While the fine points of regulation are still being confirmed, there are some steps brokers can take right now.
The Patient Protection and Affordable Care Act (PPACA) requires every state to establish its own health insurance exchange by January 1, 2014-or default to a national “fallback” program.
The federal government considers exchanges key to reducing the number of uninsured Americans (approximately 45 million) and, as a result, few changes in recent years have had a greater potential to revise the terrain in the health insurance industry.
While there are still many unknowns about how this will all “shake out,” brokers would be well-advised to learn more about exchanges and begin to position themselves with their clients as the go-to expert on the topic. Here are 15 “need to knows” to keep you on track.
1.?On July 11, 2011, The Centers for Medicare and Medicaid Services (CMS) released a 360-page draft of new regulations on state health exchanges. The lengthy guidelines speak to functionality, oversight standards, reinsurance and risk adjustment standards. While much important information was included, many issues were not addressed, including quality standards for qualifying health plans, standards for exempting individuals from participation in the exchange, standards for essential health benefits and others. Final regulations will likely be released before the end of the year.
2.?States still have a fair amount of flexibility for designing their exchanges, even within the CMS guidelines. Therefore, many state legislators and regulatory bodies are presently reviewing their obligations and timing deadlines as they look for ways to comply with federal mandates, while still making sure that whatever program they put in place reflects the individual characteristics and needs of their state.
3.?States can either create the mandated exchange or simply default to the national model. States that default to the national model can set up their own exchange at a later date so long as they give the federal government a year’s notice to transition from the federally administered program.
Some states and territories, already committed to an exchange, are determining if they want to build it themselves, outsource all, or outsource select pieces to an experienced third party that can develop the necessary infrastructure and then be responsible (behind the scenes) for everything from marketing to enrollment to ongoing operations and customer support-all under the state’s private label.
4.?The U.S. Department of Health and Human Services (HHS) has allocated millions of dollars in grants to help states plan for the establishment of health insurance exchanges. For example, this past summer 13 states received a total of $185 million in federal grants. These grants will fund research and planning to determine how the states’ exchanges will be structured, operated and governed. But the window for making these decisions is closing fast.
While the mandated launch date is January 1, 2014, by January 1, 2013, HHS will determine whether a state’s exchange is in compliance and will provide either “conditional” or “full approval,” depending on progress toward meeting requirements.
5.?State-run health insurance exchanges will create an online, one-stop shopping mall where consumers, employers, insurance brokers and others will easily view competing health plans side by side, comparing benefits, costs, provider networks and other features. Exchanges will also enable individuals to access subsidies and employers to access tax credits. Moreover, such exchanges, apart from offering a platform to compare various health insurance plans for different states, might also provide ample information regarding the government’s healthcare Act and also which plans would benefit the buyer, based on which an informed decision can be made.
This transparency and accessibility is designed to lead to more value-based purchasing as buyers are able to select the health plan, benefits structure and health care providers that best meet their needs and budget. Therefore, the Congressional Budget Office estimates eight million people will buy insurance through exchanges in 2014, with participation expected to triple by 2018.
6.?State exchanges will be available to individuals and small businesses in the initial phase, and states have the option of establishing separate exchanges for each audience (one for individual and family plans and one for small businesses) or one exchange covering both.
Small businesses with fewer than 100 employees will be able to purchase coverage through the Small Business Health Options Program (SHOP) beginning in 2014. SHOPs are intended to allow employers to shop for qualified coverage and more easily compare prices and benefits. In 2017, states will have the option to allow businesses with more than 100 employees to purchase coverage through the SHOP exchanges.
7.?The federal government, through tax subsidies and other financial incentives, is attempting to make participation in the exchanges as appealing as possible. Premium-assistance subsidies will be available to certain individuals, and small businesses will be eligible to receive tax credits if they buy through a state exchange.
