Covered California will contract with a vendor the for administration of the SHOP Exchange as opposed to developing its own administrative infrastructure. Several business functions such as governance and policy management are considered “core” and will be maintained internally.

Rationale Considered

The federal government must certify that Covered California will be capable of performing all minimum functions in time for open enrollment in October 2013. The complexity of the Individual Exchange and the interrelationship with other state health programs require the Exchange to devote significant staff and consultant support to policy and systems development that will assure the success of this effort. Because of this, the Exchange will go with a contracting arrangement strategy for the initial administration of the SHOP at least in the early years. Covered California will implement a transition strategy contracting for establishment and operational services for SHOP in the near term, and then they will evaluate bringing operational control of the SHOP operations in-house after after 2015. This transitional approach will allow Covered California to focus on standing up the individual exchange in the near term while taking advantage of consultant outside expertise to ensure that small businesses and their employees receive best-in-class service.

The rationale for contracting with a vendor for the establishment and initial administration of the SHOP include:

• The time required to build an internal operational capability for SHOP is significant, and the time may not be sufficient to be in a position to implement small business open enrollment by 2013
• External vendors have existing functionality that serves the small business market today that could be easily adapted to the Covered California functions
• There are other competing, high priorities with tight timelines facing Covered California Staff (i.e. building and operationalizing the Individual exchange)
• Variations in enrollment volume (higher volume at the end of the month and immediate enrollment growth during open enrollment) are expected in the near term. These factors will require flexibility in service center operations - and possibly other areas - which could be challenging to manage internally

SHOP Functions to Retain

It is important to note that Covered California considers some functions to be “core” operational and policy functions. “Core” functions that will be internal to the Exchange include:

• Governance, policy development, and quality assurance: Covered California will retain ultimate governance and policy-making authority and ensure that contractors are meeting contractual quality, service and related standards.
• Health plan management: Covered California will retain control over health plan selection, certification and ongoing management of plan relationships for the SHOP.
• Marketing: Covered California will lead SHOP marketing efforts and will maintain direction of marketing campaigns and outreach.

Questions and Concerns Remain

• How should Covered California best use marketing expertise and agent relationships that may reside with potential vendors?
• How can Covered California best assure coordination and integration between it and a contracted vendor to assure maximum enrollment of individuals who may be family-members of covered small business employees who are eligible for Exchange tax- credit support or Medi-Cal?