Enhance Choice, Affordability and Coverage 10 | P a g e
“disbanded” shortly after initial operations began.
HIPC’s Fail to Attract Sizeable Enrollment (Bender 2007)
State Eligible
Employers
Market Share Status
12/31/2007
CA 2-50 2% Disbanded in
2006
CO Any Size 2% Disbanded in
2002
FL 1-50 5% Disbanded in
2000
TX 2-50 1% Disbanded in
1999
UT 2-50 N/A Disbanded
(date
unknown)
Connector/Exchange Models
The concept of connectors is not a new approach as proposals
Implementing Exchanges that Enhance Choice, Affordability and Coverage 11 | P a g e
have been introduced in at least 15 states prior to the
current health reform law with Massachusetts and Washington
state adopting health insurance legislation in 2006 and 2007
respectively.(Kingsdale 2010) The basic tenets are similar to
what is being proposed today as the exchange would market
coverage, collect premiums, enroll employees, and administer a
subsidy program for those less fortunate. The Commonwealth
Health Insurance Connector is the most comparable program and
many elements have been incorporated into the current
approach. Sources have cited a number of factors that may
alter the cost of insurance coverage that are problematic to
measure. They include: mandates to buy insurance could force
lower-cost persons and companies who previously decided not to
buy coverage to enter the market, subsidies create incentives
to purchase insurance through the Connector, merging the
individual and small groups markets might lower premiums for
individuals while raising costs for small employers, and the
Connector would enjoy a pricing advantage largely due to
requiring young adults to purchase products through the
Connector and not in the open market. In Massachusetts, the
Commonwealth Connector (a form of purchasing pool) has played
a role in reducing the cost of health insurance for employers
Implementing Exchanges that Enhance Choice, Affordability and Coverage 12 | P a g e
who do not receive health insurance through their employer.
The state requires that employers have a Section 125 plan
allowing employees to buy health insurance through the
Connector with pretax dollars (The Massachusetts Health
Insurance Connector Authority, 2008). The purchasing entity is
coupled with a legislative approach requiring employers to
allow employees to purchase coverage with pretax dollars which
reduces the cost for people who work but do not have access to
insurance through their employers. Similar strategies are
incorporated within the ACA legislation.
Federal Employee Health Benefit Plan (FEHBP)
Many individuals prior to the health reform legislation
referenced the FEHBP. This program is offered to federal
government employees who enjoy premium contributions of
seventy five percent by the federal government. The funding
and coverage levels proposed in the “exchanges” would also
enjoy federal funding support. The FEHBP plan was profiled
because it offers a “benefits rich” package to government
employees is relatively stable and serves as a “benchmark” for
the essential benefits package incorporated in the
legislation. Exchanges comes in a number of different
varieties such as health purchasing cooperatives (HIPCs),
Implementing Exchanges that Enhance Choice, Affordability and Coverage 13 | P a g e
Association Health Plans (AHP’s) and health connectors. Many
HIPCs were established in the 1990’s with other reforms aimed
at improving access and affordability. AHP’s differ from HIPCS
in that they limit participation to members in a trade or
professional association (Wicks and Hall 2001). The state of
Massachusetts included a purchasing pool, called the
Commonwealth Connector which is open to those who do not have
insurance from an employer or are ineligible for public
insurance programs. (Solomon 2007) Like the ACA legislation
the purchasing pool was coupled with an individual mandate.
III. The Current Landscape
Today there are a number of factors impacting health care
costs and reform efforts. Consumers have difficulty
weighing options and understanding how coverage operates.
Health insurers must be carefully monitored to avoid
“redlining” (i.e. denying coverage to certain occupations
or communities) and “street underwriting” both of which
Implementing Exchanges that Enhance Choice, Affordability and Coverage 14 | P a g e
impact risk selection. (Business Roundtable 2009) More
rigid monitoring of underwriting rules consistently
applied with marketplace plans could level the playing
field, but today’s realities of gimmickry in plan
designs makes it difficult to compare “apples to apples”
plans and challenging to examine pricing objectively.
“Churning” carrier and coverage at the employer level
make insurers ability to focus on “improving health” in
the small and individual markets problematic. Agents and
brokers fees comprise up to 15 to 20 percent of
“marketing expenses”. Advocates for health insurance
reforms see an opportunity to reduce costs in these
areas. Next, I will consider the legal, economic and
political contexts of health care reform.
