1. DISPUTES & INVESTIGATIONS ECONOMICS FINANCIAL ADVISORY MANAGEMENT CONSULTING Health Insurance Exchanges: A National Perspective Healthcare Financial Management Association Connecticut Chapter June 5, 2014 Cristine Vogel ©2013 Navigant Consulting, Inc. All rights reserved. Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services. See www.navigantconsulting.com/licensing for a complete listing of private investigator licenses. Investment banking, private placement, merger, acquisition and divestiture services offered through Navigant Capital Advisors, LLC., Member FINRA/SIPC.www.navigantconsulting.com/licensing

2. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Section 1: Overview of Marketplaces and Enrollment Section 2: Marketplace Competition and Premiums Section 3: Potential Impact Table of Contents 2

3. Overview of Marketplaces and Enrollment ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy.

4. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. The ACA requires that a Health Insurance Marketplace be established in each state for individuals and small employers to purchase coverage and access Federal subsidies: National Overview ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. State-based Marketplace (15) Federally-facilitated Marketplace (29) State Partnership Marketplace (7) California, Colorado, Connecticut, D.C., Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont and Washington Alabama, Alaska, Arizona, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia 4

5. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Of the 15 State-based Marketplaces: National Overview California, Colorado, Connecticut, D.C., Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont and Washington State-based Marketplace (15) Transitioning to Federal Marketplace for 2015: Maryland Massachusetts Nevada Oregon Facing operational challenges: D.C. Hawaii Minnesota 5

6. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Health plan participation is varied » Blues overwhelmingly participate in the Marketplaces › Large national plans opted to sit out the first year in many states › Many participants were in individual market, but expanded their markets › Many Marketplace insurers are also Medicaid plans » Nearly all consumers (about 95 percent) have some choice › Two or more health insurers › An average of 53 Qualified Health Plan (QHP) choices (not all insurers provide statewide coverage) › Some counties within a state have little competition » Overall, there are about 254 QHPs and few new health plan entrants › 23 CO-OPs (non-profit Consumer Oriented and Operated Health Plans started up with Federal grants) › Two start-ups in New York Overview of Marketplace Health Plans 6

7. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Information about Marketplace enrollees is now becoming available: › Nearly 5.4 million people signed up for coverage through the Federally-facilitated Marketplace › Approximately 2.5 million people enrolled through the State-based Marketplaces » Of the nearly 8 million who enrolled with a Marketplace health plan: › 46 percent are males and 54 percent are females › 28 percent are between the ages of 18 and 34 years old › 85 percent have selected a plan with financial assistance › Plan Selection by metal level: ‒ 20 percent have selected a Bronze level plan ‒ 65 percent have selected a Silver level plan » 6.7 million people were notified of their eligibility for Medicaid by the Marketplace » It has been estimated that only one-third were previously uninsured Overall Marketplace Statistics ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Source: Office of the Assistant Secretary for Planning and Evaluation (ASPE) Issue Brief, May 2014 7

8. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Marketplace Enrollment » Many Marketplaces have exceeded enrollment projections: » Some Marketplaces fell short of their projections: Projected EnrollmentActual EnrollmentEnrollment % of Projected California641,5001,405,100219% Florida421,300983,800234% Idaho35,00076,100217% Michigan151,100272,500180% North Carolina197,700357,600181% Washington98,900163,200165% Projected EnrollmentActual EnrollmentEnrollment % of Projected District of Columbia22,50010,70048% Hawaii15,8008,60054% Massachusetts49,00031,70065% New York643,100370,50058% Source: Exchange Enrollment, Study conducted by Avalere, May 2014 8

9. Marketplace Competition and Premiums ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy.

10. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Number of Participating Issuers Number of States Average Silver Plan PremiumStates 12-163$334 California, New York, Wisconsin 9-116$292 Colorado, Massachusetts, Michigan, Ohio, Oregon, Texas 5-810$276 Arizona, Florida, Georgia, Illinois, Minnesota, New Mexico, Pennsylvania, Utah, Virginia, Washington 49$293 Idaho, Indiana, Iowa, Louisiana, Maryland, Nebraska, Nevada, Oklahoma, Tennessee 311$303 Arkansas, Connecticut, Kansas, Kentucky, Missouri, Montana, New Jersey, North Dakota, South Carolina, South Dakota, D.C. 210$390 Alabama, Alaska, Delaware, Hawaii, Maine, Mississippi, North Carolina, Rhode Island, Vermont, Wyoming 12$345 New Hampshire, West Virginia Number of Marketplace Insurers by State One measure of competition is the number of insurers participating in the Marketplaces - New York has the most with 16, New Hampshire and West Virginia have only one insurer. 10

11. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Other measures of competition is the number of new entrants and the impact on premiums. › Lower average premiums in Marketplaces with new market entrants (CO-OPs) in comparison to Marketplaces with no CO-OPs: › Higher average premiums in Marketplaces with one or two insurers in comparison to Marketplaces with greater than 10 insurers: Bronze Plan Premium Silver Plan Premium Marketplaces with CO-OPs$245$303 Marketplaces without CO-OPs$271$326 Bronze Plan Premium Silver Plan Premium Marketplaces with 1 or 2 insurers$316$381 Marketplaces with > 10 insurers$205$305 Health Plan Competition in Marketplaces Premium data was analyzed by author using the “Health Insurance Marketplace Premiums for 2014” ASPE Issue Brief, September 25, 2013. (no data for Hawaii) 11

12. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Marketplace health plans vary widely in premiums and out-of-pocket costs based on: › Geographic location › Deductible and other cost-sharing requirements › Provider networks » Premiums for a Silver plan vary by as much as 350 percent in different states: Marketplace Health Plan Premiums Lowest Average Cost Bronze Plan Lowest Average Cost Silver Plan Oklahoma$174$256 Alabama$247$303 New York$276$319 California$278$341 Wisconsin$287$344 Mississippi$342$403 12

13. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. A study examined multiple factors related to competition in seven states: Marketplaces and Competition ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Competition Compared to Pre-ACA (HHI)* Percent Market Share of Largest Insurers Number of Insurers Over 5% Market Share CaliforniaMore Competitive 47 to 30 percent More competitive 3 to 4 More competitive ConnecticutLess Competitive 45 to 60 percent Less competitive 4 to 2 Less competitive MinnesotaSimilar 59 to 58 percent Similar 4 to 3 Less competitive NevadaSimilar 44 to 37 percent More competitive 3 to 4 More competitive New YorkMore Competitive 28 to 18 percent More competitive 5 to 7 More competitive Rhode IslandSimilar 94 to 97 percent Similar 1 to 1 Similar WashingtonLess Competitive 40 to 62 percent Less competitive 3 to 3 Similar Source: C. Cox, R. Ma, G. Claxton, L. Levitt, Sizing Up Exchange Market Competition, March 2014 *HHI : Herfindahl-Hirschman Index was calculated by taking the sum of squares of market share by state 13

14. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. Federal premium subsidies are based on income. Individuals are expected to pay 2 to 9.5 percent towards their premium; therefore, if rates increase, individuals will likely not experience an increase in their portion of the premium payment unless their income increases. Below are examples of estimated average premium subsidies by states: Why is this important? Enrollees Eligible Estimated Average Premium Subsidy Estimated Total Premium Subsidies Arizona92,703$1,820$169 M Vermont22,320$2,970$66 M California1,250,817$3,019$3.7 B Indiana117,761$3,759$443 M Connecticut61,435$4,033$248 M Wyoming11,109$4,811$53 M Source: Marketplace Enrollment and Premium Subsidies, Kaiser Family Foundation Data, April 2014 14

15. Potential Impact ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy.

16. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Consumers › More people have health coverage – this is good! ‒ Increase in Medicaid enrollment in “expansion” and “non-expansion” states ‒ Marketplace health plans with significant subsidies to make coverage more affordable ◦ Narrow networks may become a "dissatisfier" ◦ Access may be impaired » Employers › Possibility of additional taxes, fees and penalties › Drop employer-sponsored coverage » Health Plans › Marketplace user fees, additional taxes and potential penalties › Increase in compliance and monitoring › Need to determine 2015 premiums – now! Potential Impact? ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. 16

17. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » With so many different health plans to choose from, people may switch from year to year: › Providers should expect patient shifting › Lower-income people will “churn” between Medicaid and Marketplace plans which will result in confusion for both patient and provider as covered benefits and reimbursement levels change » Providers need to manage more health plan contracts than before » Potential increases in bad debt: › If individuals default on premiums, they may unknowingly lose coverage › The ACA provides individuals with extended grace periods when enrolled in Marketplace plans, allowing them to continue using medical services without paying premiums. Providers will incur claims without assurance of payment. › Many people may not be able to pay out-of-pocket costs for medical services or may not understand their obligation to pay out-of-pocket costs Potential Impact: Providers 17

18. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Many Marketplace plans offer narrow provider networks to contain costs: › Consumers and providers are dissatisfied with narrow provider networks › Providers must decide which health plans to contract with › Providers must keep track of the networks to which they belong › Legislation is under consideration in a number of states; there is likely to be further regulations regarding network composition Potential Impact: Provider Networks will be under more scrutiny for the 2015 plan year according to guidance from CMS to insurers offering plans inside the Federally- facilitated Marketplaces – this may improve negotiations for providers. 18

19. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » Many Marketplace plans will reimburse at lower rates than individual plans sold outside the Marketplace » Providers in all states should expect to see an increase in Medicaid revenue as a percentage of total revenue and a decrease in uncompensated care related to the uninsured › Many ACA outreach efforts target low-income populations › Lower-income individuals who are not eligible for a Marketplace plan are directed to sign up for Medicaid instead (single application process improves the likelihood of enrollment) Potential Impact: Providers 19

20. ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. » “Employer Mandate” has been postponed until 2015 because of political pressure › If employer mandate becomes effective, some employers may choose to drop coverage and pay penalty › Until then, employers will continue to compete for top talent by offering health benefits » Shift to “private exchanges” where employer gives employees money to buy private insurance on a private market › Large employers dropping part-time employee coverage and directing them to private exchange (Sears, Darden Restaurants, Walgreens) or to the public Marketplace (Target, Home Depot, Trader Joe’s) › Early retirees will likely be directed to either a private exchange or the public Marketplace » SHOP will be further implemented in 2015 so impact of small employers is not understood at this time Potential Impact: Providers 20

21. Questions? ©2013 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. 21