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Iowa ‘Partnership’ Exchange – We’ve Only Just Begun

Iowa 'Partnership' Labyrinth

Iowa ‘Partnership’ Labyrinth

As we now know, Iowa has elected to implement a ‘state partnership exchange’ for at least 2014 with the expectation to migrate to its own exchange in subsequent years.

Last year at this time, David P. Lind Benchmark was hired by the State of Iowa to provide background information for Iowa’s Health Benefit Exchange (HBE). We were responsible for providing two reports to the state regarding Iowa’s health coverage marketplace:

  1. Background Research
  2. Background Research & Simulation Modeling

As a sub-contractor to CSG Government Solutions, Inc., our firm worked very closely with Data Point Research (DPR) on both reports. DPR is the firm that we’ve worked with over the past 14 years on our annual “Iowa Employer Benefits Study.” Additionally, we sought the assistance and expertise of Magnum Actuarial Group for their comments, analysis and input on the second report listed above.

During the time of this research, we worked on the premise that Iowa would develop its own HBE, which required a great deal of assumptions about many unanswered PPACA*-related provisions affecting state-based exchanges. Much like examining an onion to determine its core, we took great care in peeling back the many layers of this complex subject in an attempt to learn the core issues specific to all stakeholders within Iowa.

To provide a glimpse of the many complex issues being addressed within the second report, below is the ‘Summary’ as found on pages 6 and 7.

“Under the Affordable Care Act (ACA), private insurers are required to deliver coverage to individuals and small businesses in more open and transparent insurance markets. Beginning in 2014, insurers must offer products with more comparable benefits and cost-sharing. Additionally, they would be required to provide coverage to anyone regardless of any pre-existing health conditions, allowing consumers to more easily shop for coverage. A Health Insurance Exchange (HBE) will facilitate insurance purchasing with the hope that new competition among insurers will help to moderate premiums for individuals and small groups. The Federal government will subsidize the cost of coverage for low and moderate income individuals who buy insurance through the Exchanges.

As with all other states, Iowa will need to make many critical policy decisions to implement new insurance market rules and decide whether and how to operate Exchanges. Many of these decisions may be influenced by how competitive Iowa’s insurance market is perceived to be, with the subsequent results of these decisions affecting how insurance markets operate and the cost of coverage. Because Iowa is highly concentrated with few insurers in both the Individual and Small Group markets, Iowa may lean toward using the purchasing power of an Exchange to counteract the market power of one or a few large insurers. Given the various political and economic dynamics found within Iowa, unique considerations will need to be made to avoid unintended consequences for both the Individual and Small Group markets.

When assessing the Individual and Small Group markets inside the HBE, a key decision that Iowa must address is whether the Iowa HBE should take an Exclusive, Qualifying, or Open approach. The implications stemming from each approach are far-reaching, as it will affect many inter-related issues. Requiring or not requiring carriers to offer their Qualified Health Plans (QHPs) outside the HBE would also provide potential advantages and disadvantages under each scenario. However, it is only after considering whether to standardize the health plans offered both within and outside the Exchange that a combination of choices can be generated to provide some clarity of which paths to seriously consider.

Determining how best to develop and implement the transitional reinsurance program for the individual market is another decision to be made by Iowa. As with the HBE, Iowa will be able to either take an active role in designing and running the reinsurance program or default to a Federal option. If Iowa chooses to run its own program, the next steps would involve forming the reinsurance entity or entities and contracting with an administrator. The analysis indicates that Iowa should seriously consider running its own transitional reinsurance program, but adopt the 2014 assessment rates and reimbursement parameters.

The ACA does not dictate a timeline to merge the Individual and Small Group risk pools, which means that both markets can be merged at any time on or after 2014. Given the complexities of the various reform provisions of ACA for 2014 and beyond, Iowa may wish to experience ACA-required changes to both markets before deciding to merge them. A preliminary analysis performed by The Urban Institute for this report shows that merging both markets would likely lead to higher premiums in the Small Group market and lower premiums in the individual market.

It is difficult to predict the change to the insurance market that would be caused by classifying organizations with 51-100 employees as small groups before the 2016 mandate. The ACA has many moving parts. The creation of a Basic Health Program (BHP) and Exchange along with the possible market disruptions from merging the individual and small market plans, defining sole proprietors as small employers, and adding organizations with 51-100 employees to the small employer definition all interact with each other with various outcomes that are most likely to be unknown.

Iowa may need to first decide whether to merge the Individual and Small Group risk pools before determining the potential impact of sole proprietors being defined as “individuals” or as “small employers.” If the two risk pools are not merged, pricing differences could emerge. In either event, there does not appear to be any compelling ACA-related reason not to include sole proprietors in Iowa’s definition of “small employer” and to allow them to purchase either individual or small group coverage.

Another question to be addressed by Iowa is whether to revise the definition of “small employer” outside the HBE to be consistent with the HBE definition. Successful state Exchanges have often ensured a level playing field between policies in and out of the Exchange by standardizing definitions and regulations. These common regulations and definitions reduce the potential for adverse selection.