If we take a “macro” view of what the Affordable Care Act
does it fundamentally alters three things: (1) Legally it
creates a mandate, requiring that nearly every American
get an approved threshold of health insurance coverage or
pay a penalty. (2) Economically it creates a mechanism of
federal subsidies to completely or partially pay for the
newly created health insurance of approximately thirty-
four million Americans. The subsidies are made possible
Implementing Exchanges that Enhance Choice, Affordability and Coverage 15 | P a g e
through a combination of expanding the existing Medicaid
program and the establishment of new administrative
entities called Exchanges. (3)It places new requirements
on the health insurance industry that will alter the
business model.(Hoff 2010) Examples include: it requires
insurers to issue policies to anyone who qualifies, to
renew policies without regard to the health status of the
individual and it requires that rates in the Exchange
and small group markets vary only on age, the geographic
area, family composition, and tobacco use.(Bredsen 2010)
Some consider the provisions requiring insurance
companies to pay providers at least 85% of the premium
dollars collected from large groups for medical care
excessive and political in nature.(Business Roundtable
2009). Politically, and to confirm to the president’s
stated goal, health care reform had to show that it would
not “increase the deficit”.(CBO 2010) The financial
impact of the legislation is complex and may be even more
so by the practice of focusing on the deficit rather than
actual costs, savings, and new revenues it’s expected to
produce. (Bredsen 2010)The Innovation Center run by the
Centers for Medicare & Medicaid Services (CMS) identified
Implementing Exchanges that Enhance Choice, Affordability and Coverage 16 | P a g e
additional risks that could undermine potential savings
or shift costs to the private sector (Business
Roundtable, 2010). They include: delayed or water down
implementations; potential legislative reversals of cost
saving components; continuation of the practice of
“defensive medicine”; failure to implement a strong
mandate; and cost shifting to the private sector from
reductions in federal reimbursements to providers.(Sisko,
Truffer, Keenhan,Poisal,Clemens,Madison 2010)
IV. Midterm Elections: New Challenges for Health Policy
The results of the 2010 midterm elections have
significant implications for health care reform
implementation though I do not believe the campaign trail
rhetoric calling for repeal of this landmark legislation
by some high ranking Republicans will materialize.
Nevertheless, health care reform will remain a leading
issue for the new Congress which convenes in January 2011
and governs through the end of 2012(Towers Watson 2010).
There was never a chance that Republican mid-term
victories even with the most optimistic of scenarios
would or even could untangle the health reform law. Even
Implementing Exchanges that Enhance Choice, Affordability and Coverage 17 | P a g e
if Republicans had secured a majority control in the
Senate along with their victories in the House, the law
was in no danger of repeal according to the International
Foundation of Employee Benefits and Lockton, the world’s
largest privately held insurance broker. (Willis 2010)
Perhaps the most impactful potential for change comes
from the newly elected Republican governors in twelve
states bringing a majority to the republican side.
Look for governors to influence implementation on four
“battlefronts”: (1) slowing the progress of the exchanges
in selling insurance policies; (2) tinkering with the
proposed Medicaid expansion subsidies; (3) challenging
the legality requiring most Americans carry insurance or
pay a fine; and (4) delaying the expansion beyond the
2014 timeline.(Adamy 2010). Looking forward politically
and practically, I can envision five scenarios
Republicans might do to disrupt the implementation of the
Patient Protection and Affordable Care Act. A brief
overview for each scenario follows. (Koster, 2010)
Scenarios
1. “Repeal and Replace.” This is unlikely given the
President’s ultimate veto authority and the sentiment
Implementing Exchanges that Enhance Choice, Affordability and Coverage 18 | P a g e
around getting the economy moving again among many
republicans. This could move to the forefront during the
2012 presidential elections. 2. “An incremental
approach”. Compromise on items like the individual
mandate, medical loss ratios or “play or pay”
requirements for employers may surface given the
President’s willingness to “tweak” various aspects of the
law to preserve his credibility. 3. “Starvation”. Many of
the provisions in the legislation take place in the
future and involve continued and consistent funding.
Political maneuvers to eliminate or reduce funding for
key regulations in the law would put various aspects of
the law in “limbo” creating a state of uncertainty which
would be problematic for the White House. 4. “Legal
challenge and investigation”. Legal suits are pending in
21 states today declaring the individual mandate as
“unconstitutional” with a likely outcome being the
Supreme Court will get involved. 5. “State-level
intervention”. Three options are likely: a) Republicans
could pass mandates stating that states are not obligated
to enforce the individual mandate or incur additional
expenses relative to health care reform; b) states could
Implementing Exchanges that Enhance Choice, Affordability and Coverage 19 | P a g e
elect not to develop exchanges leaving the set-up
responsibility with the Federal government; and c)
Medicaid expansion efforts could be thwarted. (Koster
2010) Political pundits point out that predictions
predicated on mid-term elections are almost always wrong.
