1. © HealthPass 20111 How Health Insurance Exchanges Will Affect Employers and Health Plans Shawn Nowicki, MPH Director, Health Policy HealthPass | New York Business Group on Health A Presentation for the National Congress on Health Insurance Reform Pre-Conference on Health Insurance Exchanges Ritz-Carlton Hotel, Washington, DC January 19, 2011

2. © HealthPass 20112 1. About HealthPass 2. How Exchanges Affect Employers 3. How Exchanges Affect Health Plans 4. Questions Today’s Agenda

3. © HealthPass 20113 About HealthPass New York

4. © HealthPass 20114 Commercial health insurance exchange started in 1999 Joint collaboration between: –Northeast Business Group on Health –Mayor’s Office of the City of New York –Health insurance industry Missions: –Grant small businesses greater access to healthcare –Help stem the tide of the working uninsured A Commercial Health Insurance Exchange for NY Small Businesses

5. © HealthPass 20115 An Employee-Choice Model Employee-choice, defined contribution model for small businesses in a pure community-rated environment Menu of carriers and benefits Serve 5 boroughs of NYC, Long Island, Mid-Hudson Valley

6. © HealthPass 20116 How Exchanges Affect Employers

7. © HealthPass 20117 Must be a simple, streamlined purchasing experience  In Utah Exchange pilot, 20% of eligible groups didn’t enroll because employees couldn’t complete application Defined contribution model encouraged Broad, but not overly complicated, range of choices needed Simplified administration & a suite of solutions  One-page group election and employee enrollment forms  Robust member services/call center  Ancillary services Employee choice (at the point of enrollment)  Relieves employer from choosing coverage plan that may or may not fit employees’ needs and budget SHOP Exchanges Must Be Attractive to Employers

8. © HealthPass 20118 Exchange Must Streamline Health Benefits Services R OBUST A DMINISTRATIVE S ERVICES In-House Member Services COBRA & State Continuation Admin. Premium Aggregation & Monthly Consolidated “List” Billing Section 125 for Pre-Tax Premium Contributions Eligibility Determination Enrollment & Subsequent Employer and Employee Education Size of small business correlated with HR capability

9. © HealthPass 20119 Choice at What Level? Mirrors individual exchange options Small ERs offer cost-sharing options outside of Exchange (e.g., HDHP/HSA vs. traditional plan) FULL/BROAD EMPLOYEE CHOICE ACROSS TIERS Explicit option in Affordable Care Act Enjoys some support because of adverse risk selection concerns WITHIN EMPLOYER- DESIGNATED PRECIOUS METAL TIER Traditional method of employer-sponsored coverage However, system needs to move to individual, employee choice EMPLOYER CHOICE Defined fixed-dollar employer contribution recommended across all options DESIRABILITY

10. © HealthPass 201110 A True One-Stop SHOP Exchange Employer Carrier ACarrier BCarrier C Carrier DCarrier E Broker/ Navigator IRS Tax Credit Mechanism (P) – Group Premium Payment (E) – Plan Selection, Enrollment (I) – Premium Invoice I: One consolidated “list” bill P E Facilitate Compensation P P PP P E E E E E Carrier Reconciliation Adopted from: Terry McCorvie, Workable Solutions, Inc.

11. © HealthPass 201111 Employers & Health Plans May End Up Financing Exchanges Self- sustaining Exchange Fee/load on top of premium, paid by ER Substitute admin. revenue to Exchange Assessment on insurers Anticipate Exchange needing 2.5% - 4.0% of premium rate for self-sustainability

12. © HealthPass 201112 Brokers & Agents Are Vital Employer elects SHOP exchange Employee selects & enrolls in coverage Exchange administers & supports Considerations : - Equality between brokers and navigators? - What about other feeder groups? Broker/agent assists, educates, & services

13. © HealthPass 201113 Exchange Implementation Timeline October 2010 HHS awards first round of planning and establishment grants to states 2011 – 2012States authorize exchange through legislation January 2013 HHS determines if state is willing and able to open exchange by January, 2014 August 2013Exchange begins selling health insurance January 2014State exchange must be fully operational January 2015Exchange must be self-sustaining 2016Small group must be expanded to groups up to 100 EEs 2017State may open exchange to large groups (>100 EEs)

14. © HealthPass 201114 Employer & Employee Benefits Employer Benefits No need to pick one plan for different employees Curbs wasted healthcare spending Helps to attract and retain key employees Empowers employees to participate in making informed healthcare decisions Defined contribution sets a benefits budget Simplified administration Robust client support Home billing of COBRA and COBRA administration No need to shop for insurance every year Employee Benefits A voice in a personal decision – healthcare Choice of plan types (e.g., HMO, EPO, POS, PPO, HSA) Choice of insurer Annual choice to meet individual healthcare and budget requirements Pre-Tax contributions (thru Section 125) minimize out of pocket costs Robust member and advocacy services

15. © HealthPass 201115 How Exchanges Affect Health Plans

16. © HealthPass 201116 Product Mix Dependent on Governing Model, Regionalization, & Market Rules Governance model Regional or Statewide Market Rules PRODUCT & STRATEGY Active purchaser? Selective contractor? Passive clearinghouse? Regional exchanges? Regional sub-exchange(s) within a state? One statewide exchange? Rules mirrored inside and outside exchange? State rules stricter than PPACA requirements? Benefit mandates? Benefit plan standardization?

17. © HealthPass 201117 Exchanges Will Attract Varying Populations Newly insured individuals eligible for subsidy (133%- 400% FPL) [pent-up demand?] ~40% of uninsured eligible for subsidy have chronic condition or report health as fair or poor 1 Individual Exchange Previously uninsured groups Previously insured groups seeking more affordable option & choice of plans Younger, healthier firms/employees SHOP Exchange Likely to be regional and geographic differences in enrollment levels across Exchanges 1 Cunningham, PJ. (2010). Who Are the Uninsured Eligible for Premium Subsidies in the Health Insurance Exchanges? (No. 18). Center for Studying Health System Change.

18. © HealthPass 201118 Exchange enrollment projections  CBO: 24-30 million enrollees by 2019 1  Urban Institute/RWJF: 44 million enrollees by 2017 2 23 million in AHBE; 21 million in SHOP Brand & marketing/outreach will matter, especially with standardized options  Competition based on value, quality, & member services  Efficient administration Demonstrate ongoing value National & regional start-up carriers will consider entering markets Medical loss ratio (MLR) considerations Other Considerations 1 Congressional Budget Office. (2010) Estimate of the direct spending and revenue effects of an amendment in the nature of a substitute to H.R. 4872, the Reconciliation Act of 2010. Washington, DC: U.S. Government Printing Office. 2 Buettgens M, Bowen G and Holahan J. (2010). America Under the Affordable Care Act. Washington, DC: Urban Institute.

19. © HealthPass 201119 SHOP Exchanges must be designed to serve employers & their employees States must charge their Exchange with a premium aggregation function It is crucial that States develop their SHOP & AHBE Exchanges simultaneously; give AHBE & SHOP Exchanges equal attention States should consider full employee choice & a fixed-dollar defined contribution SHOP Exchange model Design Exchanges to be nimble enough to respond to market forces; their success depends on it Policy Recommendations 1 2 3 4 5

20. © HealthPass 201120 Questions Q & A

21. © HealthPass 201121 Contact Information Shawn Nowicki, MPH Director, Health Policy 61 Broadway Suite 2705 (212) 252-8010 x227 snowicki@healthpass.com www.HealthPass.com