Maine Health Exchange forSmall Businesses

Presentation by Terry GardinerSmall Business Majority

forMaine Joint Select Committee on Health Care Reform“Health Insurance Exchanges: Key Policy Issues and

Questions”September 21, 2010

• Small Business Majority is a nonprofit, nonpartisan small business advocacy organization founded and run by small business owners and focused on solving the biggest problem facing small businesses today: the skyrocketing cost of health coverage.

• We speak for the nearly 28 million Americans who are self-employed or own businesses of up to 100 employees. Our organization sponsors scientific research that guides us to understand and advocate on behalf of the interests of small businesses across the country.

About Small Business Majority

Still an Employer-Based System • CBO healthcare reform coverage projections -- 2018

(Millions of non-elderly people) Change

o Employers 159M (-3) 56%o Medicaid 51 (+16) 18%o Nongroup 25 (-5) 9%o Exchanges 24 (+24) 9%o Uninsured 22 (-31) 8%

• Healthcare reform success depends on the success of employer health coverageo Affordability – Cost containment and delivery system reformo Exchanges that work for employers

Exchanges Can Expand Employer Coverage• Rand simulation of healthcare reform found

employer coverage would expand from 115M today to 129M

• Largest increases were small employers with fewer

than 50 employees – 10.4M new workers

• Reasons:o Individual requirement increases employee

demand for coverageo Exchange benefits to employers facilitates

employer coverage

• Rand simulation: http://healthpolicyandreform.nejm.org/?p=12339&query=home

• 22 million self-employed entrepreneurs nationallyo 28% of self-employed entrepreneurs are uninsured

• Nationally, 5.9M employers with fewer than 100 employees employ 43Mo 80% (4.8M) have fewer than 10 employeeso 54% (2.6M) of employers with fewer than 10 employees

do not offer health coverage

• Most small businesses are very small and lack sophisticated HR departmentso Average employer in Connecticut exchange has 8

employees

National Small Business Landscape

Maine Small Business Landscape

• Self-employed: 115,581

• Small Businesses: 33,435 <50 employeeso 45% of firms < 50 offer coverageo 98% of firms >50 offer coverage

• Employer coverage: 687,310o 219,564 employees work at firms <100 employees

• Individual coverage: 63,175

# Employees # of Firms %

> 10 27,875 78%

10 to 24 4,175 11%

25 to 99 2,046 6%

100 + 1,771 5%

Maine Small Business Distribution

Maine exchange will have large numbers of small employers to service.

Small Employer Health Coverage Choices in 2014

• Purchase health coverage through the exchange

• Purchase health coverage in the outside market

• Maintain a “grandfathered” health plan

• Do not offer health coverage o Employers with 50 employees or fewer (94% of Maine

employers) are exempt from any shared responsibility requirements

• Small business owners are skeptical for many reasonso Recession has created a pessimistic atmosphere and the

focus is on survival – “near death experience”o Multiple versions of reform and two years of debate have

left most confused on the final outcomeo Controversy over health reform has created lack of

understanding and confusiono Our surveys find a lack of faith in any government solution

• It is vital that thousands of Maine small business owners learn about their exchange and their choices

Convincing Small Business the Exchange will Work

• Provide affordable health planso Attract insurers to the exchange and create incentives for

price/value competition among insurers

o OPM is required to provide at least two “multi-state plans”

o Create incentives for participants to select lower-cost plans

• Examples: Federal Employees Health Benefits plan, CalPERS for CA state employees and Wisconsin State Employees Health Plan have created consumer incentives

• Keep annual premiums stable

Small Business Needs - Exchange

• Offer choice of competitive plans to employees

• Single point of entry for small employero All necessary information for employer and employees

to make decisions on coverageo One applicationo One premium payment o One source for enrollment changeso Qualification and calculation of the small business tax

credito Provide additional “HR” services such as Cobra

administration, Section 125 service, HAS/FSA/HRA

Small Business Needs - Exchange

Effective Outreach & Education

• Direct contact – only half of employers belong to any business groupo IRS postcard succeeded in helping make small businesses

aware of the tax credito Direct survey and focus groups of employers

• Trusted voices of peers – historical sourceso Brokers, business groups, business media

• Navigators in ACA can work for employerso Case Study: Massachusetts Fishing Partnership Health

Plan• Uninsured rate dropped from 43% to 13%

Governance• Independent agency

• Flexibility and agility to “market health insurance”

• Subject to state laws on transparency, accountability and public participation

• Governing board should represent cooperating state agencies, interested parties and relevant expertise, and prohibit conflicts of interest

• Annual independent audit

State or National Exchange?

• State management will be closer to local market conditions and needs of individuals and small businesseso Monitoring and adapting to market conditions is ongoing

as outside market will continue to exist and evolve• States regulate insurers and coordination with the

exchange will be vital to prevent adverse selection and enforcement

• National exchange will require:o System for local stakeholder input & market knowledgeo Coordinating mechanism with state insurance regulatoro Coordinated risk adjustment (inside/outside exchange

pools)

Regional Exchange Advantages

• Larger exchange has many scale of economy advantages

o Lower administrative costso Reduce risk of adverse selectiono Create more stable risk poolso Attract more insurerso Be a driver in the overall health system for improved

value

Regional Exchange Complexities

• Need to align structure and rules of individual and small group markets in all states

• Need for enforcement consistency of insurance regulators

• Will a regional exchange actually result in more insurers marketing in another state?o Do insurers have networks in more than one state?

