Health Insurance Connectors (aka Health Insurance Exchanges) Nancy Turnbull Harvard School of Public Health and Board Member of Massachusetts Health Insurance Connector Authority October 3, 2008

What is a Connector? An entity that helps the individual insurance market function better for consumers An entity that helps the individual insurance market function better for consumers More purchasing power/lower prices More purchasing power/lower prices Increase competition Increase competition More choice of products More choice of products Less confusing and complicated to compare and buy Less confusing and complicated to compare and buy Not a purchaser of insurance Not a purchaser of insurance Not a new concept Not a new concept No single vision No single vision Minimalist Private vs. Strong Government Entity Minimalist Private vs. Strong Government Entity Individual only vs. Individual and Employers Individual only vs. Individual and Employers

What Services Can a Connector Provide to Consumers? Standardized health insurance products Standardized health insurance products Negotiation of premiums with health plans on behalf of consumers Negotiation of premiums with health plans on behalf of consumers Negotiation of commissions with brokers Negotiation of commissions with brokers Easier comparison shopping Easier comparison shopping Simpler enrollment in products Simpler enrollment in products Enable purchase of coverage with pre-tax dollars through Section 125 plans (for employers) Enable purchase of coverage with pre-tax dollars through Section 125 plans (for employers) Allow “pooling” of premiums for part-time workers Allow “pooling” of premiums for part-time workers Education, outreach and assistance Education, outreach and assistance Administration of premium subsidy programs Administration of premium subsidy programs

Massachusetts Connector’s Role in the Individual Market Offers “standardized” benefits and cost-sharing Offers “standardized” benefits and cost-sharing “Actuarially equivalent” tiers: Bronze, Silver, Gold “Actuarially equivalent” tiers: Bronze, Silver, Gold Young Adult Plans Young Adult Plans Negotiates premiums with insurers Negotiates premiums with insurers Facilitates purchase through information, outreach and marketing Facilitates purchase through information, outreach and marketing Section 125 plans for employees to purchase with pre- tax dollars Section 125 plans for employees to purchase with pre- tax dollars Administers subsidized program for people up to 300% FPL (Commonwealth Care) Administers subsidized program for people up to 300% FPL (Commonwealth Care) Plans for small employers to begin in November Plans for small employers to begin in November

Impact of Connector Is Enhanced if Coupled with Other Policies Insurance market rules (same inside and outside the Connector) Insurance market rules (same inside and outside the Connector) Guaranteed issue and renewal Guaranteed issue and renewal Limits on rating practices/rate variations Limits on rating practices/rate variations All products in same rating pool All products in same rating pool Strong base of public/subsidized coverage for people with low and moderate income Strong base of public/subsidized coverage for people with low and moderate income Individual mandate Individual mandate

Issues That Would Need to Be Addressed National, regional or state-based? National, regional or state-based? Who can buy through the Connector? Who can buy through the Connector? Individual? Individual? Small employers? Small employers? Large employers? Large employers? Competing with private insurers? Replacing private market? Just filling in gaps? Competing with private insurers? Replacing private market? Just filling in gaps? Another distribution channel or a disruptor? Another distribution channel or a disruptor?

Issues That Would Need to Be Addressed Structure and Governance Structure and Governance Private, public or quasi-public organization? Private, public or quasi-public organization? Existing or newly-created? Existing or newly-created? Subcontract with existing purchasing entities (e.g., small employer association) for some services? Subcontract with existing purchasing entities (e.g., small employer association) for some services? Financing start-up and operating costs Financing start-up and operating costs Self-sustaining or subsidized? Self-sustaining or subsidized?

Issues That Would Need to Be Addressed What insurance rules will apply? What insurance rules will apply? State rules? State rules? Federal rules? Federal rules? Minimum federal standards with state discretion? Minimum federal standards with state discretion? Same rules inside/outside the Connector? Same rules inside/outside the Connector? What products? What products? Private plans? New public plan? Private plans? New public plan? Private plans Private plans Anything? Anything? Meet minimum standards? Meet minimum standards? Standardized? Standardized?

Issues That Would Need to Be Addressed How to set premium rates? How to set premium rates? Negotiated by Connector or determined through market forces? Negotiated by Connector or determined through market forces? Is Connector its own risk pool or combined with people who buy outside Connector? Is Connector its own risk pool or combined with people who buy outside Connector? How to guard against adverse selection? How to guard against adverse selection? Any limits on profit margins/amount of premium that must be paid for medical care? Any limits on profit margins/amount of premium that must be paid for medical care? Broker commissions? Broker commissions?

Issues That Would Need to Be Addressed Outreach, Education and Enrollment Outreach, Education and Enrollment How much? How much? Coordination with insurers: Who “owns” the member? Coordination with insurers: Who “owns” the member? Overseeing the market/enforcement of the rules Overseeing the market/enforcement of the rules How to control the rising cost of health insurance? How to control the rising cost of health insurance? Negotiation/purchasing power Negotiation/purchasing power Benefits and cost-sharing Benefits and cost-sharing Premium subsidies Premium subsidies