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Covered California News & Commentary

Topics of interest to both consumers and agents related to Covered California and the ACA biased in favor of the successful implementation of the Exchange and deliberately apolitical.

February 2012 Archives

HealthPass is a private, nonprofit, multi-carrier health insurance exchange in the New York City metropolitan area small group market. It insures, nearly 3,300 businesses with about 30,000 employees and dependents. In achieving those numbers, HealthPass learned several important lessons. Mark Kessler, Director, Strategic Initiatives for HealthPass shared some of those hard-learned lessons when he participated in forum on how to best implement the SHOP Exchange in California sponsored by The California Endowment and the California Small Business Majority on January 11, 2012. We have gathered some of Mr. Kessler’s comments here.

On Launching the Exchange The first year of the Exchange is very important because it is going to establish a risk profile that is very hard to change. Creating a good mix and diversity of enrolled individuals is very important in the first year. Focus your message on reaching a broad number of small businesses to make sure your exchange mix and risk is stable”.

On Using Brokers “HealthPass New York did not try to reinvent the wheel when it comes to marketing. It is significantly more efficient and effective to leverage existing productive systems than to develop new ones that must compete with the old. In other words, it is important to use sources of information that small business owners trust, like brokers, when trying to reach a large, diverse and scattered population like small business owners. The Exchange must compete very aggressively in the marketplace. HealthPass New York, which markets itself equally to insured and uninsured small businesses, knows brokers are a powerful way to reach small business owners. Most of its marketing is aimed at brokers. We attend broker events, publish broker publications, and have dedicated broker support relationship managers.

On Price “HealthPass New York openly says their prices are the same if not slightly higher, but says they address the hidden costs of health insurance like the time a small business owner spends choosing a product and working with employees on claims, enrollment and deciphering the material. We tell them those are all drags on your time. If you had that time free, what would you do with it? Those are the costs we can remove immediately.”

On Choice “HealthPass New York’s research shows that it is more important to the employer than the employee. Employers are happy to not have the pressure of choosing one or two plans for their employees. While this is less important for employees, they do enjoy having options.”

On Diversity “New York is very diverse and HealthPass relies on brokers to reach minority small business owners. We haven’t found a community that we couldn’t reach that way.”

James Robinson, Ph.D. is Director of the Center for Health Technology and the Kaiser Permanente Professor of Health Economics at UC Berkeley. Among his research interests is health insurance. He was participated in a panel discussion at the California Health Benefit Exchange board meeting on February 21, 2012. Dr. Robinson delivers an entertaining mixture of intelligence, candor and humor. We have gathered some of his comments from that meeting here.

On What the Public Wants “We want to cover all services, for everyone, without prior authorization, and without having to pay for it.”

On Saying No “The exchange has ambitious goals. And the most difficult of those goals is moderating cost. That boils down to saying no at some point, and that’s a very unpopular thing to do. What we want is everything. And that’s the one thing the board cannot do. Board needs to find the “least worst set of options” or “the least disliked form of cost control” to keep premium costs down.

On Trimming the Fat “The common notion is that the health care system is like a steak, where you get a sharp knife and carefully pare a thick slab of fat off the meat. But there’s no painless way to reduce cost in the health care system. The real image is that the fat is marbled all the way through the steak. There’s no way to use a knife. The only way is to throw that steak in the fire.”

On Cost Control Tactics “Plans will likely have to cover a broad range of services, which drives up premiums. So one answer is cost-sharing, where patients who want certain services pay a higher price. Networks can be designed with fewer providers, which could lower cost, or base reimbursement in part on financial incentives. A third possibility is through medical management.

On Employee Choice “There is always this back-and-forth between choice and efficiency. You have to either rely on the individual to make choices among a broad menu of choices, or you have to use the leverage of enrollment and limit contracting to a small number of plans. You have to figure out where to say no — is it a decision for individuals, or is it a collective decision to be made by the board?”

Bill Wehrle is Vice President, Health Insurance Exchanges for Kaiser Permanente. In this role, he is responsible for influencing the policy development of health insurance exchanges in each state. In California, Mr. Wehrle is responsible for leading Kaiser Permanente’s relationship with the California Health Benefit Exchange and leading Kaiser Permanente’s strategy and execution for exchange products and membership.

Mr. Wherle participated in a forum sponsored by The California Endowment and organized by the California Small Business Majority. The three-part forum on how to best implement the SHOP Exchange in California took place between October 14, 2011 and January 11, 2012. We have gathered some of Mr. Wehrle’s comments here.

A Successful Exchange

“CaliforniaChoice, a private exchange that offers health coverage from several carriers including Kaiser Permanente…has been quite successful. However, adding choice can be very expensive. This is one reason why CaliforniaChoice is more expensive than the rest of the market”.