• Transitions likely needed to prevent rate shock to different individuals and groups in each state

• Risk adjustment system will be more complex• Plan pricing may need to vary based on

geographic cost differences of medical costs

Regional Cost Differences

States have different starting points for individual and small group market plans, rates and costs

State Individual Small GroupMaine $4,061 $4,320New Hampshire $3,427 $5,040Massachusetts $5,143 $5,496Rhode Island $4,779 $5,184Connecticut $3,503 $4,656Vermont $3,986 $4,260

Average Annual Premium - AHIP

Regional Exchange Option

• States may resist merging risk pools

• Regional exchange could “administer” a regional pool achieving scale of economy advantages but state risk pools could remain separate

Separate or Combined Exchanges

• Evaluation of market regulatory differences between small group and individual marketo Guaranteed issue, rating, benefits

• Evaluation of market differences between individual and small group market o Size of markets (Massachusetts had a small individual

market)o Profile of risk pools

Adverse Selection - Factors

• Adverse selection between exchange and outside marketo Exchange plan standards may differ from plans outside

exchangeo “Grandfathered plans”o Self-insured health plans have expanded to smaller

employers

• Between plans inside the exchangeo Different plan offerings by insurers may be more popular

with different individuals

Adverse Selection• Strong and clear direction to exchange governing

boards and managers to create an active and ongoing process to guard against adverse selection

• Regulate the individual and small group market identically inside and outside of the exchange.

• Sophisticated but practical risk adjustment system: adjusts risk among insurers inside and outside the exchange to discourage adverse selection against and within the exchange.o Utah has implemented a “prospective” risk adjustment

system that encourages insurers to participate• A larger exchange generally will reduce the risk of

adverse selection

Role of Brokers

• No brokers could lower costs• Different roles of brokers for individuals and small

employerso Communication with employeeso Brokers provide other products and services to

employers• Historical experience of exchanges and pools has

found brokers necessary• Middle ground – defining the new roles and costs

of brokers under the exchangeo Differentiate between individuals and employers

Cost Containment

Helen Darling, president of the National Business Group on Health, also said during the HHS panel discussion that the exchanges could serve as a "force for transformation in the health care system," one that could lead to a primary care-based system.

"If we take overuse, waste and inappropriate nonevidence-based medicine out of the health care system, we will have a lot more money to pay for all of the things we have already committed to pay for," said Darling. "We shouldn't waste this moment."

Cost Containment

• Large exchange -- 20% of market • Active purchaser

o “Clearinghouse” model unlikely to drive lower costso Selective plan offering can drive change

• Plan rating system that works for employers and employees

• Employer indexing to base health plan• Exchange should set “high standards” for insurers,

including use of innovative provider payment systems to improve quality and reduce costs

• Develop prevention & wellness programs that fit small employers

Other Options & Issues

• Healthcare co-opso Interest by employers as well as consumers

• OPM and national plans – special role in small states and non-competitive markets

• Large employerso Self-insured plans have adverse selection riskso “Free choice” voucher may prove successfulo All employers have stake in exchange potential to drive

delivery system reform

General Resources - Exchanges

• National Association of Insurance Commissioners (NAIC) has special committees implementing healthcare reform-exchanges:o http://www.naic.org/committees_b_exchanges.htm

• Prof. Tim Jost and Commonwealth Fund reports:o http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2010

/Jul/Health-Insurance-Exchanges-and-the-Affordable-Care-Act.aspx• Recent: California enabling legislation for their state exchange:

o http://www.itup.org/Reports/Health%20Reform/ExchangebillsSummaries08242010FINAL.pdf

• HHS office of healthcare reform (OCIIO) exchange conference: o http://www.hhs.gov/ociio/initiative/index.html

• Jon Kingsdale former director of the Massachusetts Connector has produced a 2010-2014 exchange timeline for states:o http://www.rwjf.org/files/research/66489.pdf

Exchange Models in Action

• Massachusetts Connector – largest individual exchange and growing small employer exchange:o https://www.mahealthconnector.org/portal/site/connector/

• Connecticut (CBIA) – largest and oldest small employer exchange:o http://www.cbia.com/ieb/er/AboutHC.php

• Utah exchange – newest small employer exchange has just expanded operations:o http://www.exchange.utah.gov/

• 8 million federal employees, retirees and family members choose plans from FEHBP exchange:o http://www.opm.gov/insure/health/planinfo/index.asp

Info for Small Businesses

• Frequently asked questions:o http://smallbusinessmajority.org/hc-reform-faq/index.php

• Small business healthcare reform summary:o http://smallbusinessmajority.org/_docs/resources/

SBM_whats_in_it_for_small_biz.pdf

• For more information:o (866) 597-7431 or Info@smallbusinessmajority.org