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Health Insurance Exchanges:
Provider Intersection
March 20, 2013
Copyright © 2013 Deloitte Development LLC. All rights reserved.
Speaker introductions
Jim HardySpecialist Leader, Medicaid Advisory Lead, Deloitte Consulting, LLP.
Jim is a Specialist Leader in the Seattle office of Deloitte Consulting and leads Medicaid Advisory Services for Deloitte’s State Healthcare Practice
20 years of Medicaid and health care experience Previously served as Pennsylvania’s Medicaid Director and as the Director of Fee-For-
Service Operations where he was responsible for the operation of the Fee-For-Service program’s $500 million pharmacy benefit
Has also consulted with states, managed care organizations and providers on health care reform, new program design and health insurance exchange design and strategies
Education: B.A. from the University of Pennsylvania
Where We are Today
4
States will implement exchanges within federal guidelines or defer to the Federal government
Federal role State role• Define broad rules for exchanges (definitions,
enrollment periods, participation requirements, etc.)
• Define essential benefits package, underwriting rules, standard enrollment/eligibility forms
• Create standards and guidelines for reinsurance and risk adjustment
• Define standard process and data exchange to support eligibility, enrollment, and subsidy administration
• Define criteria for health plans to be “qualified” to offer products through exchanges
• Set standards for plan quality and member satisfaction ratings
• Provide planning, development, and operational grants to states (to 2015)
• Determine if state exchanges will be operational by 2014, and provide a fallback exchange for states that will miss the deadline
• Operate Federal Exchange
• Contract with at least two multistate plans to be offered on each exchange
• Establish and launch individual and small group health insurance exchanges by January 1, 2014
• Define the coverage area for each exchange and determine whether or not to merge the individual and small group exchanges
• Define network adequacy standards
• Determine whether to offer a State Basic plan
• Define state-level market rules for sales on versus off the exchanges and the role of brokers/agents in the process
• Certify plans to participate on exchanges and provide quality and member satisfaction ratings for each plan
• Develop single eligibility and enrollment process for Medicaid/CHIP and exchange subsidies
• Administer premium subsidies for individuals up to 400% of the federal poverty level
5
States must elect one of three exchange models, allowing for significant variability
Source: Health Insurance Exchange System-Wide Meeting May 21-23, 2012
http://cciio.cms.gov/resources/files/hie-wtie.pdf
State-based exchange
State operates all Exchange activities; however, State may use Federal government services for the following activities: • Premium tax credit and cost sharing reduction
determination • Exemptions • Risk adjustment program • Reinsurance program
State partnership exchange
State operates activities for:• Plan Management • Consumer assistance • Both
State may elect to perform or can use Federal government services for the following activities: • Reinsurance program • Medicaid and CHIP eligibility: assessment or
determination*
Federally-facilitated exchange
HHS operates; however, State may elect to perform or can use Federal government services for:• Reinsurance program • Medicaid and CHIP eligibility: assessment or
determination* − *Coordinate with Medicaid and CHIP
Services (CMCS) on decisions and protocols
6
Snapshot of States’ Decisions on Exchange Model
RI
WA
OR
CA
NV
UT
AZNM
TX
WY
MT
IDSD
ND
NE
KS
OKAR
LA
MO
IA
MN
WIMI
IL IN OH
KY
TN
MS AL GA
FL
SC
NC
VAWV
VT ME
NH
MA
CT
NJ
DE
MD
HI
AK
NY
PA
CO
Declared State-Based (18, DC)
Default to Federal (25)
Planning for Partnership (7)
Source: Kaiser Family Foundation, “Establishing Health Insurance Exchanges: an Overview of State Efforts” November 2012
Exchange roles and mechanics
8
Exchanges will perform many roles
Manage numerous intra-governmental data and process interactions and dependencies
Product Availability / Specifications Enrollment & Eligibility MaintenanceComparison Shopping Tools
Customer Service Federal / State CoordinationPremium Collection /
Reconciliation
Provide assistance in navigating the shopping and enrollment
process
Promote the Exchange and regulate marketing of products and services
Determine who may participate and who is eligible for subsidies
Decide which carriers and products will be available and what information is required
Provide tools that consumers and small businesses can use to identify,
review and select products and prices
Support standard enrollment processes and ongoing
maintenance
Respond to inquiries, grievances and appeals
Determine premium obligations and combine with subsidies to ensure
payment for coverage
Advisor / Navigator Eligibility / Subsidy DeterminationMarketing / Public Outreach
9
Role of navigators, brokers & assistors
• Represents the insured in solicitation, negotiation, or procurement of contracts of insurance, and who has a duty to the insured to match the insured's insurance needs with proper insurance products.
