Health Insurance Exchanges: Contrasts Between Utah and Massachusetts
June M. Sullivan, Halloran & Sage LLP, Hartford, CT
Although many Americans obtain their health insurance through their employer or a family member’s employer, others are either self-employed or do not have access to employee health benefits. These individuals and small businesses often lack competitive purchasing power to obtain reasonable health insurance rates because they cannot pool their health insurance risks with others. During the creation of the latest round in our nation’s healthcare reform, the government acknowledged this problem and took steps to address it.
Health Insurance Exchanges
The term Health Insurance Exchange (“HIE”) describes a marketplace that offers health insurance options. HIEs are intended to provide relief to families who have no insurance or do not have adequate insurance from an employer and cannot afford to buy it in the individual or small group insurance market. They also allow small business owners to provide health insurance for their employees. Significantly, a HIE will fill an existing coverage gap since, if an individual loses his or her job, moves away from the job, or decides to leave the company, the individual will have access to health insurance options through the HIE. This one-stop health insurance shopping network is also meant to enable these individuals to find health insurance plans that suit their needs. It is intended to foster greater competition, lower costs, and give consumers a greater variety of affordable choices.
On March 23, 2010, President Obama signed the Health Care and Education Reconciliation Act of 2010,1 which amended Title I of the Patient Protection and Affordable Care Act of 2010 (collectively known as “PPACA”). Under PPACA, each state must establish a HIE by January 1, 2014.2 The states must notify the Secretary of Health and Human Services (“HHS”) by January 1, 2013 whether the state intends to establish a HIE. If, by that date, the Secretary of HHS determines that the state has not taken steps to develop and implement a HIE, the federal government must operate the HIE either directly or through an agreement with a non-profit entity.3 The Center for Consumer Information and Insurance Oversight (“CCIIO”) oversees the implementation of the provisions related to private insurance, including HIEs.
The time has come for states to contemplate how health insurance exchanges will provide services to their citizens. Two states, Massachusetts and Utah, are worth noting since they established HIEs before PPACA was enacted. Massachusetts takes a “hands-on” approach by becoming very involved with its HIE, providing significant funding and oversight. In contrast, Utah has more of an indirect, “hands-off” approach over its HIE. Important lessons can be learned from these early HIEs that may help to guide the development of an HIE in other states. This article examines the Massachusetts and Utah HIEs to show how their HIEs may serve as models for other states in developing their HIEs.
Essential Health Benefits
PPACA mandates that HIEs meet certain requirements. They must offer health insurance plans that include a comprehensive package of items and services known as “essential health benefits.”4 Essential health benefits are healthcare service categories that must be covered by certain plans starting in 2014. The health insurance plan benefits must include items and services within the following ten categories: 1) ambulatory patient services; 2) emergency services; 3) hospitalization; 4) maternity and newborn care; 5) mental health and substance use disorder services including behavioral health treatment; 6) prescription drugs; 7) rehabilitative and habilitative services and devices; 8) laboratory services; 9) preventative and wellness services and chronic disease management; and 10) pediatric services, including oral and vision care.5 In order to be certified and participate in the HIEs, the insurance policies must offer these benefits.6 States have leeway to choose an existing health plan that sets the “benchmark” for essential health benefits package. States are free to choose one of the following health insurance plans as a benchmark:
- One of the three largest (by enrollment) small group plans in the state;
- One of the three largest state employee health plans;
- One of the three largest federal employee health plan options; or
- The largest HMO plan offered in the state’s commercial market.7
The benefits and services included in the health insurance plan selected by the state would establish the essential health benefits package.