That said it is comforting to know that the time, money
and resources committed to this monumental legislation
during 2009 may still have an impact on the well being of
many without access to care and coverage. (Liberto 2010)
V. Scan of Policy Alternatives
A poorly functioning health care “market” is one cause of
the rapid growth in health care costs above that of
growth rates in other industries. Health care is unique
in that the traditional forces of supply and demand are
altered by a third-party, fee for service payment model
and significant cost shift among payers. (Brookings
2010). Let’s consider briefly other approaches that have
been proposed to tame this perplexing issue. I will
examine the public option, consumer-directed system and a
Implementing Exchanges that Enhance Choice, Affordability and Coverage 20 | P a g e
new idea recently introduced (11/24/2010) by Senators Ron
Wyden (D-Ore) and Scott Brown(R-Mass). (Klein 2010)
In simple terms the public option is synonymous with
government-controlled health care. Many want a public
option to compete with private insurance and to improve
accountability. By definition, a public option would be
accountable to elected officials rather than many health
plans which are accountable to investors. In general
those who support a public option believe that with a
“central” purchaser concept, costs would necessarily be
lower. Many opponents see expanding government’s role as
a payer as a move toward socialism (Halpin 2010). Though
the public option had support from the public, labor
unions, consumer groups and civil rights organizations it
ultimately did not find its way into the recent
legislation.
Conservatives generally favor a market approach to health
care reform. They reason that the health insurance
industry through competition, individual accountability,
and innovation will help dampen rising costs. Past and
present strategies have been unable to demonstrate
significant improvement and sustainable improvements in
Implementing Exchanges that Enhance Choice, Affordability and Coverage 21 | P a g e
reigning in health care costs. Bending the cost curve has
been challenging and continues to be elusive for most
private employers. Recently two senators introduced
legislation that would essentially allow states to come
up with a comprehensive way to cover as many people as
the federal plan, without adding to the deficit, whereby
that state could get the same amount of money that it
would get from the federal government for health care
reform but be exempt from the individual mandate, the
exchanges, the insurance requirements, the subsidy scheme
and virtually everything else. It is clear that with new
politicians being sworn in for the 2011 Congress that
this battle is far from over which seems to suggest that
all things are still “on the table”. Those who would
rather seek prudent, comprehensive and practical guidance
for implementation should consult the article from
Brookings entitled “Bending the Curve through Health
Reform Implementation”. It is fair to assert that with
double digit increases in annual health care costs for
the public and private sector that no policy is working
in a sustainable, efficient and consistent manner.
Next, I will examine the current legislative policy for
Implementing Exchanges that Enhance Choice, Affordability and Coverage 22 | P a g e
health care reform.
VI. Analysis and Policy Recommendation
The performance dimensions against which I examined the exchanges
as a viable policy option include: cost/effectiveness,
administrative efficiency, equity, cost benefit, political
feasibility, legality, health, and unintended consequences.
Cost/Effectiveness
There is no “direct” evidence of the impact the exchange model
will have relative to overall health care spending. Sources
suggest that unsubsidized purchasing pools have not been able to
reduce premiums enough to induce un-insured employers to
participate.(Fensholt 2010) The subsidized exchange model extends
coverage to the uninsured which results in two outcomes (1) an
increase in health care use among the affected population and (2)
an increase in the overall health care spending. (Kaiser Family
Foundation 2010) This could partially be offset by “efficiently”
managed exchanges which provide greater bargaining power, reduced
administrative costs, and greater economies of scale. Moreover,
the legislation seeks to minimize the effects of adverse
selection with the individual mandate which should positively
Implementing Exchanges that Enhance Choice, Affordability and Coverage 23 | P a g e
affect premium costs. Administrative efficiency
Classic economics suggest that the exchanges will reduce the
administrative overhead of individual and small group insurance
policies by creating economies of scale. Such costs reduce
redundant functions that are noticeable in plans that exist
today. Typically administrative costs can represent up to 30 to
40 percent of premiums for individual non-group policies, 20 to
25 percent for small group plans, and 10 percent for large group
employer plans (GAO 2000). Even if the exchanges obtain
sufficient enrollment, we do not know if they will achieve the
same level of administrative efficiency as large employer groups.
