The document discusses the establishment of state-based health insurance exchanges under the Affordable Care Act beginning in 2014. The goal is to expand coverage, slow cost growth, and provide subsidies. Prior state-run insurance cooperatives and purchasing pools had mixed results. Implementing exchanges will be challenging given each state's political environment and the economy. Stakeholders must work together to address complexities of reform.

1. Gateway to Improved Health AccessImplementing Exchanges that Enhance Choice, Affordability and CoverageHarold L. Martin II12/2/2010The Patient Protection and Affordable Act (ACA) of 2010 provide for the establishment of state-based health insurance exchanges. Beginning in 2014, states will be required to establish new purchasing arrangements to distribute coverage to individuals and small employers. The goal of these exchanges is to expand health insurance coverage, slow the rate of health care inflation, and provide subsidized coverage for modest and low income Americans, and increase choice and competition in the health insurance marketplace. Prior attempts at creating health insurance exchanges have resulted in mixed results. This paper considers the challenges of previous efforts, analyzes the ACA’s key components, identifies relevant aspects for Exchanges and discusses reasonable policy recommendations. The way forward involves a concerted effort from several stakeholders coming together to mitigate the complexities of implementing health care reform.<br /> Abstract The Patient Protection and Affordable Act (ACA) of 2010 provide for the establishment of state-based health insurance exchanges. Beginning in 2014, states will be required to establish new purchasing arrangements to distribute coverage to individuals and small employers. The goal of these exchanges is to expand health insurance coverage, slow the rate of health inflation, provide subsidized coverage for modest and low income Americans, and increase competition in the health insurance marketplace. Prior attempts at creating health insurance exchanges have resulted in mixed results. This paper considers the challenges of previous efforts, analyzes the ACA’s key components, identifies relevant aspects for Exchanges and discusses reasonable policy recommendations. The way forward involves a concerted effort from several stakeholders coming together to mitigate the complexities of implementing health care reform.<br />Table of Contents<br />Introduction………………………………………………………………………………………………………………………………4-7<br />Background of Health Reform………………………………………………………………………………………7-13<br />The Current Landscape……………………………………………………………………………………………………13-16<br />Midterm Elections: New Challenges for Health Policy………………….16-19<br />Scan of Policy Alternatives………………………………………………………………………………….19-22<br />Analysis and Policy Recommendation……………………………………………………………..22-32<br />Implementation and Monitoring…………………………………………………………………………….33-35<br />Conclusion and Recommendations………………………………………………………………………….35-39<br />References…………………………………………………………………………………………………………………………………40-45<br /> <br /> <br /> <br /> <br />Introduction Health Insurance exchanges are a key element of the private health insurance reforms of the Patient Protection and Affordable Care Act (ACA) of 2010. The so called “Travelocity” of health insurance (Curtis 2010) may determine the fate of federal health care reform in meeting its goals to improve access to health coverage, enhance the value of health insurance and moderate the cost of health care. The issues facing the American people are: health insurance is expensive; subsidies to expand coverage for all citizens is an objective of the current administration; financing of the delivery system is dependent on slowing growth without sacrificing quality; and governance of exchanges must consider both state and federal institutions. ACA creates broad guidelines for the exchanges and federal regulations require the Department of Health and Human Services (HHS) to provide additional guidance over the coming months to the states. People who today cannot afford health insurance or are denied coverage will be able to purchase insurance. Implementing a health insurance exchange will be a new responsibility for virtually all states. (Kaiser Family Foundation 2010) The list of stakeholders is both long and far reaching. Implementation will impact representatives of community-based organizations, insurance commissioners, Medicaid administrators, finance directors, leaders of health care reform cabinets, health policy experts, state officials, members of the legislature, health care professionals, insurance providers, hospital executives, academics, unions, employee groups, and trade associations. At a federal level the following institutions or agencies will play a role in facilitating exchange development and monitoring outcomes; HHS, General Accounting Office, Centers for Medicare and Medicaid Services, the Office of Personnel Management, The Department of Treasury, Children’s Health insurance Program(CHIP), Office of the Actuary, National Health Care Statistics, Congressional Budget Office, The National Commission on Fiscal Responsibility and Reform, and a newly created public-private entity the Patient-Centered Outcomes Research Institute. (Patel 2010) The act gives broad authority to the state governments to implement the exchanges with guidance from HHS but must also consider the following major components: expansion of the number of people with insurance, reform of the individual and small group insurance markets, changes to the health care delivery system, and slowing the rate of cost increases, tax increases and spending reductions to finance the reform efforts.(Ginsburg 2009) The enactment of the legislation is a beginning to the tackling of this multidimensional, complex and highly charged issue. Let’s now examine some of the key concerns associated with the “centerpiece” of the private health insurance reforms.