What’s The Role of A Health Exchange?
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There’s a lot of health care reform talk in DC about having some kind of national health exchange or connector to facilitate the purchase of health insurance. This exchange - as yet undefined - is presumed to be modeled on the Massachusetts Connector, and will provide individuals - and maybe small businesses(?) - with access to health insurance products from many different health plans in understandable formats at reasonable prices. In theory, this exchange will define what a minimum benefits plan should look like, and support the purchase of health insurance by making lots of products available to people who currently have trouble accessing health insurance coverage in the individual - and small group(?) - market.
I remember when this was first being discussed in Massachusetts. The idea at the time was more affordable options and more choices - and a government middleman of sorts that would serve as a health benefits cafeteria for individuals and employees of small businesses. At the time, some people were concerned about the Connector becoming just another regulatory body - putting forth new regulations and requirements, and for all intents and purposes, re-designing the regulatory apparatus of the individual and small group health insurance market. Supporters said “no” - it would serve primarily as a facilitator - providing access to and supporting the purchase of health insurance for individuals and small businesses.
Three years later, I would describe the Connector Authority’s record in this regard as a mixed bag. On the one hand, there’s no disputing its success in putting up and managing the state’s subsidized coverage program - also known as “Commonwealth Care.” That program, which has almost 200,000 enrollees, went up in no time and operates as a step up for low income working people who don’t qualify for Medicaid, but either can’t access coverage where they work, or qualify for some state support to make the premium payment math work. Bravo.
On the other hand, the Connector has become another regulator of individual and small group health insurance, and its decisions have significantly altered the cost of individual and small group health insurance since its inception. To begin with, it defined minimum creditable coverage - that is, the coverage an individual needs to carry to avoid being penalized on his or her state tax return for not having adequate enough coverage - very broadly. Qualified plans had to offer full drug coverage, all mandated benefits (although that one belongs mostly to the legislature), and they had to comply with maximum limits on co-pays, coinsurance and deductibles.
It’s hard to tell exactly how much these requirements - along with some other costs that have been shifted to the health plans to fund health care reform and balance the state’s FY 2010 budget - add up to on a single small group policy, but I’d put it in the 5-8% range - before medical expense trend - depending on which plan someone had purchased previously. This is not an inconsequential number. A buyer pays for it every year.
More recently, the Connector’s decision to re-frame the products that can be offered through the Connector will add to the size of that existing premium differential. Right now, the state offers three categories of private plan designs - Bronze, Silver and Gold. The Bronze plans are the least expensive, and not surprisingly, the most popular. There are four or five spins on the ball available to consumers choosing among the Bronze plans offered by MA-based carriers, and the state has decided to “simplify” them. That means reducing the differences in plan designs being made available to purchasers by the carriers.
In our case, our most popular Bronze plan will be frozen to new enrollees, and we will now offer three other “approved” plans in its place to new buyers. None of these options offers the same combination of low premiums and first dollar coverage for office visits that our original plan did, and two of the new plans will cost at least 2% more per month than our original plan. Since we have over 2,000 enrollees in the ”frozen” plan, and little or no sign of dissatisfaction with this offering, we wonder about why the state feels the need to freeze out something that’s working and replace it with something that’s mostly more expensive or less attractive.
For those of you who are keeping score, the state’s track record so far in making “affordable” options available to people who have to buy coverage with their own money - either on their own or through a small employer - is not all that great. First, we didn’t eliminate or scale back one mandated benefit, including some, like bone marrow transplants for breast cancer, that have since been proven to be harmful to patients, when we reformed and merged the small group and individual health insurance markets several years ago.
Then we told people who weren’t buying drug coverage that their health insurance coverage was inadequate, thereby bumping up their premiums by 10-15%, depending on their previous plan designs, if they wanted to meet our minimum requirement standards. And since then, we’ve added another 5-10% or so in “reforms,” “policy changes” and “new assessments” on top of medical inflation.
This does make one wonder about what the proposed role of a National Connector might look like in the short term, how it might morph over time, and whether or not it will prove to provide better options at lower prices for individuals and small businesses.
