States Implementing Health Reform: Exchanges Part II

1. States Implementing Health Reform: Exchanges Part II Next Topics in the Webinar Series: Medicaid Wednesday, January 12th 2:00-3:30 p.m. EST Primary Care Workforce Wednesday, January 19th 2:00-3:30 p.m. EST National Conference of State Legislatures  Wednesday, December 15, 2010

2. This webinar series is sponsored by these NCSL projects:Legislative Health Staff Network (LHSN)Men’s Health ProjectPrimary Care ProjectRural Health ProjectMinority Health ProjectNCSL’S Standing Committee on Healththrough grants fromThe Robert Wood Johnson FoundationThe Kellogg FoundationHRSA’s Bureau of Primary Health CareOffice of Rural Health PolicyHHS’s Office of Minority Health

3. Submitting Questions Q&A icon Questions may be submitted at any time during the presentation. To submit a question: Click on the Question Mark icon (?) on the floating toolbar (as shown at the right). This will open the Q&A window on your system only. Type your question into the small dialog box and click the Send Button. Questions will remain anonymous.

4. States Implementing Health Reform: Exchanges Part II Session Panelists: Joel Ario, Director, Office of Health Insurance Exchanges, Office of Consumer Information and Insurance Oversight, HHS Bob Carey, Senior Advisor, Public Consulting Group (Former Policy Director for the Massachusetts Connector) Sumi Sousa, Special Assistant to the Speaker, Office of the Assembly Speaker, California State Assembly Sandra Shewry, Advisor, Health Care Reform Implementation, California Health and Human Services AgencyWelcome to the webinar! We will begin shortly.

5. Federal Planning & Support Opportunities for States Joel Ario Director, Office of Health Insurance Exchanges, Office of Consumer Information and Insurance Oversight

6. The Health Insurance Exchange: Key Issues for State Policymakers National Conference of State Legislatures December 15, 2010

7. Agenda • Key Issues for State Policymakers • To Exchange or Not? • Governance and Administration • Role of the Exchange in the Marketplace • Establishing a Continuum of Coverage • Basic Health Program • Alignment with State Health Reform Efforts • Leveraging Existing Resources and Systems • Brokers and Navigators • Rating and Underwriting Rules • State Mandates and Minimum Essential Benefits • Pitfalls and Opportunities • What’s Next?

8. To Exchange or Not? Options: • Establish single, statewide Exchange or regional Exchanges within a state • Join with other states to establish multi-state Exchange • Defer to the federal government Prime Considerations: • Control/authority over portion of the commercial health insurance market • Funding and feasibility of establishing and operating an Exchange • Uncertainty over how the federal government will operate an Exchange • Ability to collaborate with other states in a timely fashion • Coordination of benefits across state programs

9. Governance and Administration Options: • State agency (existing or newly created) • Quasi-public authority • Non-profit entity Prime Considerations: • Control – executive model (Utah), board (CA and MA), or advisory • Nimbleness and flexibility to respond to evolving program and changing circumstances • Accountability and transparency • Hybrid commercial/government enterprise

10. Role of the Exchange in the Marketplace Options: • Market organizer/distribution channel • Selective contracting agent • Active purchaser Prime Considerations: • Market conditions • Overall goals and purpose of the Exchange • State’s approach to the commercial health insurance market • Potential population served by the Exchange

11. Establishing a Continuum of Coverage Options: • “Benchmark” benefits for Medicaid expansion population • Eligibility processes across public and private insurance programs • Minimizing gaps and lowering cliffs Prime Considerations: • Benefits and products in the commercial market • Medicaid MCOs and commercial insurers • Streamlining eligibility systems and coordinating enrollment processes • Rating and underwriting rules in the commercial market/Exchange

12. Basic Health Program Options: • Separate health benefit plan for 133% - 200% FPL • Richer benefit package with lower point-of-service cost sharing • Not part of the commercial market/risk pool Prime Considerations: • Can state establish and administer this program (with everything else going on)? • How will removing this group from commercial insurance pool affect the market? • How will the Exchange be affected (e.g., membership, sustainability, attractiveness to commercial carriers)? • Can state negotiate lower costs and richer benefits, without indirectly shifting costs to the commercial market?

