From the 7/18/11 issue of Health Plan Weekly:
HHS on July 11 released its proposed regulations for the development and operation of insurance exchanges (see story, p. 1). HHS has made it clear that it wants stakeholders to weigh in on the proposals by providing a 75-day comment period. Industry observers interviewed by HPW say HHS might be flooded with comments given the number of unresolved issues and questions that haven’t been fully answered.
Here’s a look at questions, answers…and more questions based on the proposed regs, and how they could impact health insurers, brokers and the states:
(1) Which insurers will participate? While some states might opt to allow all qualified health plans (QHPs) to participate, the reg also suggests that exchanges could undertake a competitive bidding or selective contracting process, which would limit participation similar to a state contract with Medicaid managed care companies. “The reference to Medicaid managed care was a bit surprising because that signals that there could be a degree of competitive bidding with a potentially limited number of winners,” says Caroline Pearson, senior manager at the Washington, D.C., advisory services company Avalere Health. “Medicaid managed care frequently results in only one or two plans being available in a market. I think [states] will have to question the feasibility of having just one plan in the market.” She adds that while Massachusetts has been “fairly aggressive” in its criteria for participation in its Connector exchanges, Vermont might be the state most likely to limit participation as it moves toward a single-payer system. Deborah Chollet, a senior fellow at Mathematica Policy Research, says it’s unlikely that an exchange will exclude qualified carriers, at least initially.
(2) How much influence will health insurers have? Advocacy groups lobbied against allowing health insurers to participate on governing boards. While HHS would allow health plan representatives to participate, they would not be allowed to have a voting majority on governance boards. Instead, the majority would need to come from consumer representatives. Health plans, brokers and other related professions will likely be counted together. Most states that have made some governance decisions already have included one or two health plan representatives. But six states already have explicitly prohibited health plan representation. “I think insurers will have a voice on most governance boards, but I don’t think they will be driving the decision making,” says Pearson. Still, consumer groups likely will push HHS to curb health insurer influence even more, says Manny Munson-Regala, vice president of strategy and partnerships at Ceridian Corp., a technology firm that provides back-office services for exchanges. Some exchanges, he adds, might opt to use insurance company representatives only as advisors and restrict them from any policy decisions. Prior to joining Ceridian this year, Munson Regala was deputy commissioner of the Minnesota Department of Commerce’s Market Assurance Division.
(3) Will brokers have a role? The reform law allows agents or brokers to help individuals and employers enroll in coverage offered through an exchange. But brokers aren’t likely to operate as “Navigators,” who would perform a similar function but are not able to accept payment from a health plan. While states have the ability to exclude brokers from an exchange, it’s unlikely that will happen, particularly during the first few years. “Drawing from the experience in Massachusetts, we expect that agents and brokers will have more of an ongoing role in the SHOP [i.e., Small Business Health Options Program] exchanges than in the individual exchanges. SHOP exchanges are more administratively complex [for employers] who are buying for a group,” Pearson explains. The proposed regulation “seems to assume that agents and brokers will be a part of the process,” adds Munson-Regala. “Any smart exchange will have a big red button at the bottom of the website that says ‘still confused? Press here to be connected to a broker.’” The exchange also could provide brokers with an opportunity to talk with consumers about other products such as long-term care or life insurance, he adds.
(4) What will the federal exchange look like? The reform law requires the federal government to operate an exchange for any state that is not able to build its own by the deadline. But it’s unclear exactly what a federal exchange will look like, who will pay for it and whether it will need to be financially self-sufficient, as required of state-operated exchanges. “Until you know how the feds will create and run an exchange, there’s no way for states to know how they can take control back,” says Cindy Gillespie, a managing director at McKenna Long & Aldridge, where she leads the law firm’s health insurance exchange group.
(5) Who will collect premiums? It’s still unclear who will collect premiums from those who purchase coverage through an exchange particularly in the individual market. Requiring the state to do this is a big overhead cost, but insurers might not be set up to do it either, says Gillespie, who notes that some Medicaid managed care plans have no experience collecting premiums from individuals. More importantly, HHS hasn’t laid out how subsidies and tax credits will flow through the exchanges, she adds.
(6) How much of a role will HHS have? Some states have expressed a preference for a “flexible state partnership model” that would combine state and federal business functions. The reg suggests that functions such as eligibility and enrollment could be shared. A federally run exchange also might operate a web portal that could be used by multiple states. Munson-Regala suggests that some states might operate the SHOP exchange on their own, but look for federal assistance on the individual exchange, which will be complicated by the individual mandate and subsidies.
(7) How will adverse selection be addressed? While the proposed regulation didn’t discuss products offered outside of the exchanges, it did suggest fixed annual enrollment periods, which could help prevent people from enrolling in coverage only when they need care. It also outlines several special enrollment periods that could be made available if, for example, a participant wants to move to a different coverage tier after a change in income status. “There is a need to limit adverse selection, but there also needs to be freedom for consumers to change plans based on their circumstances,” says Pearson.