(Stolzfus 2010) As such, the exchanges present each state with an opportunity to improve the inefficiencies in the small group and individual insurance markets, to provide coverage and choice to more people, to minimize the adverse selection concern from past purchasing arrangements, to impact favorably the cost side of the equation, and to provide a model of how state and federal government can work together. The issues are: 1.How should exchanges be governed? 2. What should be done to avoid adverse selection? 3. What must exchanges consider to reduce health costs? 4. What information should exchanges make available to consumers or employers? 5. How can administrative costs be managed to make exchanges self sustaining entities over time? Perhaps the biggest hurdles are: each state’s political environment, the economic constraints of operating in a recession, and the political uncertainty of expected leadership transitions created by the mid-term elections. <br />Background of Health Reform The health care reform that President Obama signed into law earlier this year is seventy-five years in the making. Beginning with Franklin D. Roosevelt, U. S. presidents have struggled to pass health care reform legislation; most have failed.(Morone 2010) This paper does not set out to provide exhaustive detail on each of the failed attempts to change the health care system, but rather examines the “public option” as background for framing the discussion. The “public option” for health insurance grew from roots planted in California in 2001. (Halpin and Herbage 2010) Generally speaking, progressives supported it as a voluntary transition toward single-payer insurance while conservatives opposed it as government takeover of health care. The public option language did not make into the final packages passed by both houses of government in March, 2010. Today we have public health insurance programs like Medicare, Medicaid, the Federal Employees Health Benefit Plan (FEHBP), and the Children’s Health Insurance Program (CHIP) that have operated for years. The notion of a “public option” to compete directly with the private health insurance industry that reduces health care costs and premiums has been proposed. Proponents argue a public option would have significant impact on the U. S. health care market by creating a more competitive playing field particularly in select states where few insurance options exist. It was advocated that such a “public option” would keep insurers honest by giving consumers an option to choose the “public option”. Opponents feared that private plans could not compete against it and that, over time, it would cause erosion in the risk selection of both the individual and group health insurance markets. A fundamental question arises do government sponsored health insurance purchasing entities reduce costs or expand coverage for individuals and small employers? Let’s examine four prior policy imperatives that address this issue while providing insights into the actual results of these efforts.(Bender and Fritchen 2008) Policymakers have previously considered alternative purchasing mechanisms to facilitate the purchase of insurance coverage while delivering lower cost alternatives for individuals and small employers. Insurance Purchasing Cooperatives (HIPCS) Several states established state-sponsored purchasing arrangements commonly called Health Insurance Purchasing Cooperatives during the 1990’s. Supporters reasoned that that they would provide “lower-cost” health insurance and offered up the following rationale: (1) collective purchasing power would increase competition;(2)purchasing insurance through a single entity would provide economies of scale reducing administrative costs; and (3) competition would be introduced by allowing employees to select from a menu of options offered by several health plans. These state-sponsored entities failed to deliver on these promises because they failed to offer better value for those electing the option. Most were “disbanded” shortly after initial operations began. HIPC’s Fail to Attract Sizeable Enrollment (Bender 2007) <br />StateEligible EmployersMarket ShareStatus 12/31/2007CA2-502%Disbanded in 2006COAny Size2%Disbanded in 2002FL1-505%Disbanded in 2000TX2-501%Disbanded in 1999UT2-50N/ADisbanded (date unknown)<br /> <br /> Connector/Exchange Models The concept of connectors is not a new approach as proposals have been introduced in at least 15 states prior to the current health reform law with Massachusetts and Washington state adopting health insurance legislation in 2006 and 2007 respectively.(Kingsdale 2010) The basic tenets are similar to what is being proposed today as the exchange would market coverage, collect premiums, enroll employees, and administer a subsidy program for those less fortunate. The Commonwealth Health Insurance Connector is the most comparable program and many elements have been incorporated into the current approach. Sources have cited a number of factors that may alter the cost of insurance coverage that are problematic to measure. They include: mandates to buy insurance could force lower-cost persons and companies who previously decided not to buy coverage to enter the market, subsidies create incentives to purchase insurance through the Connector, merging the individual and small groups markets might lower premiums for individuals while raising costs for small employers, and the Connector would enjoy a pricing advantage largely due to requiring young adults to purchase products through the Connector and not in the open market. In Massachusetts, the Commonwealth Connector (a form of purchasing pool) has played a role in reducing the cost of health insurance for employers who do not receive health insurance through their employer. The state requires that employers have a Section 125 plan allowing employees to buy health insurance through the Connector with pretax dollars (The Massachusetts Health Insurance Connector Authority, 2008). The purchasing entity is coupled with a legislative approach requiring employers to allow employees to purchase coverage with pretax dollars which reduces the cost for people who work but do not have access to insurance