What Can an Exchange Accomplish? Challenges and Opportunities for National Health Care Reform Amy M. Lischko State Coverage Initiatives, July 2009

Agenda Data Potential Goals Questions Challenges Opportunities

Data Lessons drawn from: History of exchanges Current work with states assessing feasibility (WV, MN, RI) and implementation (MA, WA) CMWF grant to evaluate MA Connector (with Sally Bachman and Alyssa Vangeli)

History of Exchanges  Small group purchasing pools: HIPCs, AHPs, other arrangements (Arkansas, Kansas,Texas, NY)  Target Population: Mostly small employers (size varies)  Value Proposition: Provides more affordable health insurance by pooling small employers together, employee choice, minimize administrative costs.  Rating rules: often different, adverse selection, participation and contribution rules for employers vary  Outcome: Either small in membership or closed due to poor risk

Connecticut (CBIA)  Private sector purchasing mechanism: a division of the Connecticut Business and Industry Association (CBIA)  Target Population: Serves employers with employees, targets In operation for 12 years, serves over 6,000 employers and 88,000 members  Value Proposition: Provides choice to employees of small businesses and full service HR shop for employers  Rating rules same inside CBIA and outside  Key Success Factors: Flexible, nimble organization, responds to business needs, strong employer & broker relationships

Massachusetts Connector  Established in 2006 as key element of system-wide reform. Independent, quasi- governmental entity – separate from the state, governed by a 10-member board  Began offering subsidized products in October 2006, private products to individuals in April 2007, private products to employers in October 2008  Connector designed to help eligible individuals and small groups purchase health insurance at affordable prices oAdministers premium assistance program for those under 300% FPL oMakes it easier for businesses to offer pre-tax contributions to part-timers, contractors oFacilitates pro-rata contributions for individuals working for multiple employers oImproves transparency and choice for small employers (Gold/silver/bronze) oFacilitates affordable, portable individual insurance coverage  Key Challenges oMarkets exist side-by-side, carrier and broker resistance remain oMost of “sales” have been of subsidized product oHas not addressed health insurance cost trends

Washington Health Insurance Partnership  Quasi-governmental organization Established by law in 2007 with a 7 member board  Narrowly targeted for start-up Small employers who do not currently offer coverage and have low-wage workers (low-wage workers get subsidy from state)  Market Organizer Offers 12 plans (in four tiers). Employers choose plan for workers with no employee choice. Does not negotiate rates for any products.  Requirements Employers required to contribute 40% of single premium – no minimum participation requirements. Small group rating rules apply  No mandate and narrow target = very little impact on uninsured Projections of take-up are mostly for low-income, subsidized employees  Initial goals unclear -- Policymakers evaluating options, on hold due to budgetary concerns

Potential Goals Increase transparency of insurance purchase Distribute insurance Facilitate subsidies Increase portability Increase choice for employees of small employers Improve outreach and education Set standards, implement policies around health insurance Purchase health insurance (for subsidized or larger group) Reduce system costs and improve quality of health care

Questions What infrastructure is necessary to achieve goals? How big is big enough? How much choice should be offered? How are products rated? Are there minimum contribution and participation requirements for employers? How is the exchange governed? Who can purchase? Who is required to purchase?

Challenges Duplication and redundancy of functions  Other state agency functions  Commercial functions Resistance from brokers, carriers and providers Conflicts between policy and business functions Clarity and prioritization of roles Avoiding selection Improving quality and affordability Program integrity Coordination across multiple public programs

Opportunities Bi-partisan support Innovate around product design Reduce administrative waste Increase portability Reach hard-to-reach (part-time workers with multiple jobs, sole proprietors, employees working for small firms) Coordinate all aspects of health reform