It is important to remember that the potential of having 50
different state run exchanges or separate “individual” and “small
employer” exchanges within each state or duplicative functions
performed by several entities could jeopardize any cost
efficiencies. It is not clear at this stage of the process
whether exchanges will deliver on the promise of improved
efficiency.
Equity Simply
put the Exchanges are required by January 2014 to provide
individuals and small employers the ability to shop for insurance
from a range of health plans offered through the Exchanges. Lower
Implementing Exchanges that Enhance Choice, Affordability and Coverage 24 | P a g e
and middle-income individuals up to four times the Federal
Poverty level (FPL)—more than $88,000 for a family of four in
calendar year 2010- may be eligible for premium relief. In
addition small employers with lower income workers that offer
employer provided insurance (ESI) may be eligible for premium
subsidies for up to two years (Carey, 2010). The eligibility
process makes clear that there is no wrong door. Regardless of
where an individual or family in need shows up, its application
for assistance must be routed to the right program. (Stoltzfus,
2010)Supporters of the Affordable Care Act take considerable
pride in the fact that it will make health insurance available to
another thirty-four million people. That is a lot of citizens who
won’t have to go to emergency rooms or charitable clinics every
time they need medical attention, who will get preventive care,
and who will have continuity in their medical care, and who will
not be forced into bankruptcy by unanticipated health problems.
Many non supporters would suggest that expanding coverage is
about all that was done.
Cost/ Benefit Most
employers do not believe that the health care reform legislation
will reduce the rising health care costs (Willis, 2010).
According to the Office of the Actuary “by calendar year 2019,
Implementing Exchanges that Enhance Choice, Affordability and Coverage 25 | P a g e
the mandates, coupled with Medicaid expansion would reduce the
number of uninsured from 57 million as projected under prior law,
to an estimated 23 million under the PPCA. The additional 34
million people would become insured by 2019 reflect the net
effect of several shifts”.(Foster, 2010)One, an estimated 18
million would gain primary Medicaid coverage by virtue of the
expansion of eligibility to all legal adults under 133 percent of
the FPL. Second, about 2 million people with employer sponsored
coverage would enroll in Medicaid for supplemental coverage.
Third, another 16 million people would receive individual
coverage through the Exchanges with most of these eligible for
federal premium subsidies. Lastly, it is estimated that the
number of individuals with employer sponsored coverage would
decline by about 1 million. The independent technical advisor to
the Administration and Congress asserts “that the overall
national health care expenditures under the health care reform
act would increase by a total of $311 billion(0.9 percent) during
calendar years 2010-2019, principally reflecting the net impact
of greater utilization of health care services by individuals
becoming newly covered, lower prices paid to health providers for
those individuals who become covered by Medicaid, and lower
payments and payment updates for Medicare services.(Foster,
Implementing Exchanges that Enhance Choice, Affordability and Coverage 26 | P a g e
2010). He further asserts that although several provisions would
help reduce health care growth, their impact would be more than
offset through 2019 by the higher health expenditures resulting
from the coverage expansions. The future impact of ACA on health
expenditures, insured status, individual decisions, and employer
behavior are very uncertain. The legislation will result in how
health insurance is provided and funded in America and the scope
and order of magnitude of these changes is without precedent.
That said any estimates are necessarily subject to a greater
degree of uncertainty than with less ambitious health care
legislation initiatives.
Political Feasibility
HHS officials tasked with delivering on the benefits of the law
to the American people will seek a consistent, transparent
implementation process. Yet recent surveys have suggested it
would be acceptable to repeal the law. (Willis 2010) The new
political environment creates uncertainty for health care reform
as stakeholders develop strategies to function in this new era
and while it is impossible to predict what the new Congress may
enact, much of the activity will be centered toward the 2012
elections. Opponents and supporters will use this period to
posture for their changes making the 2012 elections a referendum
Implementing Exchanges that Enhance Choice, Affordability and Coverage 27 | P a g e
for “halftime” adjustments to health care reform. Moreover, far
more serious and subtle efforts to undermine the law may come
about through challenges to various administrative arrangements,
taxes, and subsidies to fund expansion of coverage. History tells
us that “the financing of the original 1935 blueprint for Social
Security was greatly revised in 1939, and the program experienced
near-fatal interruptions in scheduled taxes and benefits during
World War II”.(Skocpol 2010). I assert that politics moves
quicker today and that new health care reform may become
entrenched over the next five to eight years.