through their employers. Similar strategies are incorporated within the ACA legislation. Federal Employee Health Benefit Plan (FEHBP) Many individuals prior to the health reform legislation referenced the FEHBP. This program is offered to federal government employees who enjoy premium contributions of seventy five percent by the federal government. The funding and coverage levels proposed in the “exchanges” would also enjoy federal funding support. The FEHBP plan was profiled because it offers a “benefits rich” package to government employees is relatively stable and serves as a “benchmark” for the essential benefits package incorporated in the legislation. Exchanges comes in a number of different varieties such as health purchasing cooperatives (HIPCs), Association Health Plans (AHP’s) and health connectors. Many HIPCs were established in the 1990’s with other reforms aimed at improving access and affordability. AHP’s differ from HIPCS in that they limit participation to members in a trade or professional association (Wicks and Hall 2001). The state of Massachusetts included a purchasing pool, called the Commonwealth Connector which is open to those who do not have insurance from an employer or are ineligible for public insurance programs. (Solomon 2007) Like the ACA legislation the purchasing pool was coupled with an individual mandate. <br /> <br /> <br />The Current Landscape Today there are a number of factors impacting health care costs and reform efforts. Consumers have difficulty weighing options and understanding how coverage operates. Health insurers must be carefully monitored to avoid “redlining” (i.e. denying coverage to certain occupations or communities) and “street underwriting” both of which impact risk selection. (Business Roundtable 2009) More rigid monitoring of underwriting rules consistently applied with marketplace plans could level the playing field, but today’s realities of gimmickry in plan designs makes it difficult to compare “apples to apples” plans and challenging to examine pricing objectively. “Churning” carrier and coverage at the employer level make insurers ability to focus on “improving health” in the small and individual markets problematic. Agents and brokers fees comprise up to 15 to 20 percent of “marketing expenses”. Advocates for health insurance reforms see an opportunity to reduce costs in these areas. Next, I will consider the legal, economic and political contexts of health care reform. If we take a “macro” view of what the Affordable Care Act does it fundamentally alters three things: (1) Legally it creates a mandate, requiring that nearly every American get an approved threshold of health insurance coverage or pay a penalty. (2) Economically it creates a mechanism of federal subsidies to completely or partially pay for the newly created health insurance of approximately thirty-four million Americans. The subsidies are made possible through a combination of expanding the existing Medicaid program and the establishment of new administrative entities called Exchanges. (3)It places new requirements on the health insurance industry that will alter the business model.(Hoff 2010) Examples include: it requires insurers to issue policies to anyone who qualifies, to renew policies without regard to the health status of the individual and it requires that rates in the Exchange and small group markets vary only on age, the geographic area, family composition, and tobacco use.(Bredsen 2010) Some consider the provisions requiring insurance companies to pay providers at least 85% of the premium dollars collected from large groups for medical care excessive and political in nature.(Business Roundtable 2009). Politically, and to confirm to the president’s stated goal, health care reform had to show that it would not “increase the deficit”.(CBO 2010) The financial impact of the legislation is complex and may be even more so by the practice of focusing on the deficit rather than actual costs, savings, and new revenues it’s expected to produce. (Bredsen 2010)The Innovation Center run by the Centers for Medicare & Medicaid Services (CMS) identified additional risks that could undermine potential savings or shift costs to the private sector (Business Roundtable, 2010). They include: delayed or water down implementations; potential legislative reversals of cost saving components; continuation of the practice of “defensive medicine”; failure to implement a strong mandate; and cost shifting to the private sector from reductions in federal reimbursements to providers.(Sisko, Truffer, Keenhan,Poisal,Clemens,Madison 2010) <br />Midterm Elections: New Challenges for Health Policy The results of the 2010 midterm elections have significant implications for health care reform implementation though I do not believe the campaign trail rhetoric calling for repeal of this landmark legislation by some high ranking Republicans will materialize. Nevertheless, health care reform will remain a leading issue for the new Congress which convenes in January 2011 and governs through the end of 2012(Towers Watson 2010). There was never a chance that Republican mid-term victories even with the most optimistic of scenarios would or even could untangle the health reform law. Even if Republicans had secured a majority control in the Senate along with their victories in the House, the law was in no danger of repeal according to the International Foundation of Employee Benefits and Lockton, the world’s largest privately held insurance broker. (Willis 2010) Perhaps the most impactful potential for change comes from the newly elected Republican governors in twelve states bringing a majority to the republican side. Look for governors to influence implementation on four “battlefronts”: (1) slowing the progress of the exchanges in selling insurance policies; (2) tinkering with the proposed Medicaid expansion subsidies; (3) challenging the legality requiring most Americans carry insurance or pay a fine; and (4) delaying the expansion beyond the 2014 timeline.