Navigators Brokers
• Assist the population with understanding individual and family health insurance needs, making the appropriate coverage decisions, and assisting with Exchange website and other programs/services available to the customer.
• Exchanges are responsible for Navigator certification and payment.
• Provide in-person, linguistically and culturally appropriate assistance to those applying for coverage through the Individual Exchange and/or SHOP Exchange
AssistorsDifferent State Approaches
Passed legislation allowing insurance brokers to act as Navigators
Given the higher number of insured individuals, Navigators will focus on member transitions into QHPs rather than first time enrollment
10
Multiple Models for Exchanges
Competitive Regulated
Th
inR
ob
ust
• Delivers bare minimum capabilities to meet requirements of ACA
• Impartial aggregator of information
• Provides structure to allow health plan design and price comparisons
• Accountability of the product/service delivered is primarily left to the plan
• Creates a retail shopping experience
• Offers a broad range of products
• Provides education, outreach, and technical assistance for consumers
• Provides information and enrollment assistance
“INFORMATION AGGREGATOR”
“RETAIL-ORIENTED EXCHANGE”
• Limits carriers available on the Exchange
• Products may also be standardized
• More prescriptive mandates and regulatory oversight over the market
• Functions “owned” by the Exchange are minimal
• Likely only an interim model for states
• Creates a robust end-to-end consumer experience
• Limits carriers available on the Exchange through a competitive selection process
• Exchange responsible for selecting the products
• Provides suite of consumer and member management services
“GUIDED EXCHANGE”
“MARKET CURATOR”2
1
4
3
Market Environment
Exc
han
ge
Ch
arac
teri
stic
s
Partnership Model Federal Regional State-based
Consumers and Health Insurance Exchanges
12
Purpose of exchanges
• Foster competition and value-based consumer purchasing decisions
• Improve transparency and consumer understanding of insurance (pricing, benefit design)
• Serve as a central point of information and provide consumers with comparative plan
benefit information in a standardized format
• Provide consumers with quality data and member satisfaction scores to supplement
decision making
One goal of exchanges is to improve consumer purchasing decisions
Exchanges will transform the healthcare marketplace, especially for individual and small
group segments
13
Most individual exchange consumers will be previously uninsured and inexperienced
These individuals will have a different set of expectations and needs than previously insured consumers
Source: Kaiser Family Foundation “A Profile of Health Insurance Exchange Enrollees” March 2011; “Uninsured but Not Yet Informed” August 2011
67%Previously Uninsured
21%Previously Insured through Employer
Sponsored Insurance
Previously Insured in Individual Market
Previously Insured with Medicaid
8%
4%
Individual Exchange Consumers
Previously UninsuredPreviously InsuredTotal Consumers = 27M
• Pre-conceived expectations about how the system does/ does not work
• Likely has experience with one or more providers
• May have experience navigating the system (if previously insured through Individual)
• Largely uninformed• Approximately 47% do not think ACA
will have much impact on them• Likely has little to no experience
using the health care system• Likely to need navigation support
14
Premium and cost-sharing subsidies, along with consumer protection mechanisms tied to exchanges, will be the primary forces driving purchase through the exchanges
Why will individuals go to the exchange?
Tax credits and cost-sharing subsidies
• The ACA will provide premium tax credits to those below 400% Federal Poverty Level (FPL) and cost sharing subsidies for individuals with incomes at or below 250% of FPL
• Premium tax credits are aimed to decrease the cost of insurance and will be calculated based on the second lowest priced Silver plan
• Federal cost-sharing subsidies are available for individuals who qualify for federal premium credits and are enrolled in a Silver tier plan
Source: The Kaiser Initiative on Health Reform and Private Insurance
Year Individual penalty (Greater of the two)
2014 $95/Adult/Yr.$47.50/Child/Yr.$285/Family/Yr.