13. Alignment with State Health Reform Efforts Options: • Laissez faire approach • Activist role for the Exchange • Selective support/promotion of health reform initiatives Prime Considerations: • Ability (and willingness) of commercial insurers to participate • Marketability/attractiveness of commercial products in the Exchange • Difference between health plans inside and outside the Exchange • Size of the Exchange market • Medicaid program and state employees health insurance program also included?

14. Leveraging Existing Resources and Systems Options: • State (Medicaid) agency systems and processes • Private sector operations • Stand-alone Exchange functions Prime Considerations: • Ability to modify/upgrade existing public agency systems to support Exchange operations (e.g., eligibility, enrollment broker) • Use of private sector to provide key functions and services • Competing priorities of existing programs/entities • Buy, rent or build?

15. Brokers and Navigators Options: • Determine role for Navigators • Brokers as active (and willing) sales force or not • Reimbursement structure for brokers Prime Considerations: • Existing resources/entities and their role in the marketplace (e.g., community-based outreach efforts, non-profit agencies, human service contractors) • Licensure and regulatory authority over Navigators vis-à-vis brokers • Brokers role in the individual and small group markets • Compensation model for brokers and Navigators

16. Rating and Underwriting Rules Options: • Establish standard rating and underwriting rules • Allow carriers to apply different rating and underwriting rules inside and outside the Exchange • Apply base rating and underwriting rules, with some flexibility Prime Considerations: • Differences among carriers in the existing commercial market • Potential impact on premiums • Comparability of rules inside and outside the Exchange • Willingness of carriers to participate

17. State Mandates and Minimum Essential Benefits Options: • Adjust/revise state mandates to reflect minimum essential benefits • Maintain existing state mandates that exceed minimum essential benefits and pay for those benefits for individuals and families purchasing coverage through the Exchange • Maintain mandates outside the Exchange, but eliminate mandates for policies purchased inside the Exchange Prime Considerations: • Cost of mandates that exceed minimum essential benefits • Political realities and influence of advocacy community • Market realities and impact of modifying mandates

18. Outreach is critical to ensure broad risk pool, stabilize premiums, and attract sufficient volume Administrative efficiencies are contingent upon economies of scale Opportunity to streamline, consolidate or eliminate existing public subsidy programs Strategic contracting with carriers and vendors can help lower costs Inventory existing resources – public and private – to identify and leverage available infrastructure Learned behavior can be difficult to overcome Continuous open enrollment in guaranteed issue, modified community rated individual market can create adverse selection problems for carriers Carrier underwriting rules (e.g., contribution and participation requirements) can affect small group coverage through the Exchange Capitalize on health reform to promote other state priorities Pitfalls and Opportunities

19. What’s Next? • States developing strategic plans for Exchange design and implementation • Additional federal guidance expected in early 2011 • “Innovator” grants to jump-start technology and establish prototypes to be awarded in early 2011 • Eligibility • Enrollment • Premium tax credits administration • Cost-sharing assistance administration • Exchange implementation grants available in Spring 2011 • Impact of Congressional changes and altered political landscape TBD • Progress throughout 2011 will ultimately determine states’ ability to establish a fully-functioning Exchange

20. Bob Carey is a senior advisor at Public Consulting Group (PCG). Prior to joining PCG, Mr. Carey was the Director of Planning and Development for the Commonwealth Health Insurance Connector Authority, an independent authority established pursuant to Massachusetts’ landmark health reform law of 2006. In this role, Mr. Carey worked closely with the Executive Director and the Board of the Connector Authority to design and implement new health insurance programs, including establishing publicly-subsidized and commercial health benefit plans, as well as developing health care financing arrangements and coordinating activities across state agencies. Mr. Carey has experience setting up and managing a statewide Health Insurance Exchange, and has first-hand knowledge of the myriad issues – and choices – that states will confront in establishing and operating an Exchange under federal health reform. Contact info: Bob Carey Senior Advisor Public Consulting Group rcarey@pcgus.com 617-717-1345 (office) 617-470-3614 (cell) Bob Carey