(Adamy 2010). Looking forward politically and practically, I can envision five scenarios Republicans might do to disrupt the implementation of the Patient Protection and Affordable Care Act. A brief overview for each scenario follows. (Koster, 2010) Scenarios 1. “Repeal and Replace.” This is unlikely given the President’s ultimate veto authority and the sentiment around getting the economy moving again among many republicans. This could move to the forefront during the 2012 presidential elections. 2. “An incremental approach”. Compromise on items like the individual mandate, medical loss ratios or “play or pay” requirements for employers may surface given the President’s willingness to “tweak” various aspects of the law to preserve his credibility. 3. “Starvation”. Many of the provisions in the legislation take place in the future and involve continued and consistent funding. Political maneuvers to eliminate or reduce funding for key regulations in the law would put various aspects of the law in “limbo” creating a state of uncertainty which would be problematic for the White House. 4. “Legal challenge and investigation”. Legal suits are pending in 21 states today declaring the individual mandate as “unconstitutional” with a likely outcome being the Supreme Court will get involved. 5. “State-level intervention”. Three options are likely: a) Republicans could pass mandates stating that states are not obligated to enforce the individual mandate or incur additional expenses relative to health care reform; b) states could elect not to develop exchanges leaving the set-up responsibility with the Federal government; and c) Medicaid expansion efforts could be thwarted. (Koster 2010) Political pundits point out that predictions predicated on mid-term elections are almost always wrong. That said it is comforting to know that the time, money and resources committed to this monumental legislation during 2009 may still have an impact on the well being of many without access to care and coverage. (Liberto 2010) <br /> <br />Scan of Policy Alternatives A poorly functioning health care “market” is one cause of the rapid growth in health care costs above that of growth rates in other industries. Health care is unique in that the traditional forces of supply and demand are altered by a third-party, fee for service payment model and significant cost shift among payers. (Brookings 2010). Let’s consider briefly other approaches that have been proposed to tame this perplexing issue. I will examine the public option, consumer-directed system and a new idea recently introduced (11/24/2010) by Senators Ron Wyden (D-Ore) and Scott Brown(R-Mass). (Klein 2010) In simple terms the public option is synonymous with government-controlled health care. Many want a public option to compete with private insurance and to improve accountability. By definition, a public option would be accountable to elected officials rather than many health plans which are accountable to investors. In general those who support a public option believe that with a “central” purchaser concept, costs would necessarily be lower. Many opponents see expanding government’s role as a payer as a move toward socialism (Halpin 2010). Though the public option had support from the public, labor unions, consumer groups and civil rights organizations it ultimately did not find its way into the recent legislation. Conservatives generally favor a market approach to health care reform. They reason that the health insurance industry through competition, individual accountability, and innovation will help dampen rising costs. Past and present strategies have been unable to demonstrate significant improvement and sustainable improvements in reigning in health care costs. Bending the cost curve has been challenging and continues to be elusive for most private employers. Recently two senators introduced legislation that would essentially allow states to come up with a comprehensive way to cover as many people as the federal plan, without adding to the deficit, whereby that state could get the same amount of money that it would get from the federal government for health care reform but be exempt from the individual mandate, the exchanges, the insurance requirements, the subsidy scheme and virtually everything else. It is clear that with new politicians being sworn in for the 2011 Congress that this battle is far from over which seems to suggest that all things are still “on the table”. Those who would rather seek prudent, comprehensive and practical guidance for implementation should consult the article from Brookings entitled “Bending the Curve through Health Reform Implementation”. It is fair to assert that with double digit increases in annual health care costs for the public and private sector that no policy is working in a sustainable, efficient and consistent manner. Next, I will examine the current legislative policy for health care reform. <br />Analysis and Policy Recommendation<br />The performance dimensions against which I examined the exchanges as a viable policy option include: cost/effectiveness, administrative efficiency, equity, cost benefit, political feasibility, legality, health, and unintended consequences. Cost/Effectiveness There is no “direct” evidence of the impact the exchange model will have relative to overall health care spending. Sources suggest that unsubsidized purchasing pools have not been able to reduce premiums enough to induce un-insured employers to participate.