PPACA provides for four basic ways that states can structure their HIEs: 1) use an existing state government agency, such as Medicaid or a consumer protection agency; 2) create a new state agency; 3) establish a nonprofit entity; or 4) join a multi-state exchange.8
Similarities and Differences between HIEs in Utah and Massachusetts
The HIEs in Utah and Massachusetts have much in common. Both are focused on state specific issues and responsive to those issues as well as state customs and business practices. They both take a consumer-business approach, meaning that they address the needs of both the individual as well as the business community. Both have broad, bipartisan support for their basic elements.9
However, there are also drastic differences. Massachusetts has an individual mandate for residents to maintain health insurance and requires employers to provide health insurance.10 The Massachusetts HIE is The Commonwealth Health Insurance Connector Authority, referred to as “The Connector.” The Connector is a public agency overseen by a board of twelve directors.11 Its purpose is to facilitate the availability, choice and adoption of private health insurance plans to eligible individuals and groups and to facilitate the purchase of healthcare insurance products at an affordable price.12 The government acts as a contracting agent. The Connector has broad regulatory responsibilities. It started with the public sector reforms first and then focused on the private insurance market reforms. There is no risk adjustment mechanism. The Commonwealth initially appropriated $25 million to establish the HIE, and there is ongoing funding through retention of a portion of premium. There is a staff of approximately 45 employees.13 The Massachusetts’ Connector enrolls approximately 220,000 people.14
Utah does not have an individual or employer mandate for health insurance. The Utah Health Exchange is operated by the Office of Consumer Health Services, established within the Governor’s Office of Economic Development.15 The government’s role is as a market facilitator. The regulatory authority is strictly limited to establishing electronic data standards. Utah began by implementing private market reforms first before focusing on public sector reforms. Utah has a risk adjustment mechanism to deal with adverse selection issues. Utah initially appropriated only $600,000, but there is ongoing funding through annual appropriation and technology fees. The Utah Health Exchange has a staff of just two employees and enrolls about 5,000 people.16
The HIEs in Massachusetts and Utah are structured very differently, yet both may serve as a model for a state to establish its own HIE. A HIE can act more as a facilitator, such as in Utah, or it can take a more hands-on approach, as done in Massachusetts. In either case, there are important points to consider. First, states should recognize that they have the freedom to develop their HIE using a variety of different structures, as long as the HIE meets the minimum standards under PPACA. Second, HIEs can be useful aides to provide consumers with the tools to make comparisons among health plans. Third, HIEs require the participation of consumers as well as health plans.
Lastly, but most importantly, the state must actively attract consumers to use the HIE so that the HIE will have enough enrollees to sustain itself. This requires extensive public education and strong support to help consumers who are just learning about HIEs. In our technologically based society, people are accustomed to instantly receiving information through the internet. If the process of obtaining health insurance is complicated and onerous, many consumers will become discouraged, frustrated, and avoid using the HIE altogether. In order for an HIE to be effective and sustainable, there must be a critical mass of participants. Without those participants, there will be no reason for HIEs to exist.
|1 ||Pub. L. 111-152|
PPACA § 1321.
|3 ||PPACA § 1321(c)(1).|
A qualified health plan is a health plan that is certified by each Exchange through which the plan is offered; provides the essential benefits package; is offered by an issuer that is licensed and in good standing in each state in which the plan is offered; agrees to offer at least one qualified plan in the silver and gold levels; agrees to charge the same premium whether the plan is sold through the Exchange or outside the Exchange; and complies with other requirements developed by the Secretary and the Exchange. Section 1301, Affordable Care Act of 2010. Bulletin issued by Department of Health and Human Services; accessed at http://www.hhs.gov/news/press/2011pres/12/20111216c on March 11, 2012.
www.healthcare.gov/glossary, accessed April 8, 2012.
PPACA § 1937(b).
PPACA, §§ 2001(c), 1311(d)(1) and § 1311(f)(1).
The Utah Health Exchange: A Utah Solution for Utah Businesses, presented by Cheryl Smith, accessed at this link on March 12, 2012.
Chapter 58 of the Acts of 2006, An Act Providing Access to Affordable, Quality, Accountable Healthcare. Constitution of the Commonwealth of Massachusetts. The General Court of Massachusetts. April 12, 2006. http://www.malegislature.gov/Laws/SessionLaws/Acts/2006/Chapter58 .
https://www.mahealthconnector.org accessed on March 12, 2012.
|12 ||Mass. Gen. Laws Ann. Ch. 176Q § 2(a) and § 3 (2010).|
Id. The Utah Health Exchange: A Utah Solution for Utah Businesses, presented by Cheryl Smith, accessed at this link on March 12, 2012.
The Massachusetts and Utah Health Insurance Exchanges: Lessons Learned by Corlette, Alker, Touschner and Volk, George University Health Policy Institute, accessed on March 11, 2012 at http://www.rwjf.org/files/research/72105massutah201103.pdf
|15 ||Utah State Legislature, H.B. 133 (2008), Second Substitute, Health System Reform, http://le.utah.gov/~2008/bills/hbillenr/hb0133.pdf.|
The Utah Health Exchange: A Utah Solution for Utah Businesses, presented by Cheryl Smith, accessed at this link on March 12, 2012; Utah Health Exchange Advisory Board minutes for November 29, 2011, accessed at http://www.exchange.utah.gov/news-and-updates/health-exchange-advisory-board-minutes on March 12, 2012.
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