hCentive Health Insurance Exchange Platform

A Complete Guide to State ExchangesAll you need to know about the state health insurance platforms

Cent ivehTechnology Solutions to Simplify Healthcare

Published by: hCentive

Date: 29 November 2010


Table of Contents

The Numbers Game 4

Patient Protection and Affordable Care Act 6

Timeline of the Act 7

Small Business Health Options Program (SHOP) 9

Timeline for Changes Impacting Employers 10

State Health Exchanges 10

Functions of a State Exchange 11

Structure of an Exchange 12

Operating an Exchange 12

Benefits of the Exchange 13

Eligibility 13

Timelines 14

Summary 15


The Number Game

Introduction

Health Insurance Coverage Status

Health insurance has been, and continues to be, a highly debated issue in the United States. Every aspect of the healthcare industry is under question, from the cost of healthcare to its availability. This paper focuses on the changes mandated by the federally enacted Patient Protection and A�ordable Care Act which calls for dramatic changes in the way health insurance is sold in this country.

The U.S. is well known for its medical advances, but it also has the dubious distinction of being one of the only developed nations that does not guarantee medical insurance for all its citizens. The U.S. Census Bureau claims that there are about 50.7 million uninsured Americans, including 8.7 million children. The U.S. also has the third highest per capita expenditure for public healthcare. Furthermore, in 2007, nearly half of all personal bankruptcies were attributed to medical debt.

Private

Medicare

Medicaid

Other Government

Uninsured

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

Source: US Census Bureau, Current Population Survey, 2008 Annual and Social Economic Supplement

2006

2007

1990

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In 2000, the United Nation’s World Health Organization (WHO), ranked America’s healthcare system as the highest in cost, �rst in responsiveness, 37th in overall performance, and 72nd in overall level of health (among the 191 member countries of the UN). In addition, the Institute of Medicine of the United States National Academies points out that around 18,000 unnecessary deaths are caused in the U.S. every year and that the lack of medical care has resulted in the death of about 100,000 Americans annually .

Employers still serve as the primary source for health insurance among most Americans, but due to rising health care costs, many employers have limited or, in some cases, eliminated coverage for their employees. This and the large number of unemployed have contributed to the rising number of unin-sured Americans.

These statistics represent some of the reasons for the passage of the Patient Protection and A�ordable Care Act.

Source: U.S. Census Bureau, Income Poverty and Health Insurance Coverage in the United States, 2007

Health Insurance Status (Under 65 Years of Age)


Employer sponsored healthinsurance

Non-group health insurance

Not Insured

Medicare

Medicaid

Military Health Care

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Patient Protection and Affordable Care Act

Reform �nally culminated with President Obama signing into law on March 23, 2010 the Patient Protection and A�ordable Care Act. This legislation promised to change the business of health insurance in the U.S. substantially – not just for consumers seeking to buy coverage, but also for brokers, health insurance carriers, states and the federal government as well.

This law calls for the implementation of various health insurance provisions over a four-year period. The goal is to make healthcare more accessible and a�ordable to all individuals irrespective of age, income or health condition. The Act is an attempt to make health insurance more consumer-friendly and eliminate any unfair advantages among insurers.

The Act intends to reform individual and group coverage plans and also changes the insurance laws for health carriers selling medical insurance. The Act will be implemented in the following phases.

Health reform was a key issue during the Presidential elections of 2008. While the Republicans emphasized having an open-market competition rather than government controlled, then Senator Barack Obama campaigned for universal healthcare.

Obama also called for the formation of state based Exchanges – a sort of market place – where insurers could compete for consumers based on the products, prices and services that they o�er.

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Timeline of the Act

EFFECTIVE BY 2010:

No discrimination permitted against children with pre-existing medical conditions

Insurance companies cannot drop people from coverage unless there is a serious case of fraud

There would be no lifetime limit on insurance coverage

Annual limits on insurance coverage would be regulated

Insurance companies must set up a consumer appeals board

Information on health insurance must be provided online

Quali�ed small businesses will get tax credits if they provide coverage at work

Seniors hitting the prescription drug coverage “donut hole” (the coverage gap in drug spending in which seniors pay 100% of the costs) are given a one-time rebate check of $250

Preventive healthcare such as mammograms and �u vaccines will be available free of cost

$15 Billion will be allocated to the Prevention and Public Health Fund to encourage Americans to live healthy lifestyles

Adults with pre-existing medical conditions can access a�ordable healthcare through a high risk pool program

Children can stay on their parents’ coverage until the age of 26

A $5 billion federal fund will ensure that early retirees have access to a�ordable coverage

New incentives encourage more primary healthcare providers to work in underserved areas

Insurance companies must justify unreasonable rate hikes

Medicaid will be expanded to accommodate more people from low-income brackets

Rural healthcare providers are paid to ensure that they continue serving these communities

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EFFECTIVE BY 2012:A Hospital Value-Based Purchasing Program is established that o�ers �nancial incentives to hospitals to improve the quality of care

Physicians are incentivized to join Accountable Care Organization

Electronic health records are created to reduce paperwork and administrative costs

CLASS, a voluntary long-term care insurance program will provide cash bene�ts to disabled adults

EFFECTIVE BY 2013:

More funding to state Medicaid programs to provide preventive services

Primary care physicians will be paid 100% of Medicare payment rates

Additional funding to ensure children not eligible for Medicaid are covered


EFFECTIVE BY 2014:Health insurers can’t discriminate on the basis of pre-existing health conditions or gender of the bene�ciary

No annual dollar limits on the amount of coverage an individual might receive

Individuals participating in clinical trials will be ensured coverage

Tax credits are provided to lower income individuals applying for medical insurance

Each state must create Exchanges for individuals to shop easily for health insurance

Small businesses providing coverage to workers will receive increased tax credits

Individuals and families that can a�ord insurance will be encouraged to buy their own insurance

Workers can use the employer’s insurance fund to receive a�ordable coverage for themselves

EFFECTIVE BY 2011:

Seniors who fall in the coverage gap receive a discount of 50% on Medicare Part D prescription drugs

Free preventive services provided to seniors

The Department of Health and Human Services (HHS) must submit a national strategy to improve the quality of healthcare in government sponsored programs like Medicaid, Medicare and CHIP

The Community Care Transition Program must ensure that high risk Medicare bene�ciaries do not undergo unnecessary readmissions

Community Health Centers are constructed and expanded. Insurance companies must spend 80% (80% for small group and individual markets and 85% for large groups) of their premium dollars on healthcare services

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Small Business Health Options Program (SHOP)

The reform legislation also calls for the creation of the Small Business Health Options Program (SHOP) that would act very similar to exchanges, but is designed primarily for small employers. Both the exchanges and SHOP would act very much like Expedia or Travelocity but for consumers and small employers buying health insurance.

SHOP will prohibit health insurance companies from underwriting or pricing insurance based on health status, gender or claim experience . The SHOP pool must comply with the ratings rules and minimum bene�t packages set for the program.

The SHOP provides tax credits for small business owners to make healthcare coverage a�ordable. To obtain these credits, the employer has to pay a minimum of 60% of the premium. The tax credits available are:

EFFECTIVE BY 2015:

The payment of physicians will depend on quality and not volume. This will encourage physi-cians to focus on providing quality healthcare

$1000 for each employee who receives self-only coverage$2000 for every employee who receives family coverage$1,500 for each employee who receives health insurance coverage for 2 adults or 1 adult and 1 or more children through the employer


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Health insurers can’t discriminate on the basis of pre-existing health conditions or gender of the bene�ciary

No annual dollar limits on the amount of coverage an individual might receive

Individuals participating in clinical trials will be ensured coverage

Tax credits are provided to lower income individuals applying for medical insurance

Each state must create Exchanges for individuals to shop easily for health insurance

Small businesses providing coverage to workers will receive increased tax credits

Individuals and families that can a�ord insurance will be encouraged to buy their own insurance

Workers can use the employer’s insurance fund to receive a�ordable coverage for themselves

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$200 for each employee who receives self-only health insurance coverage$2000 for $400 for

each employee who receives family health insurance coverage through the employer

$300 for each employee who receives health insurance coverage for 2 adults or 1 adult and 1 or

more children through the employer

10 or fewer full-time employees 100%

More than 10 but not more than 20 full-time employees 80%




More than 50 full-time employees 0%

Bonus tax credits will be provided to those employers who exceed the 60% threshold and contribute more towards their employee health insurance:

However all tax credits depend on the number of workers employed by the �rm:

SHOP program tax credits are also subject to the percentage of year factor, determined by the number of months during the taxable year in which the employer paid or incurred quali�ed employee health insurance expenses.

Timeline for Changes Impacting Employers


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2011: Penalty for incorrect spending within Flexible Savings Account will increase from 10% to 20%

2013: Medicare tax will increase to 2.35% for individuals earning above $200,000 and for couples earning more than $250,000

Contribution to Flexible Savings Account will be limited to $2500 per year

For those with annual income of more than $200,00O, hospital tax will increase by 0.9 percentage points

2014: Companies with more than 50 employees will have to pro-vide coverage at work or pay penalty of $2,000 per employee

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Americans without any form of medical insurance must pay an annual �ne of $95. This amount will increase in subsequent years

2016: : States will have to open SHOP to facilitate bulk buying of health insurance by small business employers.

Both Exchanges and SHOP will be administered by individual states. The federal government will only administer an Exchange or a SHOP if a state refuses to create one.

A state health Exchange is an insurance market place.

An Exchange is a multi-carrier shop and an

information kiosk. The A�ordable Care Act requires

state Exchanges to provide health insurance

information in a manner that is easy to comprehend

for consumers.

State Health Exchanges

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Functions of a State Exchange

For those who do not have access to any sort of assistance, Exchanges will facilitate enrollment in plans and the payment of premiums. They will serve as portals where applicants can check their eligibility for plans and subsidies.

By purchasing health plans from Exchanges, individuals can retain their coverage even when between jobs.

In addition to being a market place for insurance products, Exchanges will have �ve crucial

functions:

Foster competition among insurers to ensure that the consumers get the best rates and services. All the costs and services would be listed in a manner that will make comparison across plans easy.

Exchanges also are required to provide transparent and authentic information about plans, premiums, coverage, bene�ts, and the like.

1.

2.

3.

4.

Inspect policies to ensure that they adhere to the standards set by the government and are in the best interest of the consumers

Have no power to decide premiums but can ask carriers to justify rate hikes. If they are unsatis�ed with a carrier’s explanation, they have the right to not display that carrier’s products.

The Exchanges will provide resources so that people who do not have access to the Internet can get information through mail and community announcements.

Must use standard forms, de�nitions and marketing materials. Individuals should have the option to enroll online, over the phone, by mail or in person.

States must operate call centers to ensure e�cient customer service.

Exchanges must adhere to the following regulations:

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5.


The Act directs every state to have a state-based health insurance Exchange as health insurance rules vary from state-to-state. A state Exchange will also give a greater sense of ownership to its citizens.

The Exchanges will be funded by federal dollars. The Act also has provisions calling for the federal government to create and administer an Exchange if any state refuses to do so.

There is a possibility that, at some later date, all state health insurance Exchanges will be integrated into a

single national Exchange. This would reduce the administrative costs associated with the Exchanges. A national Exchange also would ensure that consumers are not deprived of coverage even when they change their state of residence.

Structure of an Exchange

The Exchanges will have �ve categories of health plans depending on the expenses. Other than providing the essential health bene�ts, the following di�erent bene�t categories will also include a:

Bronze Plan: 60% of the costs with HSA out-of-pocket limits

Silver Plan: 70% of the costs with HSA out-of-pocket limit

Gold Plan: 80% of the costs with the HSA out-of pocket limit

Platinum Plan: 90% of the costs with the HSA limit

Catastrophic Plan: For those below the age of 30 and are exempted from the mandatory purchase of health policy.

Though the Act leaves it to the states to decide upon the form and medium of the Exchanges, most states, barring a few, will eventually govern their own health insurance Exchanges.

1.

2.

3.

4.

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Administrating a state based Exchanges that operate on federal dollars and adhere to both federal and state regulations will require collaboration by federal and state governments.

Operating an Exchange

Benefits of the Exchange

Since Exchanges will be funded largely by the federal government, each state’s Exchange will be audited by federal agencies to ensure compliance with federal health insurance regulations.

Since states will administer the Exchanges, it is important that state governments and their respective insurance departments form an Exchange Board to oversee operations. The e�ective management of the Exchanges will ensure that consumers reap the maximum bene�ts when purchasing health insurance.

Advocates of the Act and its mandated Exchanges point to the following bene�ts:

Standardized bene�ts make comparisons across plans easier.

Provides for access to federal subsidies and infor-mation about eligibility for government sponsored programs

Consumers can retain their employee sponsored coverage even when they change jobs

Allows convenient access to the cheapest plans

Bene�ciaries do not have to worry about the authenticity of their coverage, as only those plans that comply with the A�ordable Care Act and are sold by insurance companies that have the license to do so, will be exhibited on the Exchanges. Employers will enjoy more �exibility and choices while providing group coverage to their employees

A�ordable plans and non-denial to any applicant will ensure that more people have access to medical coverage.

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Eligibility

Timelines

Not everyone can sell or purchase a plan through an Exchange. Both buyers and sellers must meet certain eligibility criteria before they can operate on an Exchange platform.

For Buyers: Initially, Exchanges will be limited to unemployed individuals, those self-employed or employers with fewer than 100 employees.

Health insurance carriers: Only those health insurance companies with acceptable rates, who spend no less than 80% of their premium dollars on health care expenses for their members and who comply with the federal guidelines will qualify to showcase their products on an Exchange platform.

Exchanges will provide consumers with a broad selection of health insurance options. However, with increased options comes, in some cases, confusion. It will be important that states also provide support – including call centers -- for consumers participating in the Exchanges.

Though Exchanges don’t become fully operational until January 1, 2014, implementation has already begun. The following outlines the mandated implementation plan

States develop informal databases capturing the issues that will a�ect the formation of Exchanges and the drafting of grant applications.

The Department of Health & Human Services (HHS) establishes interoperable standards and protocols for enrollment in the HHS program

2010

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States begin to apply for federal grants for: A) HIT enrollment standards & protocols and; B) develop-ment of health bene�t Exchanges Develop strategic plans to integrate the A�ordable Act within the realms of the Exchanges

Grants from the HHS become available for planning and developing standards for compiling and providing enrollees with summary of bene�ts

Establish Health Bene�t Exchanges

Develop, issue, and review RFPs for IT and infrastructure

States seek and receive �nal approval from HHS for Health Bene�t Exchanges

Develop and implement ‘plans of operations’

Select audit �rms to assess system of internal controls, key processes and systems

Select vendors for outreach, marketing, advertising and develop strategy and materials

Develop and issue RFPs for a) Navigators b) Call Centers c) Financial systems/ Subsidy Reconciliation

State implements federal eligibility and subsidy determination guidelines

IT/ Website developed and implemented

HHS approves that a state is willing and able to implement the Exchange by January 1, 2014

Begin development of QHP (Quali�ed Health Plan) RFP speci�cations

HHS to provide loans to assist Co-Ops

Select QHP and begin implementation

Marketing and outreach campaign

Full Enrollment Systems Testing

Begin selling health plans

2011

2012

2013

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Corporate HeadquartershCentive, Inc.12355 Sunrise Valley Drive, Suite 310,Reston, Virginia 20191,U.S.

Contact UsPhone: 800-984-7952

Sales: [email protected]

Support: [email protected]

Partnerships: [email protected]

-----------------End of White Paper-----------------

IT/ Website developed and implemented

HHS approves that a state is willing and able to implement the Exchange by January 1, 2014

Begin development of QHP (Quali�ed Health Plan) RFP speci�cations

HHS to provide loans to assist Co-Ops

Select QHP and begin implementation

Marketing and outreach campaign

Full Enrollment Systems Testing

Begin selling health plans

Health Bene�t Exchange becomes fully operational

The state based health insurance Exchanges are one of the most important aspects of the healthcare reforms of 2010. The Act sets certain guidelines that every Exchange has to adhere to and yet leaves enough �exibility for states to accommodate their individual preferences and regulations. More importantly, the Act provides a platform for consumers to cost e�ectively and more easily purchase health insurance.

2014

Summary

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