(Fensholt 2010) The subsidized exchange model extends coverage to the uninsured which results in two outcomes (1) an increase in health care use among the affected population and (2) an increase in the overall health care spending. (Kaiser Family Foundation 2010) This could partially be offset by “efficiently” managed exchanges which provide greater bargaining power, reduced administrative costs, and greater economies of scale. Moreover, the legislation seeks to minimize the effects of adverse selection with the individual mandate which should positively affect premium costs. Administrative efficiency Classic economics suggest that the exchanges will reduce the administrative overhead of individual and small group insurance policies by creating economies of scale. Such costs reduce redundant functions that are noticeable in plans that exist today. Typically administrative costs can represent up to 30 to 40 percent of premiums for individual non-group policies, 20 to 25 percent for small group plans, and 10 percent for large group employer plans (GAO 2000). Even if the exchanges obtain sufficient enrollment, we do not know if they will achieve the same level of administrative efficiency as large employer groups. It is important to remember that the potential of having 50 different state run exchanges or separate “individual” and “small employer” exchanges within each state or duplicative functions performed by several entities could jeopardize any cost efficiencies. It is not clear at this stage of the process whether exchanges will deliver on the promise of improved efficiency. Equity Simply put the Exchanges are required by January 2014 to provide individuals and small employers the ability to shop for insurance from a range of health plans offered through the Exchanges. Lower and middle-income individuals up to four times the Federal Poverty level (FPL)—more than $88,000 for a family of four in calendar year 2010- may be eligible for premium relief. In addition small employers with lower income workers that offer employer provided insurance (ESI) may be eligible for premium subsidies for up to two years (Carey, 2010). The eligibility process makes clear that there is no wrong door. Regardless of where an individual or family in need shows up, its application for assistance must be routed to the right program. (Stoltzfus, 2010)Supporters of the Affordable Care Act take considerable pride in the fact that it will make health insurance available to another thirty-four million people. That is a lot of citizens who won’t have to go to emergency rooms or charitable clinics every time they need medical attention, who will get preventive care, and who will have continuity in their medical care, and who will not be forced into bankruptcy by unanticipated health problems. Many non supporters would suggest that expanding coverage is about all that was done. Cost/ Benefit Most employers do not believe that the health care reform legislation will reduce the rising health care costs (Willis, 2010). According to the Office of the Actuary “by calendar year 2019, the mandates, coupled with Medicaid expansion would reduce the number of uninsured from 57 million as projected under prior law, to an estimated 23 million under the PPCA. The additional 34 million people would become insured by 2019 reflect the net effect of several shifts”.(Foster, 2010)One, an estimated 18 million would gain primary Medicaid coverage by virtue of the expansion of eligibility to all legal adults under 133 percent of the FPL. Second, about 2 million people with employer sponsored coverage would enroll in Medicaid for supplemental coverage. Third, another 16 million people would receive individual coverage through the Exchanges with most of these eligible for federal premium subsidies. Lastly, it is estimated that the number of individuals with employer sponsored coverage would decline by about 1 million. The independent technical advisor to the Administration and Congress asserts “that the overall national health care expenditures under the health care reform act would increase by a total of $311 billion(0.9 percent) during calendar years 2010-2019, principally reflecting the net impact of greater utilization of health care services by individuals becoming newly covered, lower prices paid to health providers for those individuals who become covered by Medicaid, and lower payments and payment updates for Medicare services.(Foster, 2010). He further asserts that although several provisions would help reduce health care growth, their impact would be more than offset through 2019 by the higher health expenditures resulting from the coverage expansions. The future impact of ACA on health expenditures, insured status, individual decisions, and employer behavior are very uncertain. The legislation will result in how health insurance is provided and funded in America and the scope and order of magnitude of these changes is without precedent. That said any estimates are necessarily subject to a greater degree of uncertainty than with less ambitious health care legislation initiatives. Political Feasibility HHS officials tasked with delivering on the benefits of the law to the American people will seek a consistent, transparent implementation process. Yet recent surveys have suggested it would be acceptable to repeal the law. (Willis 2010) The new political environment creates uncertainty for health care reform as stakeholders develop strategies to function in this new era and while it is impossible to predict what the new Congress may enact, much of the activity will be centered toward the 2012 elections. Opponents and supporters will use this period to posture for their changes making the 2012 elections a referendum for “halftime” adjustments to health care reform. Moreover, far more serious and subtle efforts to undermine the law may come about through challenges to various administrative arrangements, taxes, and subsidies to fund expansion of coverage. History tells us that “the financing of the original 1935 blueprint for Social Security was greatly revised in 1939, and the program experienced near-fatal interruptions in scheduled taxes and benefits during World War II”.