CALPIRG Education Fund
Consumers across the state know that the health insurance marketplace is broken. Insurers don’t compete for their business, instead offering take-it-or-leave-it deals. Important information about coverage is buried in the fine print, making it hard to know what’s really covered. Instead of working to lower costs and improve quality, too many insurers focus on covering healthy enrollees and dumping the sick. And costs are continuing their unsustainable rise. Nationally, the great majority of individual-market policyholders—77% —saw a premium increase from early 2009 to early 2010, with an average rate hike of 20%. Small businesses, too, pay 18% more for insurance than their larger competitors and have seen repeated double digit premium increases.
The creation of a new health insurance exchange offers our state the chance to build a better marketplace for health care. The exchange can help individuals and small businesses by increasing competition and improving choices in the state’s insurance market. By providing better options and better information, and negotiating on behalf of its enrollees, the exchange can level the playing field for consumers.
Success is not assured, however, as states confronting the task of setting up their exchange must grapple with important policy questions. This report is a blueprint for creating a strong, pro-consumer exchange that lives up to its promise of a better marketplace.
Accountability and Transparency
The exchange must be accountable to the public, and individual and small business consumers, not the special interests. The exchange’s legislative mandate and mission statement should clearly state that the exchange is to be operated for the benefit of individuals, businesses and their employees, not the insurance and health care industries. It should be run and overseen by representatives drawn from the consumer and small business communities that the exchange is designed to serve, not insurers or providers who could benefit financially from the exchange’s decisions.
The Power of Negotiation
Just as any big business negotiates with insurers, using the bargaining power of its employees to push for lower premiums, so too a strong exchange must have the power to negotiate for better choices and lower costs. That means it must have the authority to exclude plans that fail to deliver robust consumer protections, quality care, and reasonable costs, particularly if the plan has a history of unreasonable rate increases. And because the bigger the exchange, the greater its negotiating power, the state should plan to open the exchange to employees of large businesses as soon as possible, and work to enroll as many eligible consumers as possible.
Promoting Innovations in Cost and Quality
Research and the experience of innovative providers across the country have identified game-changing strategies to hold down costs by providing higher-quality, coordinated care to patients: medical homes, chronic disease management, accountable care organizations, and bundled payments. The exchange, in its negotiations with insurers, can drive them to adopt these proven strategies. Once plans have initially agreed to adopt these reforms, the exchange must monitor their implementation, so that insurers disclose information on the impact which the reforms actually have on quality of care and coverage, cost, outcomes, and adherence to best practices. The exchange should provide a special “seal of approval” for the plans that do the best job at providing high quality care, and provide consumers with easily understandable information about what these reforms mean and how consumers can best make use of them.
If the exchange is not designed correctly, sicker enrollees can congregate within the exchange, with healthier enrollees remaining outside. Because sicker enrollees cost more to insure, this drives up premiums, leading more healthy people to drop coverage which in turn sends premiums up again. Policymakers must prevent this dynamic from ruining the exchange’s potential to improve consumer choices and hold down costs. They can require insurers to offer “mirror” versions of their products, on both the exchange and the market outside the exchange. The state should prohibit insurers or brokers from steering people either onto or off of the exchange, through setting different broker commissions, adopting targeted marketing strategies, or by any other method. And because a larger exchange will have more stability, states should conduct strong outreach and enrollment and widen the eligibility rules for the exchange.
Designing a Consumer-Friendly Exchange
The consumer experience is an important prerequisite for the exchange’s success. Its web-portal must be well-designed, ensuring that the language used is straightforward, avoiding jargon as much as possible and addressing the diverse language needs of enrollees. The exchange must also help those without high-speed internet to find coverage, providing a toll-free hotline and face to face assistance through its Navigator program. It should take steps to help consumers make informed choices, by allowing them to make apples to apples comparisons of their options and making it easy to search for products that meet a consumer’s particular needs. The exchange must safeguard consumers’ privacy, by ensuring that identifiable personal information is not shared, internally or externally, with those who do not have an immediate, legitimate need for it.
Coordinating with Public Programs
The exchange will be only one piece of the state’s larger health care landscape, which will continue to include public programs like Medicaid and the Children’s Health Insurance Program (CHIP). Coordinating these various programs will require careful attention to issues of eligibility, enrollment, and transition, but will allow states to save money due to increased efficiency, and give consumers an easier experience getting their coverage. Whatever door a consumer enters through – applying to the exchange or a public program – they should quickly and easily receive the appropriate coverage. The state’s system should obtain updated information from enrollees in both public programs and the exchange each year, and if the enrollee’s eligibility has not changed, their coverage should be automatically renewed. If the enrollee instead becomes newly eligible for some other coverage source, the exchange should present the enrollee with their new choices, and automatically enroll them unless they opt out.
Also, the exchange has the opportunity to create ratings, comparison tools, standardized forms, and other services to allow consumers to easily understand their coverage options when purchasing coverage through the exchange’s web portal. Some of them might also be helpful for allowing public program beneficiaries to understand their coverage, so states may want to incorporate these aspects of the exchange’s systems into those of their public programs. Similarly, exchanges should encourage private insurers to adopt reforms to how they pay for care that would reward high-quality, lower-cost care. The impact of these reforms will be heightened if similar reforms are also instituted in, and coordinated with, the public programs administered by the state.
Making Health Care Work for Small Businesses
The small businesses who will get coverage through the exchange will see important benefits. For smaller businesses, if one employee gets unexpectedly sick, premiums for the entire business can jump. The exchange can help mitigate this problem; by bringing the small business into a much larger pool, comprised of individuals and other small businesses, changes in the age or health status of a few employees will no longer have as much of an impact on overall costs. And untangling the confusing array of plan options available to small businesses today can be a full time job by itself. By standardizing insurance products within tiers, and creating decision tools to allow for easy apples-to-apples comparisons, the exchange can allow even small businesses without much time or expertise to make choices that are right for them. But to make sure the exchange delivers value for small businesses, the exchange must provide for small business owners and their employees to have a voice in its decisions.