As a small business owner, mother, wife, daughter, I can only pray that Americans will wake up in time before any Legislation is passed in Washington putting the Government in control of Health Care! Last Friday, I sat at the hospital bed of my 37 year old business partner not sure if he would ever wake up. He has been battling cancer for 2 years now. One of the drugs that has helped him was a Chemo pill that had not yet been approved by the FDA (it has now since approved). The pill cost $18,000 every other week. He was administered that pill for over 1 year. Our
health insurance premium is $2,000/ month (2 family plans). I think you get my point. I would pay whatever premium needed to keep
him alive. I understand the health care premiums are high for small businesses. Like most companies, it is our biggest expense every month. However, if the Government takes over administrating Health Insurance I shutter to think what would happen in the future to people facing similar diseases as my partner and not having access to the drug because of cost. How much is too much when it comes to keeping your parent, child, spouse or friend alive?
One more thing, the Washington Legislature will not be required to go on the new Government run health plan….how dare they!
Is too early to tell?
Charlie:
As a broker, we look into anything that may our clients. We have looked into the Connector Authority and see it as a good option when a company may want to offer mutltiple carriers. Other then that, we do not see why would not want to deal with an insurance carrier directly versus going through the Connector Authority.
On the other hand, you are right CommonwealthCare has been a huge success. In fact I read recently that In the last three months alone, enrollment has increased from 165,000 member to 177,000 members, and is projected to grow to 212,000 next year. In three months, enrollment has gone up 10%!!! Why???
Maybe you could do some research like you did on your last blog looking into the loss ratio and persistency of individuals buying health insurance the last year through Harvard Pilgrim. I know alot of people, who have cancelled their unsubsidzed plan for the subsidized CommonwealthCare.
Currently to qualify you only need to be below 300% of the Federal poverty limit and there is no asset test; for example a family of four earning less the 66,156 can get on CommonwealthCare. It would be interesting if the five or six major HMO’s in Massachusetts could check the 200,000 CommonwealthCare subs to see how many were insured with them before CommonwealthCare started.
Thanks
Bill Randell
Advantage Benefits
Worcester, MA
Charlie - The Connector has largely become a very costly vehicle to hand out free or heavily subsidized healthcare. Look at the minutes from the June 23rd Connector meeting… Commonwealth Care added nearly 13,000 new members in April, May and June of 2009 while Commonwealth Choice actually lost membership in June. They admit this rapid enrollment growth in the free programs is unsustainable and they had to shut off the auto assignment feature to keep people off the Commonwealth Care rolls and to “hide” costs. They also kicked in $5 million from Connector “reserves” to balance off some of the cost increases. Granted the economy is bad but you have to think some of those 13,000 new enrollees are folks simply looking for a bargain as opposed to paying for health insurance via their employer or in the open market. Even with the auto assignment off, they can’t sustain adding close to 5,000 new Commonwealth Care members a month…. it will destroy their budgets and costs will explode to all new highs. The Connector has done well finding and enrolling people in Commonwealth Care but the recent trends spell huge problems in terms of cost, enrollment levels in Commonwealth Care and people moving out of private plans and on to the state subsidized plans.
sean, if you are eligible for insurance through your employer–even if the benefits are worse than those provided by Commonwealth Care–you must take it. I don’t know whether the state is willing to help pay for premiums.
Abby:
You are correct. What if you are a small group of 1 or 2 that has health insurance. You are not eligible for the Insurance Partnership, since you already have it? So why not cancel the group coverage.
Now you turn and apply for CommonwealthCare and your are eligible since your employer does not provide group insurance. Happens all the time.
Think about it. You are a self-employed plumber with a wife and two kids earning a pay of $55,000 per year struggling to pay your health insurance. Cancel it and join CommonwealthCare. You can since you are under 300 percent of the Federal poverty limit and there is no asset test.
You have no idea how much this is happening. I read, as as Sean alludes to, the membership went up 10% in three months. Over 12 months that is 40%!!!
CommonwealthCare needs to drop down to 200% of the Federal poverty limit, an asset test needs to be added and the Insurance Partnership let people be eligible even if they have health insurance.