(Skocpol 2010). I assert that politics moves quicker today and that new health care reform may become entrenched over the next five to eight years. Legality Legal fights against the law’s requirement that most Americans carry insurance or pay a fine are already underway. Today’s constitutional challenges may amount to political theater scripted to insight media coverage, enlighten partisans and influence uncertain or uninformed voters that something must be inherently bad or wrong with the bill. Fundamentally it comes down to whether you think health care is a “right” or a privilege. Historically, the word health does not appear in the Constitution and it relegates this function to the states or the people. While we can debate the legality of the mandate the 2010 law calls for several years of complex implementation including a cascading series of regulations, subsidies, taxes, and tax breaks intertwined with fifty states and more than a few federal agencies. One thing is certain there will be midcourse adjustments with the Affordable Care Act. Health In theory, the Exchanges expand coverage and they should have the potential to improve health. The Exchanges address the needs of high risk individuals who have been unable to purchase health insurance previously. In addition the preventative components within the legislation provide substantial opportunities to address the health and wellbeing of individuals and their families. Based on an economic model developed by the Urban Institute, Trust for America’s Health found an investment of $10 per person per year in effective programs to improve physical activity, nutrition and prevent smoking could result in more than $16 billion in health care costs annually within 5 years. This is a return of $5.60 for every $1. This may be a future modification policymakers may want to consider. (Hamburg 2009) The law’s provisions advance information technology and support comparative-effectiveness research (Patel 2010). Many experts believe it will improve the quality of care and it is hard to predict if the gains will be substantial and long-lasting. The prevention efforts will improve health outcomes for those without prior coverage and public health will benefit, but it is unlikely to reduce costs quickly. Unintended Consequences The legislation has caused concern in the areas of Affordability, Access and Coverage. Health insurance is expensive and the legislation as enacted according to many reports will add costs to the already expanding federal deficit.(Eaken and Ramlet 2010) State governments will be asked to expand capacity and resources to prepare for and establish the Exchanges at a time when their fiscal budgets are in disarray.(Blumberg and Politz 2009) Some question the merit of tackling such monumental legislation during a recession purporting that job creation has been stifled with the focus and debate lasting well beyond a year. Access may be impaired as Medicaid will incur expansion under the law despite grappling with state and federal challenges fiscally and resource wise. “Doctor shortages” exist today and with additional insured’s entering the market something short of a “Armageddon” looms as a real possibility to access given the time and adequate resources needed to train new doctors. Emergency room capacity issues may have been minimized when sweeping the legislation to the forefront of American social justice. Finally, I suspect the prospect of large employers eliminating employer provided and sponsored coverage was largely ignored with passage of the legislation. MIT economist Jon Gruber say’s its “impossible to create new government benefits without some unintended consequences, but he doesn’t see a big drop in employer coverage.(Alonso-Zaldivar 2010) Ironically, one major assertion of the legislation is that it would stimulate competition among health insurance companies yet with the requirements being imposed on the industry(i.e. medical loss ratio thresholds)some payers are exiting the market(Principal) or reevaluating their business strategies. The Exchange implementation process among individual states may affect health care reform in several ways. First, there is little evidence to suggest effectiveness will be improved. Though regulatory and policy options (i.e. individual mandate) might improve the viability of purchasing pools and enhance their ability to decrease costs, much is still unknown. Second, administrative efficiency, cost benefit, political feasibility, cost effectiveness, legality, indirect economic benefits and health impacts are uncertain or dependent on too many variables to predict with any degree of success. The exchanges face difficult implementation, regulatory guidance and hurdles not yet envisioned as details emerge from the state and federal policy recommendations. Third, equity is achieved with the policy as many without health care coverage today gain insurance and some unintended consequences may surface. Fourth the exchanges will broaden the range of health plan choices available to consumers, small employers and the uninsured. This may enhance the overall experience and health of the population, but at a cost for society. The following table will provide an overview of the proposed health care reforms. Please note that the “Empower States” option recently introduced on 11/24/2010 by Democratic and Republican senator(s) is essentially a policy that givens the states control to do whatever works best to cover everyone at the lowest cost. States can go their separate ways and the other states can judge the winner based on results not political ideology. If the stakeholders make the system work better, then states will prosper. If conservative solutions are more efficient that will be evident when money is saved. If liberal ideas work better perhaps it’s time we found out. This was recently introduced making it challenging to draw conclusive results from such an approach. <br /> ExchangesStatus QuoGovernment Run Empower StatesCost/EffectivenessNo EvidenceNo effectEvidence InconclusiveNo EvidenceAdministrative Ease/EfficiencyUncertainNo effectUncertainUncertainEquityImproveNo effectUncertainImproveCost/BenefitUncertainNo effectUncertainNo EvidencePolitical FeasibilityModerateEasyDifficultDifficultLegalityPossiblyNo effectYesYesHealthImproveNo effectNo EvidenceNo EvidenceConsequence/Unintended YesNo YesUncertain<br /> <br />Implementation and Monitoring<br /> The new national health care reform law calls for the state or regional exchanges to be established by January 1st, 2014. HHS will oversee and monitor the establishment of the exchanges providing guidance, recommendations, and