1. Overview of Massachusetts Health Connector & Exchange: Design Issues & Lessons Learned Kevin J. Counihan Chief Marketing Officer 2010 Health Care Forecast Conference U.C. Irvine February 25, 2010

2. 2 Agenda 1.Progress in Massachusetts 2.Application to National Health Reform 3.Preliminary Design Issues for Exchanges 4.Lessons Learned

3. 3 Achievements of Massachusetts Health Care Reform – 8 Facts 1.2.6% uninsured after 2 years 2.43% of newly insured are private pay 3.CommCare average rate trend = 4.7% thru FY 2010 4.PMPM Cost is at Budget 5.98.6% compliance rate (taxpayer filings) 6.69% - 75% approval rating 7.Free Care Pool usage down 38% - payments down 36% 8.Payment Reform is Next Step – MA +33% Nat’l Av’g

4. 4 Some Myths about MA Health Care Reform Comm Care costs MA $1.3B in FY ’09 - False –’06 Proj of FY09 spend of $725M –Actual FY09 spend is ~$800M Premiums have increased Dramatically - False –Commercial increases 9-12% –Comm Care increases <5% –Ind/Small Group market merger impact HCR caused a PCP shortage and long wait - False –Over 90% of individuals report having PCP –5% reported unmet need v. ~20% nationally –Wait time increase from 38 to 44 days

5. 5 Application to National Reform: “Shared Responsibility”

6. 6 Role of the Health Connector Establish and administer Commonwealth Care™ subsidized coverage for low-income, uninsured adults - up to 300% of FPL Establish and administer Commonwealth Choice™, a commercial insurance “exchange:” –Standardized benefit plans –More affordable coverage options (small group/non-group market merger) Make policy decisions as authorized by Health Care Reform Law: –Definition of Minimum Credible Coverage (MCC) –Schedule of Affordability –Section 125 Regulations Conduct outreach and communication efforts to inform public of new opportunities and responsibilities

7. 7 Application to National Reform Efforts 1.Expansion of Medicaid coverage – new subsidized plans for lower income Ees not covered by ESI 2.No exclusions for pre-existing conditions 3.Guaranteed Renewal 4.Merger of small group and individual markets 5.Insurance exchanges for individuals and small businesses 6.Individual mandate with penalty for not having insurance 7. Employer mandate or “pay or play??”

8. 8 Subsidized Uninsured Small Employers Other?Individual/Non-Group Key Elements of National Reform: 3. Insurance Exchanges

9. 9 Likely Functions of Exchanges 1. Subsidize coverage for low-income uninsured 2. Offer coverage for other target market segments (non-group, small group, other?) 3. Specify plan designs & coverage tiers for unsubsidized coverage 4. Contract with & sell health plans 5. Education, outreach & marketing 6. Oversee/Ensure risk adjustment works 7. Ensure compliance with benefit offering rules and requirements - Benefits determined by Feds (MCC?) - States must reimburse Feds for extra costs due to mandates beyond MCC

10. 10 Who Will “Run” Exchange? HELP –States may decide whether governmental, non- profit, or quasi-independent –No federal rules Finance –National exchange (“Yellow Pages”) – moving to state exchange –Federal rules House –Commission of Health Choices Administration –States may apply to run, with federal rules

11. 11 Commonwealth Choice: unsubsidized marketplace for non- & small-group

12. 12 Starting List of Design Issues 1.Governance: Semi-independent Public Agency - Distributor/Guardian of public funds -“Market maker” -Interacts w/ other gov’t agencies

13. 13 Starting List of Design Issues 2. Coordinate with Other Agencies -Medicaid -Division of Insurance -Dept of Revenue (IRS?) -Health & Human Services

14. 14 Starting List of Design Issues 3. Premium Rating in the Exchange - Self-contained Purchaser (S-I) - Market Rates, based on ACR - Managing the “Risk Premium”

15. 15 Starting List of Design Issues 4. Risk Adjustment - Mandate is Essential - Standardizing Benefits - Age/sex/geography & acuity - Limiting Choice of Actuarial Tiers

16. 16 Starting List of Design Issues 5. Benefits specification - Market Research - Encourage Innovation - Standardize for Easy Comparison - Manage Change

17. 17 Starting List of Design Issues 6. Carrier Bidding & Selection - “Managed Competition” - Transparency - Long-term Relationships

18. 18 Starting List of Design Issues 7. Administrative Functions - Outreach & Marketing - Eligibility Determination - Enrollment & Premium Billing - Customer Service - Appeals

19. 19 Potential Value of Exchanges 1.Protecting/representing enrollees 2.Prudent purchasing of health insurance 3.Choice & “managed competition” 4.Scale economies in distribution

20. 20 Lessons Learned Hire Staff with Health Insurance Experience Sequence Health Reform Policy Decisions Communication Never Ends Balance Minimum Coverage / Affordability For Consumers, Less = More Nurture Stakeholder Relationships Leverage Public/Private Practices

21. 21 Increased Support for Reform Should be Not Government’s Responsible Responsibility Overall60% 37% Rep29% 69% Dem86% 13% Ind60% 37% G 20 92% 7% Source: Brookings Institute / World Public Opinion

22. 22 It’s About People, Not Just Policy “If I didn’t have health insurance, I would never have made an appointment with my doctor because of the cost. The cancer would have spread and I would not be alive today to tell you my story.” - Jaclyn Michalos, 27