How Massachusetts Answered Tim Jost’s Eight Questions Nancy Turnbull Harvard School of Public Health Board Member of Massachusetts Health Insurance Connector September 24, 2010

Massachusetts Connector Individual- Unsubsidized Subsidized CommCare Small Employers- Unsubsidized Section 125 plans Making the market work better: Set standards Increase transparency Simplify consumer experience Create more affordable options Standardize benefit plans

#1: Structure and Governance? Independent public authority Governed by 10-person board 4 government officials Chaired by secretary of administration and finance Medicaid director Commissioner of insurance Head of agency responsible for state worker and retiree benefits 3 gubernatorial appointees: economist, small employer, actuary 3 Attorney General appointees: consumer, union, health and welfare trust funds Three-year terms for appointees Broker will be added to board as of July 1, 2011 3 3

#2: Protecting against adverse selection? Before the exchange: Long history of insurance market reform Guaranteed issue/renewal No rating on health status, medical claims, gender Modified community rating 2:1 rating bands All products available to everyone Major carriers must sell individual products All products at each carrier in one rating pool

#2: Protecting against adverse selection? Since reform Same insurance rules inside and outside the exchange Same rating pool inside and outside Connector Merged small employer and individual markets Insurer must sell “Seal of Approval” products inside and outside the Connector Individual mandate Standardized products in the Connector LACKING Insurers can sell non-standardized products outside the Connector No risk adjustment across insurers (except in subsidized Commonwealth Care)

#3: Preventing Selection Against Exchange by Self-Insured/Large Employers?

#4: Making exchange attractive to small employers? ~6000 members in small employer plans Biggest value: Easy to compare what’s available from many carriers But many challenges Opposition by BCBSMA (60% market share) Concern about adverse selection if BCBS sits out Opposition by most brokers (lower commissions) Whining about standardized products New 5% state premium subsidy for participation in Connector plan with wellness program How much will federal tax credits help?

#5: How to pick health carriers and products? Subsidized program Medicaid Managed Care plans initially Robust competitive procurement Unsubsidized program Standardized products: Gold, Silver, Bronze, YAP Carriers with 5,000+ lives in small employer market must bid Must bid for all lines of business and all products “Seal of Approval” to plans that provide “good value” and “high quality”

#6: Information for Consumers? Massachusetts 1.0: “Actuarial Value” 9 Premiums for 50-year-old resident of Boston for effective date of June 2009 9

Mass 2.0: Standardized Products 10 10

#7: Eligibility across programs? Single application for all health programs Electronic application, sort of “Passive enrollment” – use information from other state agencies to verify eligibility Auto enrollment for subsidized plan– enroll into cheapest plan Outreach grants to community organizations across state: big pay-off

#8: Reducing Administrative Costs and Finding Funding? $25 million start-up funding Collects administrative fees 3.5% of premium Cut of premium not an add-on: reduces revenue paid to health insurers Self-sufficient since 2008 Broker commissions $10 per subscriber per month: groups 1-6 lives 2.5% premium: groups with 6+ lives 90% of Connector small group sales are not through brokers Scale/size is critical to lowering administrative costs Tensions about disrupting existing business practices: Duplicative? More expensive? Adding value?

#9: Implementation is an on-going campaign Needs adequate funding Coordinated framing and messaging Public-private partnerships for aggressive public education and outreach/enrollment/re-enrollment Implementing on time and celebrating every success, big and small Establish credible measurement of results Aggressive, coordinated and rapid response to lies and misinformation 13 13

Eyes on the Prize 2.7% 2009 Source: Massachusetts Division of Health Care Finance and Policy, 2009 Household Insurance survey 14 14