Bill Randell
Advantage Benefits
http://www.advantagebenefits.com
Charlie:
I talked to a guy this week-end who signed up for Commonwealthcare and his company has a group sponsored health plan. He told me that nobody asked or checked to see if he was eligible for a company sponsored group health plan.
Should they not be checking this??
Bill Randell
Advantage Benefits
Bill –
The answer is, “of course!!!” You should consider sending an email to the team at the Connector and asking them for a copy of their enrollment/eligibility verification process.
Charlie - I think their “process” is to sign up anybody they can find to solidify their existence. Now that they have hundreds of thousands of covered lives the Connector staff are pretty much guaranteed a future with high salaries, great benefits and a great pension. I would think the health plans would be monitoring terminations to see if people with group options are leaving for the free CommonwealthCare and I would think hospitals and providers would be petrified of seeing their best paying patients from BCBS, Tufts and HPHC migrating to Medicaid type rates via the CommonwealthCare options. With the auto assignment feature off, it will be interesting to see the enrollment numbers over the next few months…. if they continue at their current pace I would guess there is a lot of “help” being provided to people to make sure they find their way on to a Connector plan.
Charlie,
I am sure I am one of many people who will miss this blog on health issues when you leave HPHC to run for governor. Thank you for posts that are always interesting, insightful, and provocative, even when I disagree with them. I am certain you’ll bring the same qualities to discussion of a wider range of issues during your run, and I look forward to that. Hope you’ll have a blog!
As a member of the Connector board, I have a few thoughts on your most recent post:
1. Some readers might think that you’re suggesting that the overall cost of most health insurance in Massachusetts—or at least most individual and small group policies– in has been affected by Connector decisions. This is not the case. The vast majority of people already had coverage that far exceeded the Connector’s MCC standards when they were adopted and so the standards have had no impact on premiums. Requiring drug coverage was the change that does have a significant premium impact on many policies. Reasonable people can–and did–disagree about requiring drug coverage. As someone who voted to include drugs in MCC, my rationale was that drugs are a critical component of medical care for so many conditions and that not covering them can have significant health and financial consequences for people. I also believe that sound insurance systems require broad spreading of risk and that allowing people to pick and choose whether or not they want drug coverage undermines this. You’ve written in past blogs about your concern about not encouraging adverse selection or letting people buy coverage only when they need it. My own view is that making drug coverage optional in health insurance does just that.
2. We’ve had lively discussions about mandated benefits since our time together in state government. I think this issue is a red herring for the most part in terms of costs, unless one wants to eliminate the mandates for maternity care, mental health, home health, and preventive care for children (which I don’t). According to last year’s report on mandates by DHCFP, these four mandates account for ~75% of the total cost of mandates in the state. The mandate you mention, BMT for women with metastatic breast cancer, had zero impact on premium because it’s not consistent with current medical practice. Maybe this mandate should be eliminated on quality grounds, or for administrative simplification, or as part of a “regulatory review” but doing this wouldn’t save any premiums for anyone. Mandates are a tricky topic: some correct failures in the insurance system to appropriately recognize the benefits and externalities of certain services or to promote other appropriate policy goals, while others are passed largely for the providers that benefit from them. We can debate which ones fall into each category. But I do wish we could move beyond including mandated benefits in any discussion of the major reasons why health insurance costs so much. Even if we eliminated them all—or most of them—one year of medical inflation in all the other services would bring us back to the same level of premium. Focusing on mandates deflects attention and energy from the things we really need to address to moderate health care costs, which are admittedly much more complex and hard to do.
3. The Connector’s recent decision to standardize the benefits in Commonwealth Choice is, in my view, a positive development. It will make it much easier for consumers to compare plans and pick plans of higher value, since they will be comparing prices for the same benefits. In the previous structure, almost every carrier offered a different benefit configuration for products within the same benefit tier and it was very confusing to compare benefits and prices. Although I worry that we now have too many choices of products, at least products in the same tier now have the same benefits.
Best, Nancy
Nancy Turnbull - To keep things transparent, how much are Connector Board members compensated? Similar to the Health Care for All crowd getting state money for “outreach” it is important to know how much people are getting paid to deliver their message.
Hi Sean, Connector board members aren’t compensated. No payment, except for working with talented people on interesting and challenging issues. Nancy