Or 1.0% of applicable income, whichever is greater
• Plans featured on exchanges meet specified quality requirements
• Features only plans meeting all minimum essential health benefits
• Allows individuals/families to objectively compare plan options
Penalty avoidance Consumer protection mechanisms
• Beginning in 2014, the Individual Mandate applies penalties to those who do not obtain health insurance coverage
Individual Income $17K-$32K
Individual Income $32K-$51K
Individual Income $51K+
0%
20%
40%
60%
80%
100%
$1,289
$3,450$4,656
$3,367
$1,206
Consumers’ Net Premium and Government Premium Tax Credit (illustrative)
Net Silver Premium Premium Tax Credit
Health Insurance Exchanges and Carriers
16
HIX market entry approaches
“RELUCTANT PARTICIPANTS”
“MEASURED PLAYERS”
“PROSPECTORS”
View 2014 market as inherently risky
Planning conservative participation in 2014, with no pricing concessions,
Likely focused largely on internal fundamentals of achieving low cost
Pricing responsibly to mitigate risk of unknowns
Target goal of capturing “fair share” of exchange market
See new 2014 market as a unique growth opportunity
Plan on making pricing investments to capture significant market share, then capitalize on risk adjustment to mitigate losses
Geography: Current markets or a subset
Products: Limited products
Networks: Current networks or Narrow / ACO networks
Pricing: Conservative
Infrastructure: Focused on fundamental admin and healthcare cost efficiency projects
Geography: Current markets, or possibly a calculated subset
Products: Limited, risk-averse portfolio
Networks: Narrow / ACO
Pricing: Competitive but responsible
Infrastructure: Focused on fundamental cost efficiency as well as medical cost management
Geography: New market entry likely
Products: Broad, something for everyone
Networks: Narrow and broad options
Pricing: Investments planned
Infrastructure: Focused on developing sales and marketing capabilities
Corresponding Market Characteristics
Health plans are approaching the HIX market with a variety of perspectives
Spectrum of Market Entry Approaches
Health Insurance Exchanges and Medicaid
18
The Exchange sits at the intersection of two insurance markets – commercial and public – each with separate mechanisms for outreach/marketing, enrollment and other consumer assistance functions.
• Federal Regulations outline Exchange role in Medicaid Eligibility Determination – Exchanges may execute all eligibility functions
directly or enter into contracts with state Medicaid agencies
Provisions of ACA
Exchange
Commercial Insurance
Medicaid
– Exchanges must apply MAGI-based income standards and immigration and citizen status consistent with federal Medicaid/CHIP regulations • MAGI and attestation rules will reduce short term “churning” on and off Medicaid
• Federal regulations permit States to require the Navigator Program to also provide Medicaid/CHIP eligibility/enrollment functions. – Addressed in preamble but not regulatory text. The discussion relates to Navigator
Program financing and the ability to request Medicaid support of the Navigator program to the extent the state “permits or requires” Navigators to address Medicaid and CHIP.
19
• Under ACA, if all 50 states expanded Medicaid approximately 11 million individuals under age 65 could enroll in by 2021
• Universal coverage and HIX create an intersection between Medicaid and the individual market– Consumers coming to the exchange will be screened for Medicaid eligibility– 50% of the uninsured will be eligible for Medicaid– Changes in economic status will cause churn between Medicaid and commercial
insurance• Consumers losing Medicaid eligibility will be eligible for subsidized insurance on the HIX• Consumers whose economic situation worsens will shift from the individual market to
Medicaid
• Potential impact on State Programs– States may require Medicaid managed care organizations to offer individual products
on the exchange so that the consumer has carrier and network continuity– States may encourage or potentially require insurers selling on the HIX to participate
in Medicaid managed care– States may send Medicaid consumers to the HIX to purchase coverage
How will Health Insurance Exchanges impact Medicaid?
20
Enrollee is referred to State
Medicaid
Exchange cannot
determineMedicaid Eligibility
How states and Plans handle churn will be dictated, in part, by how Exchanges determine eligibility
Exchange hasreal-time Medicaid eligibility
determination
Sta
te E
xch
ange
MedicaidBelow
138% FPL
ExchangeAbove
138% FPL
Approximately 50% of individuals may shift between Medicaid and the Exchange annually, 24% may shift at
least twice per year1
Apply for Coverage at Exchange
Medicaid Market
Individual Market
Enrollee enters Medicaid market
through traditional channel
Enrollee enters Medicaid market
through the Exchange
Questions for states:
Will Exchanges determine Medicaid eligibility in real time?
Will Bridge plans be allowed in the bidding process in Exchanges?
Will some QHPs be allowed to bid on one metal category only?
