Coping with the mandate of insurance exchanges
By Glenn Townes
The adage “A day late and a dollar short” may soon ring true for millions of New York metro-area small businesses and their employees if local legislators continue to drag their feet on implementing a key component of the Patient Protection and Affordable Care Act. With less than a year to go, politicos in New York, New Jersey and Pennsylvania risk missing a federal deadline for establishing Small Business Health Options Programs, or SHOPs, mandated in the 2010 health care reform law, industry experts say. SHOPs advocates are incensed at the foot-dragging; especially coming from three states normally at the forefront of social change is a surprise to many.
“The establishment of health insurance exchanges, especially the SHOPs for small businesses, will be a boon to small-business owners in terms of their ability to provide affordable health insurance to their employees,” says Vincent Ashton, president and CEO of HealthPass New York, a decade-old commercial exchange established as a partnership between the New York City government, New York Business Group on Health and insurers. In a recent HealthPass poll of hundreds of small-business owners statewide, eight in 10 respondents describe insurance exchanges as a “good idea” after reading a full description of the proposal currently crawling through the New York State Assembly. Results of the poll were released last December. Ashton notes that exchanges will allow entrepreneurs to choose among various plan options and select the ones that best fit their financial situation. “Entrepreneurs are reacting enthusiastically to the idea of a privately run health insurance exchange program,” he says.
HealthPass has its own interests at heart, some say. A May 4, 2010, Crain’s New York Business article notes that the group may be put out of business if it is not selected to be the new insurance exchange created by New York State. It quotes Shawn Nowicki, director of health policy at the New York Business Group on Health as saying, “Rather than the state building an exchange from scratch, we’re saying, ‘Let’s give HealthPass the funding to do it and scale it up.’ ”
An intriguing proposition
In one of its more controversial, and perhaps intriguing, propositions, the law requires states to establish health insurance exchanges offering affordable private coverage to residents who are not insured through their jobs. It also requires states to set up SHOP exchanges, where small businesses — those with fewer than 50 workers — and nonprofits can compare health plans and enroll in or offer their employees the best fit for their budgets. Businesses that purchase coverage through the exchange are eligible for a tax credit. Both types of exchanges must be in place by Jan. 1, 2014, with a “readiness (certification) review” deadline of Jan. 1, 2013, if not the federal government will step in to establish them. That alternative makes many state legislators cringe, out of fear that the extra amenities and freedoms within state-developed programs likely would be missing in those established by Uncle Sam.
Massachusetts, Connecticut, Vermont, Wisconsin and California have already passed enabling legislation and/or established exchanges, but several others, including New York, New Jersey and Pennsylvania, are mired in the legislative process, with pressure coming from both supporters and critics of the exchanges alike. The most vocal proponents of SHOPs — consumer groups and advocates for the uninsured and low-income populations — view the “one-stop” purchasing method as promoting competition and transparency when buying health insurance. The most ardent critics are insurance companies and brokers, who insist that purchasing health insurance is an emotional decision and should not be treated in the same way as items typically purchased online with little or no human interaction. Add to these arguments the fact that the average consumer does not understand how insurance plans are rated and priced and the notion of health insurance exchanges as a good thing for consumers and small businesses truly becomes a hot-button issue.
A win-win deal
Health insurance exchanges are a win-win situation for businessowners and employees, health care reformists insist, giving them access to coverage they otherwise would not have. According to the HealthPass survey, the exchanges have the potential to change the state’s health care marketplace for the better at a time when many small-business owners are struggling to survive. New York and New Jersey should be encouraged by positive outcomes in states such as Massachusetts, whose health care reform laws give the most impoverished families and individuals access to medical coverage. The elimination of pre-existing conditions and the removal of certain benefit limitations are other benefits of the exchanges.
Pat Haraden, a certified employee benefit specialist and principal at Longfellow Benefits — a Boston employee benefits and compensation company — was active in formulating certain aspects of the health insurance exchange program in Massachusetts launched in 2007. “Many of the people who now have access to health coverage live at or below the federal poverty level,” Haraden says. “Exchanges give them access to health care that they would not otherwise have.”
Jason Hwang, a physician and the executive director of Innosight Institute, a California think tank, says lessons learned from the Massachusetts exchange may offer a glimpse into what other states must do to successfully accomplish their own exchanges. “Exchanges can only serve as an unbiased source of information for consumers as long as the information being disseminated is relevant and suitable for use by a layperson,” Hwang says. “Health savings accounts and personal electronic health records that put more control of dollars, data and decision making into the hands of patients will provide an impetus for people to use information from exchanges.”
Officials at the National Association of Health Services Executives and the National Hispanic Medical Association, industry organizations, respectively, for African-Americans and Latinos, say their ethnic groups will gain the most from the affordable coverage options offered by health insurance exchanges. Both communities suffer disproportionately from life-threatening diabetes, heart problems, hypertension, obesity, HIV/AIDS and all types of cancer and are more likely to be uninsured than other ethnic groups. According to Kaiser Family State Health Facts, “In 45 states across the U.S., when a person with a health condition such as diabetes tries to buy health insurance directly from an insurance company through the individual insurance market, insurance companies can charge higher premiums, exclude coverage for certain conditions, or even deny coverage altogether because of a pre-existing medical condition.”
The long-term success of the “one-stop shopping” concept is marginal at best, critics say. In Massachusetts, for example, some small-business owners have seen minimal decreases in premium costs while the administrative burden, including compliance and paperwork, has increased. Haraden of Boston’s Longfellow Benefits agrees, but explains why. “Small businesses use brokers that are compensated by commissions included in the rates and paid by the insurer to assist with plan selection and enrollment functions,” he says.
Opponents point out that under the new exchange legislation, some stand-alone and specialist health plans and services would be excluded. “Exchanges mandate that all eye care insurance be provided through medical health care plans, but that is in jeopardy of completely changing,” says Rob Lynch, CEO of Vision Service Plan Global in Rancho Cordova, Calif. The insurance arm of the $3 billion organization is one of the country’s largest HMOs. It provides vision insurance for millions of Americans, with roughly one in six Americans utilizing VSP services. If the new legislation is implemented, Lynch says, “The promise of ‘if you like your doctor, you can keep your doctor’ will no longer be true for your optometrist.”
Pro and con arguments aside, the deadline for a health insurance exchange “readiness review” by the U.S. Department of Health and Human Services remains just under a year away and states like New York, New Jersey and Pennsylvania have yet to make the first step of implementing legislation. For small businesses wishing to plan ahead, patience is the name of the game.