Legality
Legal fights against the law’s requirement that most Americans
carry insurance or pay a fine are already underway. Today’s
constitutional challenges may amount to political theater
scripted to insight media coverage, enlighten partisans and
influence uncertain or uninformed voters that something must be
inherently bad or wrong with the bill. Fundamentally it comes
down to whether you think health care is a “right” or a
privilege. Historically, the word health does not appear in the
Constitution and it relegates this function to the states or the
people. While we can debate the legality of the mandate the 2010
law calls for several years of complex implementation including a
Implementing Exchanges that Enhance Choice, Affordability and Coverage 28 | P a g e
cascading series of regulations, subsidies, taxes, and tax breaks
intertwined with fifty states and more than a few federal
agencies. One thing is certain there will be midcourse
adjustments with the Affordable Care Act.
Health
In theory, the Exchanges expand coverage and they should have the
potential to improve health. The Exchanges address the needs of
high risk individuals who have been unable to purchase health
insurance previously. In addition the preventative components
within the legislation provide substantial opportunities to
address the health and wellbeing of individuals and their
families. Based on an economic model developed by the Urban
Institute, Trust for America’s Health found an investment of $10
per person per year in effective programs to improve physical
activity, nutrition and prevent smoking could result in more than
$16 billion in health care costs annually within 5 years. This is
a return of $5.60 for every $1. This may be a future modification
policymakers may want to consider. (Hamburg 2009) The law’s
provisions advance information technology and support
comparative-effectiveness research (Patel 2010). Many experts
believe it will improve the quality of care and it is hard to
predict if the gains will be substantial and long-lasting. The
Implementing Exchanges that Enhance Choice, Affordability and Coverage 29 | P a g e
prevention efforts will improve health outcomes for those without
prior coverage and public health will benefit, but it is unlikely
to reduce costs quickly.
Unintended Consequences
The legislation has caused concern in the areas of Affordability,
Access and Coverage. Health insurance is expensive and the
legislation as enacted according to many reports will add costs
to the already expanding federal deficit.(Eaken and Ramlet 2010)
State governments will be asked to expand capacity and resources
to prepare for and establish the Exchanges at a time when their
fiscal budgets are in disarray.(Blumberg and Politz 2009) Some
question the merit of tackling such monumental legislation during
a recession purporting that job creation has been stifled with
the focus and debate lasting well beyond a year. Access may be
impaired as Medicaid will incur expansion under the law despite
grappling with state and federal challenges fiscally and resource
wise. “Doctor shortages” exist today and with additional
insured’s entering the market something short of a “Armageddon”
looms as a real possibility to access given the time and adequate
resources needed to train new doctors. Emergency room capacity
issues may have been minimized when sweeping the legislation to
the forefront of American social justice. Finally, I suspect the
Implementing Exchanges that Enhance Choice, Affordability and Coverage 30 | P a g e
prospect of large employers eliminating employer provided and
sponsored coverage was largely ignored with passage of the
legislation. MIT economist Jon Gruber say’s its “impossible to
create new government benefits without some unintended
consequences, but he doesn’t see a big drop in employer coverage.
(Alonso-Zaldivar 2010) Ironically, one major assertion of the
legislation is that it would stimulate competition among health
insurance companies yet with the requirements being imposed on
the industry(i.e. medical loss ratio thresholds)some payers are
exiting the market(Principal) or reevaluating their business
strategies.