21. Creating the California Health Benefit Exchange Sumi Sousa Special Assistant to the Speaker Office of the California Assembly SpeakerDecember 15, 2010

22. Overview • Goals/Concerns in establishing the exchange • How the legislation addresses these issues

23. Key Goals in Establishing the CA Health Benefit Exchange • Define the exchange’s role in overall market • Promote value, quality, transparency • Reduce potential for adverse selection • Establish a solid governance and financing structure • Meet the 2014 timeline

24. Major Considerations and Unknowns • Timeline: Legislation needed to be done in 2010 in order to meet 2014. • Unknown size other than “big”- estimates ranged from 1.25M – 8M potential enrollees. • Concerns with adverse selection and exchange viability relative to outside market. • Major differences in value of the federal subsidy between individual and small group, and concerns with merged markets. • Need to provide choice, fair competition, transparency, value. • Need to coordinate systems with existing Medi-Cal, Healthy Families, county-based administrative structure, while at same time, make transitions between coverage easier.

25. Role of Exchange in Insurance Market OPTIONS CONSIDERED: • Exchange as the entire market • Exchange as simple pass through for subsidy (Craigslist with tax credits) • Exchange operates with outside market but drives value, quality and choice in part through selective contracting

26. How Does Legislation Address These Concerns? • Approach: Exchange operates with outside markets but adds value through, among other things, ability to standardize, selectively contract. • Individual and small group market kept separate for now. • Sets clear rules for participation in the Exchange to enable choice, fair competition, drive value and quality, and promote transparency. • Exchange must offer in each region of the state a choice of qualified health plans in each of the 5 levels. • Exchange can standardize products • Exchange can selectively contract, based on choice, quality, value and service.

27. How Does Legislation Address These Concerns? (cont.) • Rules for participation in the Exchange to reduce adverse selection, promote competition and transparency • Carriers participating in the Exchange must offer at least one product within each of the 5 levels of coverage inside and outside Exchange • Carriers not participating in the Exchange are barred from selling the catastrophic plan. • If Exchange board standardizes products, carriers not participating in the Exchange are required to sell at least one standardized product in each of the four precious metal coverage levels • Exchange must coordinate with Medi-Cal, HFP and counties, but also try to reduce coverage and network disruption. • Exchange is not a third regulator.

28. Governance & Financing Federal Exchange, State Exchange, or Exchange Operated by Non-Profit? • Scope and import of the changes pointed towards need for the openness and transparency of government vs. non-profit • Ability of state to meet CA needs was preferable to federal exchange Significant Trade-Offs • If Exchange is be competitive with an outside market, needs to be agile, flexible, and responsive. • Board and staff structure must support this type of decision making. • State government provides transparency, but can be slower than outside private market.

29. Governance & Financing cont. • Exchange funds need to be protected from bad state budget cycles. • No state GF available and Exchange must be self-supporting by 2015. • Other Concerns with Exchange Authority • Limits on Plan Assessments • Limit ability to increase Medi-Cal or HFP costs • Responsiveness to legislative and executive branch

30. Governance & Financing cont. How Do the Bills Resolve These Trade-offs? • Independent, 5 member Exchange governing board within state government and members must have significant demonstrated expertise in various Exchange-related health care areas, such as the individual and small group markets. • Significant conflict of interest provisions that generally bar anyone working for insurers, agents or brokers, health care facilities and health care providers. • Staff will generally be civil service, but limited number of executive staff positions exempt from civil service. • Board members are unpaid.

31. Governance & Financing cont. • Subject to state open meeting and public record act, laws with an ability to meet in closed session regarding issues such as rate negotiations. Contracts are available 1 year after commencement. • Must issue regulations but for first 2 years, can issue emergency regulations. • Exchange must determine sufficient financial resources exist prior to commencing operations and report to the Joint Legislative Budget Committee and Dept. of Finance. • Annual report to the Legislature and Governor on expenses, performance, operations, and progress. This report is also posted on the Exchange website. • Budget, including staff salaries, must be posted publicly on website.