mechanisms for states that choose to look to the federal government to provide safety net protection. (Kinsgdale and Bertko 2010) This leaves considerable discretion to each state in how they structure plan offerings, facilitate comparison shopping and operate the Exchange. State entities that may play a role include: (1) insurance departments, (2) Medicaid agencies, (3) state health benefits administrators, (4) state health departments, and (5) the executive, legislative, and judicial branches of state government. Nearly all states will be setting up a health insurance exchange which involves a new responsibility in which they have no experience. Federal grants are an important element of funding states under ACA. HHS announced the availability of $1 million in planning grants per state to help establish exchanges. This will be put to good use by: managing information technology needs including integrating data with other agency databases like Medicaid; designing new eligibility and enrollment processes; finding staff with diverse skills needed to run the Exchanges; creating business plans for self-supporting operation of the unsubsidized portions of the Exchanges; and competing for outside consultants to assist with the design of Exchange programs. (HHS 2010). The Massachusetts Connector, the Utah Health Exchange, and the proposed California Health Benefits Exchange are up and coming models that will be emulated in some form or fashion by many states.(Stoltzfus 2010) Let’s consider what will be measured, who should assess the outcomes and how often results should be evaluated. Many elements will be measured, evaluated, and reprioritized as the Exchanges mature but the following will be of importance: enrollment and eligibility, outreach, rating methodology, consumer experience, employer participation, risk selection, data reporting, payment flows, IT systems integration, costs, workforce capacity, governance, commercial insurance carriers response, population health outcomes, and provider acceptance. Judging by what was required by HHS to obtain state planning and establishment grants to build a better health insurance marketplace there will be no shortage of measurement activities. HHS required states to submit: (1) quarterly project reports; (2) final project report; (3) public report; (4) federal financial report; and (5) quarterly reports to comply with payment management regulations. (HHS 2010) Grantees must also comply with audit requirements and performance reviews. Executive Order 12866 requires an assessment of the anticipated costs and benefits of significant rulemaking action and alternatives considered, using guidance provided by the Office of Management and Budget. (Federal Register, 2010) <br />Conclusion and Recommendations Despite the complexity, the uncertainties, and challenges we face in implementing health care reform, I am an advocate for implementing the Exchanges as a means to improve the distribution of insurance options to the individual, small group, and uninsured segments. The new health reform law provides substantial opportunities to address the health and well being of many children and their families. This may eventually permit a potential reduction in future cost trends if fully implemented and sustained. There are some “adjustments” I would like to see incorporated into successful Exchange implementation efforts. Recommendations First, ACA Section 1302 requires the inclusion of pediatric oral health care as part of the essential benefits package. (Federal Register 2010) I would like to see policymakers amend this section to encompass adult oral health care. This is consistent with focusing on prevention efforts and the costs are warranted given the potential detection of cancer, cardiovascular, and diabetic diseases from routine oral checkups. Second, exchanges should be encouraged to develop a variety of revenue sources to fund their work ahead. Exchanges should seek ways to lower administrative costs with employers, insurers and intermediaries. Legislation statewide should include agents and brokers to help educate the value of insurance within the exchange. Commissions paid to agents should be assessed, consistent, and transparent regardless of which health plan is being sold and whether it is inside or outside the exchange. Third, to the extent possible, state regulation of the individual and small-group market should be identical inside and outside the exchanges. This will negate adverse selection which has been a problem with purchasing arrangements historically. HHS may want to consider a risk-adjustment mechanism allowing states to adjust risk among participating and nonparticipating insurers. Fourth, the possibility of having several unique and different exchanges within the fifty states where some operating efficiently and others do not is something that must be addressed. Simply stated “there may be many different types of exchanges... you can have exchanges that emphasize being a marketing portal that allows comparison and examination of plans… you can have an exchange that plays the expanded role as a regulator of markets or health plans, as the enforcer of regulations or as the financier of coverage… some may fold in all of these activities.”(Reinke 2010) I recommend that The State Consortium on Health Care Reform Implementation, a collaboration of the National Governors Association, The National Academy for State Health Policy, the National Association of Insurance Commissioners, and the Association of State Medicaid Directors vigilantly monitor and share “best practices” and navigation among all parties to help alleviate such concerns.