The Exchange implementation process among individual states may
affect health care reform in several ways. First, there is little
evidence to suggest effectiveness will be improved. Though
regulatory and policy options (i.e. individual mandate) might
improve the viability of purchasing pools and enhance their
ability to decrease costs, much is still unknown. Second,
administrative efficiency, cost benefit, political feasibility,
cost effectiveness, legality, indirect economic benefits and
health impacts are uncertain or dependent on too many variables
to predict with any degree of success. The exchanges face
difficult implementation, regulatory guidance and hurdles not yet
Implementing Exchanges that Enhance Choice, Affordability and Coverage 31 | P a g e
envisioned as details emerge from the state and federal policy
recommendations. Third, equity is achieved with the policy as
many without health care coverage today gain insurance and some
unintended consequences may surface. Fourth the exchanges will
broaden the range of health plan choices available to consumers,
small employers and the uninsured. This may enhance the overall
experience and health of the population, but at a cost for
society. The following table will provide an overview of the
proposed health care reforms. Please note that the “Empower
States” option recently introduced on 11/24/2010 by Democratic
and Republican senator(s) is essentially a policy that givens the
states control to do whatever works best to cover everyone at the
lowest cost. States can go their separate ways and the other
states can judge the winner based on results not political
ideology. If the stakeholders make the system work better, then
states will prosper. If conservative solutions are more efficient
that will be evident when money is saved. If liberal ideas work
better perhaps it’s time we found out. This was recently
introduced making it challenging to draw conclusive results from
such an approach.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 32 | P a g e
Exchanges Status
Quo
Government
Run
Empower
States
Cost/Effectiveness No
Evidence
No
effect
Evidence
Inconclusive
No
Evidence
Administrative
Ease/Efficiency
Uncertain No
effect
Uncertain Uncertain
Equity Improve No
effect
Uncertain Improve
Cost/Benefit Uncertain No
effect
Uncertain No
Evidence
Political Feasibility Moderate Easy Difficult Difficult
Legality Possibly No
effect
Yes Yes
Health Improve No
effect
No Evidence No
Evidence
Consequence/Unintended Yes No Yes Uncertain
Implementing Exchanges that Enhance Choice, Affordability and Coverage 33 | P a g e
VII. Implementation and Monitoring
The new national health care reform law calls for the state or
regional exchanges to be established by January 1st, 2014. HHS
will oversee and monitor the establishment of the exchanges
providing guidance, recommendations, and mechanisms for states
that choose to look to the federal government to provide safety
net protection. (Kinsgdale and Bertko 2010) This leaves
considerable discretion to each state in how they structure plan
offerings, facilitate comparison shopping and operate the
Exchange. State entities that may play a role include: (1)
insurance departments, (2) Medicaid agencies, (3) state health
benefits administrators, (4) state health departments, and (5)
the executive, legislative, and judicial branches of state
government. Nearly all states will be setting up a health
insurance exchange which involves a new responsibility in which
they have no experience.
Federal grants are an important element of funding states under
ACA. HHS announced the availability of $1 million in planning
grants per state to help establish exchanges. This will be put to
Implementing Exchanges that Enhance Choice, Affordability and Coverage 34 | P a g e
good use by: managing information technology needs including
integrating data with other agency databases like Medicaid;
designing new eligibility and enrollment processes; finding staff
with diverse skills needed to run the Exchanges; creating
business plans for self-supporting operation of the unsubsidized
portions of the Exchanges; and competing for outside consultants
to assist with the design of Exchange programs. (HHS 2010). The
Massachusetts Connector, the Utah Health Exchange, and the
proposed California Health Benefits Exchange are up and coming
models that will be emulated in some form or fashion by many
states.(Stoltzfus 2010) Let’s consider what will be measured, who
should assess the outcomes and how often results should be
evaluated. Many elements will be measured, evaluated, and
reprioritized as the Exchanges mature but the following will be
of importance: enrollment and eligibility, outreach, rating
methodology, consumer experience, employer participation, risk
selection, data reporting, payment flows, IT systems integration,
costs, workforce capacity, governance, commercial insurance
carriers response, population health outcomes, and provider
acceptance. Judging by what was required by HHS to obtain state
planning and establishment grants to build a better health
insurance marketplace there will be no shortage of measurement
Implementing Exchanges that Enhance Choice, Affordability and Coverage 35 | P a g e
activities. HHS required states to submit: (1) quarterly project
reports; (2) final project report; (3) public report; (4) federal
financial report; and (5) quarterly reports to comply with
payment management regulations. (HHS 2010) Grantees must also
comply with audit requirements and performance reviews. Executive
Order 12866 requires an assessment of the anticipated costs and
benefits of significant rulemaking action and alternatives
considered, using guidance provided by the Office of Management
and Budget. (Federal Register, 2010)
VIII. Conclusion and Recommendations
Despite the complexity, the uncertainties, and challenges
we face in implementing health care reform, I am an
advocate for implementing the Exchanges as a means to
improve the distribution of insurance options to the
individual, small group, and uninsured segments. The new
health reform law provides substantial opportunities to
address the health and well being of many children and
their families. This may eventually permit a potential
reduction in future cost trends if fully implemented and
sustained. There are some “adjustments” I would like to
see incorporated into successful Exchange implementation
Implementing Exchanges that Enhance Choice, Affordability and Coverage 36 | P a g e
efforts.