On Employee Choice

“Kaiser Permanente believes that offering a choice of carriers is crucial. However, introducing unfettered choice among benefits is expensive. We favor a system where the employer picks a benefit level (bronze for example) and the worker can buy up one level (silver) if he chooses. That offers some choice, but is not completely unfettered.”

On Standardization of Benefit Plans

“Kaiser believes standardizing plans can be an effective approach to promote healthy competition among insurers. With that said, the SHOP must offer more than just a very small number of plans in order to meet the needs of California’s diverse small businesses. Kaiser believes this can be accomplished by having one Health Maintenance Organization (HMO) plan and one Preferred Provider Organization (PPO) plan offered in each benefit tier, both inside and outside the exchange. That would help end the carrier practice of competing to attract the healthiest customers rather than on plan price or quality. By getting creative with plan design, insurers can control the type of risk coming into their pools,and can become quite profitable by attracting healthy customers. Once one insurer does this, its competitors will often follow suit to stay competitive. By making plans standard, or as close to standard as possible, insurers will be forced to compete on price and quality, not plan design. Plan standardization must be done market-wide. Only standardizing plans that are sold in the exchange would be a mistake and would lead to adverse selection.”

On Using the Active Purchaser Role

“The challenge will be to use the exchange’s tremendous power as an active purchaser to bring real change to the marketplace. The exchange can make use of their clout to set the terms by which plan choices are offered. For example, the exchange can use its active negotiation power to standardize products-meaning plans can compete on price and quality but not benefit design. Another thing the exchange can do is to require plans to set up competing networks so there are competing healthcare delivery systems, not just plans.”

On Underwriting Rules

“There are some areas where the SHOP exchange will not want to differentiate itself from the marketplace. Underwriting decisions, for instance, must be the same within the health benefit exchange as they are in the outside market to avoid adverse selection, This is what caused adverse risk selection in PacAdvantage.”

On Brokers

“Brokers must be paid market-rate commissions in the SHOP exchange. Failing to do so means brokers will be actively selling products that compete with the exchange rather than working for it.”

A Health Access sponsored bill, AB 714, introduced on February 17, 2012, aims to automatically enroll hundreds of thousands or even possibly millions of Californians in the California Health Benefit Exchange with coverage to begin on the first day of business, January 1, 2014.

The majority of these Californians are currently enrolled in Healthy Families, AIM (Access for Infants and Mothers), MRMIP, PCIP, cancer screening programs and other public coverage programs. Between these programs, there are up to 1.5 million Californians eligible for pre-enrollment.

The bill would make the automatic enrollment of those individuals in the Exchange subject to the State Department of Health Care Services, the State Department of Public Health, and the Managed Risk Medical Insurance Board receiving approval from the United States Department of Health and Human Services to transfer the minimum information necessary to initiate an application for enrollment in the Exchange.

The bill would require each affected individual to be given the opportunity to provide informed consent to commence eligibility determination and complete enrollment, but would provide that failure to consent or to respond would be construed to mean the individual is declining coverage.

According to Anthony Wright of Health Access, “On day 1 - January 1, 2014 - we should have millions of Californians enrolled in coverage. We’ve already had LIHPs (Low Income Health Plans) enrolling 300,000 or more of the state’s most vulnerable populations. We can say with confidence that ACA means the LIHP enrollees will have coverage. Federal dollars will begin to cover enrollees in 2013 so there’s an incentive to enroll as many as possible now.”

“Aside from the fact that we want people in coverage,” Wright said, “there’s an economic imperative, as every day that passes without eligible Californians enrolled is a day we leave millions of federal dollars out of our economy. Enrolling as many Californians as possible will be vital to the sustainability of the Exchange, as those who are the least healthy will enter the program first. The only way to balance the risk pool is to recruit all.”

“We’ll need to capture people in life events that may result in uninsurance (job loss, divorce, graduation, etc)”, Wright said, “and make sure they’re able to get to the ‘door’ at the time of insurance loss. If we set up these seamless enrollment mechanisms, we’ll get a few million enrollees on day 1. Auto-enrollment mechanisms will free up our resources to focus on the difficult cases.”

Emma Hoo is currently Director at the Pacific Business Group on Health (PBGH). Previously, Ms. Hoo worked at PacAdvantage. On January 11, 2012, she participated at a forum sponsored by the California Endowment and organized by the* California Small Business Majority. Ms. Hoo commented on her lessons learned while at *PacAdvantage.

Price, Price, Price

“Cost is the primary factor driving insurance decisions for small business owners. The exchange needs to find a way to lower administrative costs for small businesses and market that. PacAdvantage wanted to market the quality of the health plans it offered. We were off base. People wanted price, price, price.”


“One of the mistakes PacAdvantage made was setting up a system that made it more profitable for brokers to sell to very small groups. The rest got ignored and were undersold. One of the challenges is setting a fee for brokers that works.”

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