32. Governance & Financing cont. • No state GF and establishes a plan assessment to fund Exchange operations. • CA Health Trust Fund is continuously appropriated but can only consist of non-GF (federal funds, assessments, CHFFA loan funds, etc.) • Plan assessment limited to 1 year’s approved operating budget – Exchange must reduce the charges in the following fiscal year if the assessments equal or exceed that amount.

33. Questions? Sumi Sousa sumi.sousa@asm.ca.gov Office of California Assembly Speaker John A. Pérez

34. California Health Benefit ExchangeEarly Implementation Tasks Sandra Shewry Advisor, Health Care Reform Implementation CA Health & Human Services Agency December 2010

35. Getting to 2014: Board Tasks • Board Appointments & Hiring Key Staff • Infrastructure & Administration • Eligibility & Enrollment • Coordination with other public & private purchasers • Essential Benefits • Marketing, Outreach & Distribution • Criteria for Qualified Health Plans • Self financing by 2015: assessments on plans • Testing of Systems • Early Enrollments

36. Board Appointments & Key Staff Appointment of Board 2 Governor; 2 Legislature; 1 Secretary of Health & Human Services • Hire Executive Officer, Chief Counsel, & other key staff • Statute: • Permits Board to hire outside of civil service • Permits Board to set salary • Requires independent salary survey

37. Infrastructure & Administration • Establish an office • Communications & Data Systems • Website • Business plan for 2011-2014 • Buy it or make it decisions • Public Meeting calendar

38. Eligibility & Enrollment • Enrollment portal for Exchange, Medicaid, CHIP and other health and social programs • Linkages to federal data bases – Homeland Security, Treasury, Social Security • MAGI rules engine • Rules for application, enrollment, disenrollment, re-enrollment, transfers, appeals • Exemptions from individual mandate • Flow of premiums; processes for free choice vouchers • Variance: individual v SHOP components of Exchange

39. Coordination with other public & private purchasers • Advance goals of • Health status improvement • Health systems improvement • Safety & quality • Cultural competence • Accessibility: hours, linguistic, physical • Efficiency

40. Essential Benefits • Compare federal essential minimum benefits to state mandates. States to bear the cost of benefit in excess of federal essential benefits • Options for state-mandated benefits that exceed the federal definition of essential benefits: (statute may be needed) • Conform state benefit mandates to the federal essential benefits. • Determine the revenue source to cover additional costs for state mandated benefits • Provide an exception in state law from state mandates for products being sold through the Exchange. • Application to large group market (>100 ees) • Variance: individual v SHOP components of Exchange • Degree of standardization

41. Marketing, Outreach & Distribution • Branding of Exchange • Alignment with public and private purchasers • One-stop shop • Driver of market reforms • Price leader • Maintain safety net • Navigators, community groups, agents, brokers – who, training, how reimbursed

42. Criteria for Qualified Health Plans • Governing board to develop standards and criteria • based on “best interests of” individuals and small employers purchasing through the Exchange • “optimal combination of choice, value, quality, and service” • Relationship to plan licensure standards • Collaboration with other purchasers: public & private

43. Self financing by 2015: assessments on plans • Assess a charge on plans that is “reasonable and necessary to support the development, operations and prudent cash management of the Exchange.” • How much; how to collect; process to reconcile

44. Testing of Systems • 2013 – DHHS to conduct readiness assessment of state systems • Eligibility and enrollment • User expectations: families, employers, distribution network

45. Transition Populations • Non-mandatory Medicaid eligible groups above new Medicaid “bright line” (medically needy) • Medicaid waiver population: coverage initiative • Parents of CHIP enrollees • PCIP members • Persons enrolled in limited scope state programs – breast cancer; family planning; HIV/AIDS • HIPAA, COBRA

46. Unknowns: Externalities • Harmonizing group size laws (<50; <100) • Basic Health Program • Public support for reform • State fiscal context • Legal Challenges

47. 2014 is tomorrow! Contact info: sshewry@chhs.ca.gov 916 653-2902

48. Submitting Questions Q&A icon Questions may be submitted at any time during the presentation. To submit a question: Click on the Question Mark icon (?) on the floating toolbar (as shown at the right). This will open the Q&A window on your system only. Type your question into the small dialog box and click the Send Button. Questions will remain anonymous.