State health insurance exchanges are on the way, but experts say the rules running the marketplaces may drive up insurance costs.
On Nov. 6, Missouri voters approved Proposition E, a measure that prohibits Gov. Jay Nixon from establishing a state-run health insurance exchange as part of the Patient Protection and Affordable Care Act, the federal reform package referred to as Obamacare.
That prohibition, however, will not prevent the federal government from setting up its own exchange in Missouri, according to policy analyst Thomas McAuliffe with Missouri Foundation for Health.
Nixon sent a letter Nov. 16 to U.S. Department of Health and Human Services Secretary Kathleen Sebelius saying Missouri would not be setting up an exchange at this time and noting Prop E prevented an exchange without a legislative act, an initiative petition or referendum. The deadline for establishing state exchanges had been Nov. 16, but Sebelius extended it to Dec. 14. Nixon spokesman Scott Holste referred questions about meeting the new deadline to Nixon’s letter.
Cost concerns McAuliffe said it would be summer before much is known about what a federally run exchange would look like – the exchanges are required to be in place in all 50 states by 2014 – but due to disagreements among state lawmakers about operating a state-run system, Missouri won’t manage its own exchange through at least 2015.
According to McAuliffe – who has held 185 meetings with business groups and others since health care reforms were passed in March 2010 – exchanges are designed to be both an educational center and an online portal for purchasing insurance plans. Depending on how the U.S. Department of Health and Human Services wants the Missouri exchange to operate, and the involvement of insurers, costs could climb or fall significantly for end users, he said.
According to nonpartisan health education organization Kaiser Family Foundation, health care expenditures in the U.S. were $2.6 trillion in 2010, more than 10 times expenditures in 1980, far outpacing inflation.
The individual mandate, which beginning Jan. 1, 2014, requires citizens to have qualifying coverage or face a penalty – starting at $95 in 2014 and increasing to $2,085 in 2016 based on income – is designed to help make insurance more affordable by broadening the base of those with coverage.
According to Kaiser, companies with 50 or more full-time employees that don’t offer insurance will face fines of $2,000 per employee, excluding the first 30 employees.
McAuliffe said a benefit of exchanges is that small businesses with fewer than 50 employees could simply stop providing coverage for employees.
“Maybe employers don’t need to be burdened with health insurance,” he said.
Rick Hughlett, owner of Rick’s Automotive, said the presence of an exchange isn’t likely to change how he does business. Hughlett said he pays 100 percent of enrollment for his 37 employees to its health insurance provider, Coventry Health Care Inc., through Employee Benefit Design LLC. The expense, which represents roughly $100,000 per year, helps him attract and retain quality employees, he said. That doesn’t mean, however, that he won’t pay attention to how the exchanges could impact costs.
“I’m definitely going to explore it and see if there are things I need to know before it gets here,” Hughlett said.
Federal vs. state The health exchanges require insurance plans to meet minimum standards, which can vary by state, and both individuals and businesses would be able to use the exchanges once they are operational, which McAuliffe said should happen by October.
“There are two theories of an exchange out there. One is that insurance packages and insurers meet the bare minimum requirements of the law. That is that the basic benefits package would include 12 or 13 things, nothing more – hospitalization, emergency services, mental health, et cetera,” McAuliffe said.
“There is another model out there called an active purchasing model. That means that whoever runs the exchange can decide to enhance the basic benefits package – add chiropractic services or physical therapy for no copay. And an active purchaser could even go so far as to talk about prices, such as, ‘Next year, prices can only go up by 5 percent.’”
He likened the state exchanges to individual farmers markets.
“(Regulators) could say, ‘If you are going to sell in this farmers market, you have to only sell organic produce or you can only sell insurance packages that have the following, and if you want access to all of these potential customers, you can’t raise prices,’” McAuliffe said.
Robert Zirkelbach, a spokesman for the trade association American Health Insurance Plans, said his organization supports state-run exchanges because officials in each state have a better understanding of what their citizens need from their providers. In any case, he said the exchanges would be widely used by AHIP’s members because that’s “where the customers will be.” AHIP represents more than 90 percent of all insurance providers in the country, he said.
Zirkelbach said many insurers are wary of the regulations that are expected to increase the costs of doing business.
“It is essentially a sales tax on health insurance,” Zirkelbach said, noting the cost of creating and maintaining exchanges – funded by the participating insurance companies – will be as much as $100 billion between 2014 and 2024.
He said the minimum benefits required though the exchanges could increase premiums for customers. In addition, he said in 2014 insurers would have limits to how much more they can charge based on age. For example, a person age 60 in poor health can’t be charged more than three times the rate for an individual age 25 in excellent health for the same plan.
“For reforms to work, coverage has to be affordable and there has to be broad participation,” he said.
“If all these other provisions are going to add to the cost of coverage, that will make it more likely that younger and healthier people, in particular, wait to buy coverage until after they need it.”
Lingering unknowns McAuliffe said the exchange Nixon and legislators were working toward initially would have been a traditional exchange, requiring a bare minimum of insurers and their plans, McAuliffe said. Now, he said the federal government will dictate what the state’s exchange looks like, and it could choose to require more benefits from insurance companies.
“If the state had followed through on its plan, all of state law and all state regulations would have applied, and the Department of Insurance, or whoever would have been designated to run the exchange, would have determined what fees would have looked like, who should participate, where’s the website – that is something the states could have decided,” he said.
CoxHealth spokeswoman Stacy Fender said it is too soon to say how an exchange in Missouri would impact its insurance company, CoxHealth Plans.
“There are many uncertainties about insurance exchanges at both the state and national levels, causing insurance companies to frequently re-evaluate their positions,” Fender said in a statement prepared for Springfield Business Journal.
“Given the indecisive nature of the current environment, it’s impossible to discuss how the exchanges will, or won’t, affect insurance companies.”[[In-content Ad]]