By deciding to establish and run its own Health Benefits Exchange (HBE), there are several key considerations for Iowa to make when confronted with the eight main issues found in Milestone 7. Each issue presents unique and complex challenges in addition to the challenges of maintaining and promoting affordable coverage and competitive markets within Iowa. When factoring in the current market conditions inherent within Iowa’s insurance industry, the state must carefully make decisions that will no doubt have both intended and unintended consequences for each insurance market. All issues are intertwined, accentuating the complex decisions the state must eventually address.”

As mentioned earlier in this blog, Iowa has elected a ‘State Partnership Exchange,’ whereby some of these questions may need direction from the federal government, but many will ultimately require difficult decisions from Iowa.

And, so the journey continues…

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PPACA* – Patient Protection & Affordable Care Act

Exchange Tally Complete

Tally marksThe “roll call” on Health Insurance Exchange decisions from each state has come and passed on December 14. Each state has the option of operating their own exchange or ‘partnering’ with the federal government to run an exchange. Should the state decide to do neither, they default to a federally-facilitated exchange. Regardless of the decision, the exchange must be ready to cover qualified individuals and small employers by January 1, 2014.

Iowa made the decision to pursue the “Partnership” Exchange, which is a ‘hybrid’ between a Federal Exchange and a State-based Exchange. Given the deadline to make this decision, it was Iowa’s best option for the time being. The Cliff Note version of the Partnership Exchange is that states can choose to:

  • Operate certain plan management functions
  • Operate certain consumer assistance functions
  • Conduct Medicaid and Children’s Health Insurance Program (CHIP) eligibility determinations (or have the Federal Government perform this)

The Department of Health and Human Services (HHS) will perform any remaining exchange functions in order to meet the standards established by the Affordable Care Act (ACA). With its’ decision, Iowa must submit a blueprint to HHS by February 15, 2013. HHS will then issue approvals beginning in March, 2013.

Establishing its’ own exchange takes considerable time and analysis for any state, Iowa included. The Partnership Exchange appears to be a viable solution that will allow Iowa to eventually pursue its’ own exchange – perhaps as early as January 1, 2015. Until then, heavy lifting will be necessary to assure that stakeholders are heard, insurance markets are carefully analyzed, and most importantly, Iowans are best served.

So what is the final tally* of the decisions made by states regarding exchanges for 2014?

  • Partnership Exchange (7 states)
  • Federal Exchange (25 states)
  • State-Based Exchange (18 states and the District of Columbia)

The next year promises to be a very tumultuous period for Iowans regarding health care and health insurance. Iowa employers will need to spend considerable time and energy learning about the changing insurance world that will impact their business. It will not be an easy task.

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*The Henry Kaiser Family Foundation

Health Care – Competing at the Right Level

David P. Lind BenchmarkThanks to the health reform law, Iowa and Nebraska just received a new health plan to compete with the other insurance companies doing business in both states.

Owned by its’ members and led by a board they elect, Midwest Members Health Inc. is a nonprofit consumer operated and oriented plan (CO-OP) that will be up and running by January, 2014. This is the same date that Iowa will have either a new state-based insurance exchange or a federal exchange. This new carrier will receive around $112 million in loans over 15 years, giving it enough money to cover claims and maintain financial solvency. A great start for an organization just approved in February.

But will this new competition create lower premiums for consumers and employers?

Hard to say.  

I must admit, I’m a skeptic whenever there is talk about how important it is to have “more competition” between health insurance carriers. Competition is important, but competition at the RIGHT LEVEL is even more important—if not critical. Health premiums are nothing more than a derivative of health costs, so having more carriers compete for our business will not meaningfully change the premiums if we can’t FIRST fix our health delivery system, one of the biggest cost drivers.

True competition must begin at the level where care is delivered—at the provider and patient level.

It is also extremely important to have transparency in cost and medical outcomes measurements. If carriers and providers don’t provide this transparency, I fear we will see more of the same—uncontrolled costs.

Knowing up front what the cost is for a given procedure and the most likely outcome for that cost (by medical provider) is absolutely necessary. This is not currently happening in Iowa or across the country. And it MUST happen if we have any glimmer of hope of containing costs in the future.

Harvard competition guru Michael E. Porter may be on to something when assessing the competitive environment in the health care industry.

Why is competition in health care not focused on value? The most fundamental, unrecognized problem with the U.S. health care system is that competition operates at the wrong level. Competition is both too broad and too narrow. Competition is too broad because much competition now takes place at the level of health plans, networks, hospital groups, physician groups, and clinics. It should occur in addressing particular medical conditions. Competition is too narrow because it now takes place at the level of discrete interventions or services. It should take place for addressing medical conditions over the full cycle of care, including monitoring and prevention, diagnosis, treatment, and the ongoing management of the condition.

Sounds reasonable to me … how about you? I hope this new health plan is a success. But real, meaningful success will only come when we have true competition in the right places.