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Baucus, Grassley Paper Describes Exchange

The SFC policy options paper, issued by Committee Chairman Max Baucus (D-Mont.) and minority ranking member Chuck Grassley (R-Iowa), describes a single national exchange that enables state-specific information to be displayed to residents. The exchange would:

1. Require all insurers that sell individual and small-group products to participate in the exchange. All insurers would be required to sell four standardized benefit options that have an actuarial value (defined as the percentage of health care costs covered by the product) ranging from 76% for the lowest option to 93% for the highest.

2. Allow individuals and very small groups to purchase the standardized products either through the exchange or buy products directly from an agent, broker or insurance company. All products, whether purchased inside or outside the exchange, would have to meet new rating and benefit requirements. And only individuals purchasing products through the exchange would be eligible for tax credits.

3. Require all individuals to purchase coverage, either through the individual or group market.

4. Initially limit participation to individuals and “micro-groups” of two to 10 employees.

5. Use a standard enrollment application and a standardized format for presenting insurance options.

6. Create marketing rules modeled on the Medicare Advantage (MA) program.

7. Establish rate schedules for broker commissions.

8. The HHS secretary could contract with a private entity to operate the exchange. The SFC policy options paper also suggests that several competing exchanges could be established in each state.

Today, we argue that the health insurance industry needs an open XML standards based effort around the purchase of health insurance. Such an open standard would, at minimum encompass the following:

• A solicitation for health insurance.
• A description of available plans for a given population.
• A health insurance application.
• An offer of acceptance for a health insurance application.
• An invoice for health insurance premiums.
• A notice of rescission or termination.

What would open standards accomplish?

An open standard would allow employers to submit census information from HR based systems in a standard format. An open standard would allow vendors of financial management programs to integrate into health insurance quoting systems and service their customers. An open standard would further the cause of interoperability in general – which is a key lynch-pin for how we gain efficiencies in the delivery of healthcare.

(Begining this post, we will refer to Health Insurance Exchanges, by their more colloquial name — “Connectors”).

We have previously in this blog, asked if Connectors should be regulatory or transactional entities. As a follow-up to this debate, it now appears that Republicans are squarely on the issue of Connectors being regulatory entities while Democrats favor Connectors being transactional entities.

Regardless of which side of this debate you are on, we would advance the following observations:

• If you live in a state where the state (such as Massachusetts) intends to provide subsidies for a certain section of the population or provide other benefits, then the case for connectors to serve those subsidized segments is strong.
• If you live in a state where the state provides no subsidies for any sections of the population to purchase health insurance, but however, employers may (at their will) provide subsidies – the case for connectors being employer oriented versus state oriented portals is strong. The state may still run a e-commerce style portal where consumers can shop, but exactly what value is the state adding in this scenario that private players are not already adding?

In other words, we argue that the need (or lack there-of) of a Connector should be driven by who the transacting parties are and what they need, versus ideology.

Is there one Health Insurance Exchange at a national level or does every state have one?

So long as health insurance remains the province of each state and the markets in each state have different rules, regulations and laws around how health insurance is sold, it strikes us as logical that there ought to be a health insurance exchange or connector for every state.

Does the current healthcare reform bill going through congress envisage creating a single national market and removing states from the picture – I do not believe so.

Given also that the demographics of our country vary widely by state, it seems reasonable that a state such as Florida (with a large retiree population) may wish to go in a different direction as compared to one with a much younger population.

One should note that there is nothing that prevents a set of states with identical needs from banding together to create a single RFP for a single, shared connector.

The Wall Street Journal reported today that the Sentate Finance Committee has endorsed the idea of creating a National Health Insurance Exchange.

In particular, the committee conceives of the Exchange as an Internet portal that would allow consumers to compare health insurance plans available to them.

Momentum for this approach clearly continues to build — and yet, there are many important questions about this Exchange that remain to be answered.  In an effort to to help debate the issues around this Exchange more clearly, we are delighted to sponsor a public domain initiative — effective immediately,  we are launching a prototype for the National Health Insurance Exchange on http://www.getinsured.com/nhie. 

As you will see from the Exchange — the effort is nascent and our goal is to help understand how the various stakeholders — health insurers, citizens and regulators interact with each other in meaningful ways.

Please do join us in this important effort and contribute your thoughts and ideas.  

Chini Krishnan

http://www.getinsured.com

Is the National Health Insurance Exchange conceived as a regulatory entity or do lawmakers think of it as an entity that actually provides services for Americans to directly purchase health insurance, obtain customer support, collection of premiums, plan fulfillment and so on?
 

By way of background, a prominent example of a Connector exists in the state of  Massachusetts with the Massachusetts  Connector Program.  Senator Baucus, who chairs the Senate Finance Committee, has strongly implied that he believes the Exchange would be a transacting,entity providing support to Americans.  The National Association of Health Under-writers  (“NAHU” — the trade organization representing licensed health insurance agents) has indicated that  they are not wholly opposed to the creation of an Exchange as a transacting entity (with some important qualifications, read the full testimony of Janet Trautwein, NAHU CEO,  to Congress in April 2009.)  

We believe that the broad creation of Exchanges will dramatically alter the landscape of how health insurance is sold and serviced. On one hand, Americans will benefit from having a single common online place in their state where they can buy plans. Large employers and advocacy groups may offer their own connector, which may make it particularly useful as well.  

If  however, as the majority of our customers do, you are accustomed to having a licensed health insurance agent walk you through your choices, then the likelihood that such a person would continue (in a world where Connectors are ubiquitous) to have the incentives to provide you service is low.  We do view this with significant concern – we speak to hundreds of Americans consumers each day and believe that the lay consumer does not understand the health insurance terms and needs help in choosing a health insurance plan that is right for them. This need is not going away magically simply because we direct them to a new web-site tomorrow. 

Thus, in a world of Connectors, it is critical to answer the question of how we leverage technology to provide expert systems, services, online wizards and other tools for Americans to  allow them to navigate to the right plan.  We for one, believe this issue is overlooked as a second order issue in the healthcare reform debate and deserves not to be.   

 Chini Krishnan

Founder and CEO 

www.getinsured.com  

The National Health Insurance Exchange

Many Americans may not realize it but Congress may be about to change the way they buy health insurance in profound ways.  Its called a “National Health Insurance Exchange”.

Congress (led by the Senate Finance Committee chaired by Senator Max Baucus) has proposed an online exchange where Americans and Small businesses can better understand and possibly purchase health insurance from an approved list of vendors.   The most important details regarding these, are however, extremely sketchy.  As we move forward, we would like to understand the answers to three questions:

1. Is the Exchange conceived as a regulatory entity or an entity that supports actual purchase transactions by citizens and businesses?
2. Is there one national Exchange or does each state have its own Exchange? Can large businesses or associations form their own Exchange?
3. Will an Exchange ultimately help or hurt the average consumer?

Chini Krishnan
Founder and CEO
www.getinsured.com