Many specifics regarding eligibility for premium tax credits were not included in the CMS guidelines issued in July 2011, and brokers are advised to keep themselves current on this important topic, as it may become a key selling tool in encouraging clients to participate in an exchange.
8.?With the introduction of health insurance exchanges, employers may soon find themselves with the means to provide health insurance in a way that is fiscally sound, while providing their employees freedom of choice. To do so, employers that wish to participate in the exchange will utilize the “defined benefit” model rather than “defined contribution.” Under this design, rather than choosing a single health plan for all employees, employers provide employees with a health insurance budget and access to multiple carriers and plan types participating in the exchange.
Across the nation, 47 million Americans work at 5.9 million small businesses. These workers are almost three times as likely to be uninsured as those who work for large businesses.
9.?Along with multiple insurance carriers, exchanges will feature four benefit levels-bronze, silver, gold and platinum-each having a different set of benefits and a different price point. In some cases employers will allow employees to select from all plans, while in other instances the employer will select a specific benefit level for its entire group.
Among these options will be a high-deductible plan (usually with a health savings account component) for those individuals who want the lowest possible premium and the highest possible personal accountability for use of their health care dollars.
Regardless of benefit level, all plans in an exchange will offer a set of essential benefits that will include hospital, emergency, maternity, pediatric, drug, lab services and other care. And regardless of any pre-existing conditions, insurance companies participating in an exchange will not be able to deny coverage. Carrier networks must also include a “sufficient number” of essential community providers (ECPs) that predominantly serve low-income, medically underserved individuals.
10.?Initial open enrollment for both the SHOP and the IFP will be October 1, 2013 through February 28, 2014. Those enrolled as of December 22, 2013, must be assured of a January 1, 2014 effective date. Each state exchange is required to have an annual open enrollment period and individuals may be restricted to these enrollment periods unless they qualify for a special enrollment period based on a triggering event such as change in dependent status, permanent move and other specified exceptions.
11.?In an exchange, not only do employees have the benefit of choice, but employers get ease of administration and a single point of contact. Ideally, this will include a user-friendly, single-entry Internet portal where consumers and small businesses can access online and multilingual enrollment, online renewals and online changes in coverage. The best exchanges will also offer live, knowledgeable telephone support to deliver a first-class customer experience.
12.?Private exchanges already exist in select markets, and the best of them have been shown to work well and are well-received by the public. CaliforniaChoice, for example, has been operating for 15 years and serves more than 150,000 members and more than 10,000 small employers. The creation of state-run exchanges in no way prevents or eliminates the existence of private exchanges.
13.?Hospital leaders are enthused about the potential of exchanges because an increase in the number of consumers with health insurance should reduce the number of uninsured patients coming to the emergency department or being admitted to the hospital. By reducing the number of patients in need of charity care, hospitals stand to decrease their proportion of bad debt. More paying patients are good for a hospital’s bottom line and are the best way to offset other budget shortfalls, such as reductions in Medicaid reimbursement.
14.?Exchanges will be sold directly, through brokers and through a still-undefined network of navigators. As is the case today, it will continue to be advantageous for employers to purchase their health insurance coverage through a trusted, licensed and qualified broker. In fact, the broker’s expertise and knowledge will be more important than ever in providing the information and unbiased recommendations employers need to make well-informed decisions as well as to provide service for everything from routine issues to serious policy interpretation issues. As with any change, those with experience and knowledge will be sought after to provide counsel and advice.
15.?The time to start positioning yourself as the go-to expert with your clients is now. In every conversation it’s time to talk about exchanges-what they are, how they work and whether or not they are the right solution to an individual client’s health insurance needs.
Discuss what is meant by defined contribution, what tax credits may be available, and how exchanges can provide employees choice while providing employers ease of administration. If you can begin to get your clients interested now, you’ll be the person they turn to when the time is right.
With so many moving pieces, it is vitally important that brokers keep abreast of the marketplace-through webinars, conferences, reading and research. Stay current and stay informed; you can be sure that’s precisely what your competitor is doing.