(Weil 2010) Fifth, greater efforts with cost containment will be necessary to balance new expenses as millions gain access to the health system. The result will be toxic if they end up gaining access to the status quo, with its underuse, overuse and misuse of care. Large employers can be a source of inspiration, creativity, and relevance and states should seek their guidance as containing health care costs has been their highest priority for decades. The work of the private sector with value based delivery models, pay for performance, and incentives for lifestyle choices should not be ignored. (Darling 2010) There is an old German saying that God helps the sailor, but he must row. The American Hospital Association crafted a proclamation entitled “Health for Life” which included five goals for a reformed health system: a focus on wellness; the most efficient, affordable care; the highest quality care; the best information; and health coverage for all, paid for by all. (AHA 2010).The authors of the ACA legislation likely borrowed from this passage to help create a foundation and perhaps an “enabling” moment for health care reform to achieve and sustain manageable cost trends. The way forward will involve all participants from patients to purchasers to providers “rowing” together to navigate the turbulent waters of health reform in the coming years.<br /> <br /> <br /> <br /> References Janet Adamy, “New Governors to Target Health Law”, WSJ 2010.<br />American Hospital Association Fund, “Shaping the Future for a Healthier America”, August 2010.<br />Karen Bender and Beth Fretchen, “Government-Sponsored Health Insurance Purchasing Arrangements: Do they Reduce Costs or Expand Coverage for Individuals and Small Employers” for the Blue Cross Blue Shield Association by Oliver Wyman Actuarial Consulting, 2007. <br />Linda J. Blumberg and Karen Politz, “Health Insurance Exchanges: Organizing Health Insurance Marketplaces to Promote Health Reform Goals”, The Urban Institute, April 2009.<br />Philip Bredsen, “Fresh Medicine: How to Fix Reform and Build a Sustainable Health Care System”, Atlantic Monthly Press, October 2010. Brookings Engelberg Center for Health Care Reform, “bending the Curve through health reform Implementation”, 2010.<br />Business Roundtable, “Health Care Reform: Creating a Sustainable Health Care Marketplace”, November 2009.<br />Robert Carey, “Health insurance Exchanges: Key Issues for State Implementation”, the Robert Wood Foundation, September 2010.<br /> Christopher J. Conover, PhD and Thomas Miller, “Why a Public Plan is Unnecessary to Stimulate Competition”, American Enterprise for Public Policy Research, January 2010.<br />Rick Kurtis, “Health Reform: What Legislators Need to Know about Exchanges”, Institute for Health Policy Solutions, 2020.<br />Helen Darling, “Perspectives from Large Employers”, Health Affairs, Volume 29, No.6, June 2010.<br />Federal Register, Volume 75, No. 148, August 2010.<br />Edward Fensholt, “What Now for Health Reform”, Lockton, 2010.<br />Richard Foster, “Estimated Financial Effects of the Patient and Affordable Act”, Centers for Medicare & Medicaid Services, April 22, 2010.<br />Paul Ginsburg, “Getting to the Real Issues in Health Care Reform”, The New England Journal of Medicine, November 11, 2009.<br />Helen A. Halpin and Peter Harbage, “The Origins and Demise of the Public Option”, Health Affairs, Volume 29, No.6, June 2010.<br />Richard Hamburg, “Principles for Incorporating Health and Prevention into Health Care Reform”, Trust for America’s Health October 2009.<br />John Hoff, “Implementing Obamacare: A New Exercise in Old-Fashioned Central Planning”, the Heritage Foundation, September 10, 2010. <br />Douglas Holtz-Eakin and Michael J. Ramlet, “Health Care Reform is likely to Widen Federal Deficits not Reduce them”, Health Affairs, Volume 29, No.6, June 2010.<br />Kaiser Family Foundation, “Staying on Top of Health Care Reform: An Early Look at Workforce Challenges in Five States”, September 2010.<br />Jon Kingsdale and John Bertko,”Insurance Exchanges under Health Care Reform: Six Design issues for the States”, Health Affairs, Volume 29, No. 6, June 2010. Ezra Klein, “Let the States Experiment Now”, The Virginia Pilot (Norfolk, VA), 2010.<br />Kathleen Koster, “5 ways GOP Might Untrack Health Reform”, Employee Benefit News, November 2010.<br />Jennifer Liberto, “Undoing Health Care Reform: Not So Easy”, CNN Money, November 3, 2010.<br />James Morone, “Presidents and Health Reform: From Franklin D. Roosevelt to Barack Obama”, Health Affairs, Volume 29, No.6. <br />The Massachusetts Health Insurance Connector Authority, “Report to the Massachusetts Legislature, Implementation of the Health Care Reform Law”, Chapter 58, 2008. Kavita Patel, “Health Reform’s Tortuous Route To The Patient-Centered Outcomes Research Institute”, Health Affairs, Volume 29, No. 10, 2010. <br />Thomas Reinke, “Will the Employer-Based System Collapse”, Managed Care, July 2010.<br />Andrew Sisko, Christopher Truffer, Sean Keenhan, John Poisal, Kent Clemens, and Andrew Madison, “National Health Spending Projections: The Estimated Impact of Reform through 2019”, Health Affairs, Volume 29, No. 10, October 2010.<br />Theda Skocpol, “The Political Challenges That May Undermine Health Reform”, Health Affairs Volume 29, No. 7, July 2010.<br />Judith Solomon, “Health Insurance Connectors Should Supplement Public Coverage not Replace It”, Center on Budget and Policy Priorities. January 29, 2007.<br />Timothy Stolzfus, “Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues”, the Commonwealth Fund, September 30, 2010. Towers Watson, “Health Care Reform Bulletin”, 2010.<br />U.S. Department of Health and Human Services, “Health Insurance Exchanges: State Planning and Establishment Grants”, September 30, 2010.<br />U.S. General Accounting Office (GAO), “Private Health Insurance: Cooperatives Offer Small Employers Plan Choice and Market Prices” March, 2000.<br />Alan Weil, “State Policymakers’ Priorities for Successful Implementation of Health Reform”, The National Academy for State Health Policy, May 2010. <br />Wicks EK and Hall MA, “Purchasing Cooperatives for Small Employers: Performance and Prospects, the Milbank Quarterly, Volume 78, No. 4, 2000.<br />Willis North America and Diamond Technology Consultants, “The Health Care Reform Survey”, November, 2010.<br />Richard Alonso-Zaldivar, “Employers Look at Health Insurance Options”, Washington Post, October 24, 2010. <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />