Commonwealth Health Insurance Connector Authority Massachusetts Health Care

Commonwealth Health Insurance Connector Authority Massachusetts’ Health Care Reform and the Role of the Connector Academy Health State Coverage Initiatives Program April 26, 2007

Outline v In the Beginning… v Key Issues and Decisions v Year One -- Accomplishments and Challenges

How it came to pass v Federal $$ at risk ($1. 2 B over three years) v Culture of health reform in Massachusetts • 1988 universal coverage ( “play or pay” plan) • 1996 -97 Medicaid expansion • 2002 universal coverage ballot initiative narrowly defeated • Strong likelihood of 2006 universal coverage ballot initiative v Key stakeholders actively engaged • Advocates • Providers • Business leaders • Insurers v State and federal political leaders’ interests aligned

Key Issues and Decisions v Who’s responsible for implementation? • • • v Existing state agency/authority New agency/authority State-sanctioned private entity What type of governance structure? • • • Executive branch department Publicly-appointed board of directors CEO

Connector Governance Structure Executive Director 10 Member Board of Directors Secretary of Administration and Finance (Chair, ex officio) Commissioner of Insurance (ex officio) Director of Medicaid (ex officio) Executive Director of Group Insurance Commission (ex officio) Three appointed by the Governor Actuary Health Economist Small Business Rep Three appointed by the Attorney General Health Care Consumer Organized Labor Employee Health Benefits Plan Specialist

Key Issues and Decisions v Develop subsidized and non-subsidized health insurance programs • Commonwealth Care Ø Subsidized health insurance program for adults with income below 300% FPL that do not have access to employer-sponsored insurance, Medicaid or Medicare • Commonwealth Choice Ø Non-subsidized, “affordable, ” commercial health insurance for individuals (non-group), small groups (50 or fewer employees) and employees above 300% FPL without access to ESI, such as part-timers and contract employees

Commonwealth Care v Statutory requirements: • Subsidized health insurance program for Massachusetts residents, age 19 or older, who are uninsured and meet eligibility requirements • Carrier choice limited to four Medicaid Managed Care Organizations (MMCOs)

Commonwealth Care – Key Issues Establish benefits package and cost-sharing v Develop sliding scale premiums for income groups up to 300% FPL v • • ~$30, 000 for an individual ~$60, 000 for a family of four Coordinate enrollment and billing with Mass. Health (Medicaid) and Maximus (Mass. Health vendor) v Negotiate capitation rates with four MMCOs v • v 15% reduction from initial proposals Initiate outreach and enrollment campaign • • Engage 30+ community groups Target “free care” pool users

Commonwealth Choice – Key Issues v Selecting a third-party administrator (i. e. , “Sub-Connector”) v “Any willing carrier” or select group of insurers v What types of plans to offer v Who’s our target market v Rating and underwriting rules/issues v The role for brokers v The Connector’s business model

Third-Party Administrator/Sub-Connector v Roles and responsibilities • • • Customer service Enrollment Premium, billing, collection and reconciliation Surrogate for health plans’ CSR staff Interface with brokers, employers, individuals and carriers

Carrier and Plan Offerings Model A -- “Any willing carrier” v Model B -- Select group of carriers and limited number of plans ===================== v Issues considered v • Administrative capacity Ø • Real variations in plan designs Ø • BCBS-MA sells 62 different plans in small group market Market taker or market maker Ø • Technical and human resources Promoting new, “affordable” products Organizing choice Ø Focus groups expressed preference for limits on plans and carriers

Target Your Market Understand your role in the marketplace v Limit (unintended) disruption to existing insurance arrangements v Fill in the gaps in coverage options ===================== v The Mass. Connector’s Target Market: v • • Non-group Small group (Sec. 125) Part-timers, contract employees not offered or eligible for group coverage (Sec. 125) Young adults (19 – 26) not offered group coverage (possible Sec. 125)

How the Mass. Insurance Market Operates v No medical underwriting v Modified community rating v Relative strict limits on rate disparity • v 2: 1 rate band compression Newly merged small group (1 – 50) and non-group markets, effective July 1, 2007

Rating and Underwriting Rules/Issues v Apply the same rules in and out of the Connector v Minimize adverse risk selection v Don’t undermine existing group market v Collaborate with carriers

The Role of Brokers v Understand the influential role of brokers in the marketplace v Recognize that you may be viewed as a threat v Consider using them as a sales force

The Connector’s Business Model v $25 million in seed money v Start up costs can be significant v Comm. Care and Comm. Choice supported by 4. 5% admin load v Comm. Choice premiums the same in and out of the Connector v Sub-Connector paid on a per-sub basis

Commonwealth Choice Non-offered Employees Individuals Small Businesses Sole Proprietors The Connector Health New England Blue Cross Blue Shield Harvard Pilgrim Neighborhood Tufts Health Plan Fallon

Year One Complete – Accomplishments… v v v v Maintained and enhanced broad support Over 63, 000 previously uninsured now covered by Commonwealth Care Comm. Choice plans available through the Connector New products -- many with select provider networks -now offered in small group and non-group markets Greater choice and more affordable products in nongroup market Minimum Creditable Coverage standards developed Affordability schedule established

…and Challenges v Will health care costs moderate? v Can “crowd out” be avoided? v Will the public accept the reality (and consequences) of the individual mandate? v How will employers respond to new rules (e. g. , non-discrimination, Section 125)? v Will Section 125 plans serve as the magic elixir…and will the Connector establish critical mass? v Will products with deductibles, co-insurance and higher point-ofservice payments be accepted in the Massachusetts market?