Recommendations
First, ACA Section 1302 requires the inclusion of
pediatric oral health care as part of the essential
benefits package. (Federal Register 2010) I would like to
see policymakers amend this section to encompass adult
oral health care. This is consistent with focusing on
prevention efforts and the costs are warranted given the
potential detection of cancer, cardiovascular, and
diabetic diseases from routine oral checkups. Second,
exchanges should be encouraged to develop a variety of
revenue sources to fund their work ahead. Exchanges
should seek ways to lower administrative costs with
employers, insurers and intermediaries. Legislation
statewide should include agents and brokers to help
educate the value of insurance within the exchange.
Commissions paid to agents should be assessed,
consistent, and transparent regardless of which health
plan is being sold and whether it is inside or outside
the exchange. Third, to the extent possible, state
regulation of the individual and small-group market
should be identical inside and outside the exchanges.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 37 | P a g e
This will negate adverse selection which has been a
problem with purchasing arrangements historically. HHS
may want to consider a risk-adjustment mechanism allowing
states to adjust risk among participating and
nonparticipating insurers. Fourth, the possibility of
having several unique and different exchanges within the
fifty states where some operating efficiently and others
do not is something that must be addressed. Simply stated
“there may be many different types of exchanges... you
can have exchanges that emphasize being a marketing
portal that allows comparison and examination of plans…
you can have an exchange that plays the expanded role as
a regulator of markets or health plans, as the enforcer
of regulations or as the financier of coverage… some may
fold in all of these activities.”(Reinke 2010) I
recommend that The State Consortium on Health Care Reform
Implementation, a collaboration of the National Governors
Association, The National Academy for State Health
Policy, the National Association of Insurance
Commissioners, and the Association of State Medicaid
Directors vigilantly monitor and share “best practices”
and navigation among all parties to help alleviate such
Implementing Exchanges that Enhance Choice, Affordability and Coverage 38 | P a g e
concerns.(Weil 2010) Fifth, greater efforts with cost
containment will be necessary to balance new expenses as
millions gain access to the health system. The result
will be toxic if they end up gaining access to the status
quo, with its underuse, overuse and misuse of care.
Large employers can be a source of inspiration,
creativity, and relevance and states should seek their
guidance as containing health care costs has been their
highest priority for decades. The work of the private
sector with value based delivery models, pay for
performance, and incentives for lifestyle choices should
not be ignored. (Darling 2010) There is an old German
saying that God helps the sailor, but he must row. The
American Hospital Association crafted a proclamation
entitled “Health for Life” which included five goals for
a reformed health system: a focus on wellness; the most
efficient, affordable care; the highest quality care; the
best information; and health coverage for all, paid for
by all. (AHA 2010).The authors of the ACA legislation
likely borrowed from this passage to help create a
foundation and perhaps an “enabling” moment for health
care reform to achieve and sustain manageable cost
Implementing Exchanges that Enhance Choice, Affordability and Coverage 39 | P a g e
trends. The way forward will involve all participants
from patients to purchasers to providers “rowing”
together to navigate the turbulent waters of health
reform in the coming years.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 40 | P a g e
References
Janet Adamy, “New Governors to Target Health Law”, WSJ 2010.
American Hospital Association Fund, “Shaping the Future for a
Healthier America”, August 2010.
Karen Bender and Beth Fretchen, “Government-Sponsored Health
Insurance Purchasing Arrangements: Do they Reduce Costs or Expand
Coverage for Individuals and Small Employers” for the Blue Cross
Blue Shield Association by Oliver Wyman Actuarial Consulting,
2007.
Linda J. Blumberg and Karen Politz, “Health Insurance Exchanges:
Organizing Health Insurance Marketplaces to Promote Health Reform
Goals”, The Urban Institute, April 2009.
Philip Bredsen, “Fresh Medicine: How to Fix Reform and Build a
Sustainable Health Care System”, Atlantic Monthly Press, October
2010.
Brookings Engelberg Center for Health Care Reform, “bending the
Curve through health reform Implementation”, 2010.
Business Roundtable, “Health Care Reform: Creating a Sustainable
Health Care Marketplace”, November 2009.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 41 | P a g e
Robert Carey, “Health insurance Exchanges: Key Issues for State
Implementation”, the Robert Wood Foundation, September 2010.
Christopher J. Conover, PhD and Thomas Miller, “Why a Public Plan
is Unnecessary to Stimulate Competition”, American Enterprise for
Public Policy Research, January 2010.
Rick Kurtis, “Health Reform: What Legislators Need to Know about
Exchanges”, Institute for Health Policy Solutions, 2020.
Helen Darling, “Perspectives from Large Employers”, Health
Affairs, Volume 29, No.6, June 2010.
Federal Register, Volume 75, No. 148, August 2010.
Edward Fensholt, “What Now for Health Reform”, Lockton, 2010.
Richard Foster, “Estimated Financial Effects of the Patient and
Affordable Act”, Centers for Medicare & Medicaid Services, April
22, 2010.
Paul Ginsburg, “Getting to the Real Issues in Health Care
Reform”, The New England Journal of Medicine, November 11, 2009.
Helen A. Halpin and Peter Harbage, “The Origins and Demise of the
Implementing Exchanges that Enhance Choice, Affordability and Coverage 42 | P a g e
Public Option”, Health Affairs, Volume 29, No.6, June 2010.
Richard Hamburg, “Principles for Incorporating Health and
Prevention into Health Care Reform”, Trust for America’s Health
October 2009.
John Hoff, “Implementing Obamacare: A New Exercise in Old-
Fashioned Central Planning”, the Heritage Foundation, September
10, 2010.
Douglas Holtz-Eakin and Michael J. Ramlet, “Health Care Reform is
likely to Widen Federal Deficits not Reduce them”, Health
Affairs, Volume 29, No.6, June 2010.
Kaiser Family Foundation, “Staying on Top of Health Care Reform:
An Early Look at Workforce Challenges in Five States”, September
2010.
Jon Kingsdale and John Bertko,”Insurance Exchanges under Health
Care Reform: Six Design issues for the States”, Health Affairs,
Volume 29, No. 6, June 2010.
Ezra Klein, “Let the States Experiment Now”, The Virginia Pilot
(Norfolk, VA), 2010.
Kathleen Koster, “5 ways GOP Might Untrack Health Reform”,
Implementing Exchanges that Enhance Choice, Affordability and Coverage 43 | P a g e
Employee Benefit News, November 2010.
Jennifer Liberto, “Undoing Health Care Reform: Not So Easy”, CNN
Money, November 3, 2010.
James Morone, “Presidents and Health Reform: From Franklin D.
Roosevelt to Barack Obama”, Health Affairs, Volume 29, No.6.
The Massachusetts Health Insurance Connector Authority, “Report
to the Massachusetts Legislature, Implementation of the Health
Care Reform Law”, Chapter 58, 2008.
Kavita Patel, “Health Reform’s Tortuous Route To The Patient-
Centered Outcomes Research Institute”, Health Affairs, Volume 29,
No. 10, 2010.
Thomas Reinke, “Will the Employer-Based System Collapse”, Managed
Care, July 2010.
Andrew Sisko, Christopher Truffer, Sean Keenhan, John Poisal,
Kent Clemens, and Andrew Madison, “National Health Spending
Projections: The Estimated Impact of Reform through 2019”, Health
Affairs, Volume 29, No. 10, October 2010.
Theda Skocpol, “The Political Challenges That May Undermine
Health Reform”, Health Affairs Volume 29, No. 7, July 2010.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 44 | P a g e
Judith Solomon, “Health Insurance Connectors Should Supplement
Public Coverage not Replace It”, Center on Budget and Policy
Priorities. January 29, 2007.
Timothy Stolzfus, “Health Insurance Exchanges and the Affordable
Care Act: Eight Difficult Issues”, the Commonwealth Fund,
September 30, 2010.
Towers Watson, “Health Care Reform Bulletin”, 2010.
U.S. Department of Health and Human Services, “Health Insurance
Exchanges: State Planning and Establishment Grants”, September
30, 2010.
U.S. General Accounting Office (GAO), “Private Health Insurance:
Cooperatives Offer Small Employers Plan Choice and Market Prices”
March, 2000.
Alan Weil, “State Policymakers’ Priorities for Successful
Implementation of Health Reform”, The National Academy for State
Health Policy, May 2010.
Wicks EK and Hall MA, “Purchasing Cooperatives for Small Employers:
Performance and Prospects, the Milbank Quarterly, Volume 78, No. 4, 2000.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 45 | P a g e
Willis North America and Diamond Technology Consultants, “The Health Care Reform Survey”,
November, 2010.
Richard Alonso-Zaldivar, “Employers Look at Health Insurance Options”, Washington Post,
October 24, 2010.
Implementing Exchanges that Enhance Choice, Affordability and Coverage 46 | P a g e