Friday, August 17, 2012

A look at the “Exchange” coming to Conn Jan. 1. 2014

One of the main parts of federal level health reform is the creation of a medical insurance Exchange in each state. It will be a place for a person to view online coverage options from various medical insurance companies. They will be able to review plan details, premiums, and then enroll through the system with the company offering the plan they selected. People will be able to look at options beginning in October 2013 and the first date of coverage will be Jan. 1, 2014.

The Exchange being develop here is called – Connecticut Health Insurance Exchange.

Exchanges will serve two market areas - Individual and Small Group. The reform law defines small group as firms with 100 employees or fewer but each state can elect, as Conn has, to stay at 50 employees and below for a couple years.

Lets look at the Individual market Exchange:

● When a person goes to the individual part of the Exchange they will have to bring lots of info. in addition to what is normally required to enroll in medical insurance. For example, specifics about their financial situation and info. about their employer.

● The enrollment system will check, as a person’s information is put in, in real time with various federal agencies such as Homeland Security to confirm citizenship and the IRS to check income. Income is needed to determine eligibility for the expanded MedicAID coverage or the premium subsidies. Those eligible for MedicAID will be enrolled through the Exchange system and receive the coverage Connecticut’s Husky A program offers. They will not be eligible to select an Exchange plan or receive premium support.

● Currently the Connecticut MedicAID system covers adults up to about 70% of the federal poverty level (FPL). Health reform provides funding for a couple years, if the state approves, to cover what is called newly eligible adults, which are individuals up to 138% of FPL.

● Premium support will be available, in declining amounts, for individuals whose income is between 138% and 400% of FPL. If a person is determined to be eligible and selects a plan say from the ABC Health Insurance Co. their premium support money will go from the federal government to ABC.

● ABC will bill the person for their share of the plans total premium. They will not be connected in any way to any programs their employer may offer such as a payroll based IRS Section 125, before tax deduction plan. Thus, their payment will be with after tax dollars.

Lets look at the small group market part of the Exchange:

● Some employers may use a defined contribution approach and tell employees the firm will pay $xxx for medical insurance. Their employees can then select any plan and pay the difference through the firms payroll system. Others firms may select the plans, which are going to be available for their employees. The monthly bill will come from the health insurance co. to the employer.

● Enrolling in plans through the small group Exchange will be the only way, after Jan 1. 2014, a firm can apply for the small business medical insurance tax credit.
Note: This tax credit, which is a part of health reform is currently up to 35% but the full amount is only available to firms with 10 or fewer employees whose average salary (not counting the owner) is 25 k or under. The available credit falls off rapidly when a firm has more than 10 employees. It stops at 25 or if the employees average salary is 50 k or more.

Some other points about Exchange operations:

● The Exchange system will offer various plan choices but a lot of bureaucratic control regulations are being placed over the available options. Plans will be offered in four levels, Platinum, Gold, Silver, and Bronze.

● Each state will select one of four benchmark (common) plans in the state e.g the HMO with the most enrolled. The focus in selecting a plan is the treatments and services, which it covers. The 10 Essential Benefits (EB) outlined in the law must be included.
Note: These EBs apply to any plan whether it is in the Individual Market or the Small group market and whether the plan is purchased inside or outside the Exchange.

The EB treatment and services, which are listed below, include Pediatric dental coverage and Habilitative coverage, which is an expansion of what is now included in Rehab coverage. These are not now covered in Conn medical insurance plans, which means more cost:
+ Ambulatory patient services
+ Emergency services
+ Hospitalization
+ Maternity and newborn care
+ Mental health and substance use disorder services, including behavioral health treatment
+ Prescription drugs
+ Rehabilitative and habilitative services and devices
+ Laboratory services
+ Preventive services and wellness services and chronic disease management
+ Pediatric services including oral and vision care

Requiring all this coverage e.g. maternity, more common in the small group market, on individual market plans means the premium will go up quite a bit! ! !

Once a state selects a plan on which the EB are based then what is called Actuarial Value (AV) has to be determined. When a person enrolls in a Platinum plan the insurance company must pay for 90% of all the treatments, tests, etc. included in the EB plan. Thus, a person who selects a plan in the Platinum level will, if they were to encounter a major medical expense situation, only have to pay, up to 10% of the AV in various co-pays, deductible, etc. Of course the premium for any plan in the Platinum level will be higher. Gold level plans will have a 80% AV. Silver will have 70% AV and Bronze will have a 60% AV.

In addition to the all the requirements on what and how medical insurance plans will pay a person’s treatment expenses the premiums will be based on an adjusted community rate system. Today in various small group plans the premium for someone in their 60s is about five times more than the premium for a 20 year old. The Health reform law says premiums can not vary more than 3 to 1 from age 20 up to the 60s. Specific rates certainly are not known at this time but my sense is the premium for someone in their 60s will drop some but the biggest change will be a big increase in the premium for younger ages. Premiums will also continue to have some location variation based on zipcodes as we have now. BTW - smokers will be charged more!

The health reform law says the premium ABC charges for the same plan whether its offered in or out of the Exchange must be the same. Thus, since an Exchange has to be self supporting after one year, some states, including Conn, are talking about adding a FEE on top of the premium for Exchange based plans!

Some information on Connecticut’s Exchange is on this web site.