Questions for plans:
Is capturing churn an objective? What kind of presence is necessary to capture the
slice of churn that is desirable? How will the presence or absence of real-time eligibility
determination affect the decision to participate in an Exchange?
Health Insurance Exchanges and Healthcare Providers
22
Possible HIX implications for health care providersC
ost
Pe
rfo
rman
ceR
even
ue/
Gro
wth
New distribution channel
New source of patients
New service offerings
Mitigation of uncompensated
care
Value based (risk) models
Realize proprietary product (ACO)
New payor and market alliances
New market/product entry (Carrier Network pull)
New capabilities Cost performance
pressure
Quality , cost and service
transparency
Capital and Resource demand
23
HIX Considerations for Health Systems
• Get involved as early as possible – Policy decisions made at an Exchange’s inception will have broad consequences– plan entry limitations in the exchange – adequate rates to sustain participation levels on a long term basis– State’s role as an “active purchaser,” empowered to negotiate with carriers directly, or
an “active regulator” empowered to set terms and conditions
• Determine your health systems' role – Consider the hospital’s role in outreach, education and the Exchange Navigator program
• Assess payment models - Consider reimbursement /payment transformation models consistent with an outcomes based managed care delivery system
• Assess the impact – Greater coverage results in an increased demand for services. – Administrators can project the impact on inpatient, ED, outpatient and physician
components of today's health systems. – Minimize patient disruption for those insured whose eligibility status fluctuates, e.g.,
transition from commercial to Medicaid
• Evaluate quality improvement reporting requirements – Ensure quality improvement measurement and processes are transparent and reportable
24
Essential Community Providers
Qualified Health Plans
(QHP)
Essential Community Providers
• Simply stated the ACA requires Exchanges to include “essential community providers” that serve predominantly low income and medically underserved individuals [Section 1311(c)(1)(C)].
– Final rule does not prescribe a definition for ECPs; States are provided flexibility
– ECPs include Federally Qualified Health Clinics, Tribal Health Programs, Title V Urban Indian Health Programs, Mental Health and Substance Abuse providers to name a few.
– Require plan issuers to contract with Essential Community Providers in Medically Underserved Areas (MUAs) unless they are exempted by criteria established in the final rule.
The Road Ahead
26
The final throes of exchange readiness are upon us
Launch Distribution & Marketing
PublicExchange
Health Insurer
Exchanges must be fully operational(1/1/2014)
2012 2013 2014
Exchange Open Enrollment Begins(10/1)
Latest likely date for QHP selection2
(7/31)
HHS conditionally approves State Based Exchanges for: 18 states and DC1
Full Business Go-Live (1/1/2014)
Open Enrollment Begins (10/1)
Acquire Exchange Capabilities
CCIIO releases bulletin on actuarial value (2/24) and first final rule (3/27) State deadline to
apply to operate a State Based
Exchange (12/14)
State deadline to apply for a Partnership Exchange, else default to the Federal Exchange (2/15)
CCIIO-suggested start to QHP certification 2 (4/1)
Develop & Launch Strategy
Business & System Testing
SCOTUS upholds
individual mandate / ACA
provisions (6/28)
Election results confirm ACA
implementation (11/6)
1 MS’s approval is outstanding as of 1/7/13, given the unresolved dispute between the State’s Insurance Commissioner and Governor2 Significant variation on these dates exist between State’s pursuing a State Based Exchange or a Partnership Exchange or a Federally Facilitated Exchange. April 2013 is the suggested CCIIO date to begin the QHP submission process for States seeking to conduct Plan Management under a Partnership Exchange.. State Based Exchange’s may select their own dates and several have already released their QHP application (CA, OR, MD, VT, DE, CT) and set QHP application deadlines as early as 12/13/2013 (OR), 1/8/2013 (VT) and 1/15/2013 (CA).
27
Closing thoughts
• Health systems will need strategies to maximize the conversion of their uninsured
population to coverage
• States that do not expand Medicaid will create a “donut hole” that will confront many of
a health system’s uninsured patients
• Providers need to be well versed on topics such as advanced premium tax credits and
the products offered in their state even if State’s opt to Federally Facilitated Exchange
since they are the “front line” for their members
• It will most likely be bumpy in the early months of the HIXs – think Medicare Part D
implementation!
• No one really knows what impact the Exchange will have on total cost of health care
delivery…stay tuned