By Joan Alker and Sabrina Corlette, Georgetown University Health Policy Institute
A sad reality of working on health care policy at the moment is the incredible politicization of the debate. This climate has the unfortunate byproduct of obstructing compromise and preventing constructive dialogue about different approaches states may take to implementing the Affordable Care Act.
Along with our Georgetown colleagues, Joe Touschner and Joann Volk, we just undertook a very interesting exercise – writing a paper for the Robert Wood Johnson Foundation comparing the Utah and Massachusetts exchanges. We started the project thinking we were looking at two very different animals. For many observers, they sit on opposite points of a continuum of what exchanges can and should provide for consumers and small businesses. As one Utah official put it, they “may well serve as bookends for other states.”
And there are certainly significant differences. But what struck us in writing the paper was some of the commonalities.
Certainly, the two exchanges were launched with very different visions. The Utah model was designed to enhance the sharing of information among the employers, employees, insurers, and brokers, and to enhance predictability for employers via a “defined contribution” benefit. In Massachusetts, by contrast, the Connector was seen as a key gateway to universal or near-universal coverage for its residents.
And in some ways, the states live up to their stereotypes. The Connector has been very effective in using its market clout in its subsidized market to keep premium increases down – they’ve been held under 5%, or about half the rate of growth in the outside market. And, in response to feedback from customers that the number of product choices was overwhelming, the Connector has required considerable standardization – plans can currently offer no more than one Gold, three Silver, and three Bronze products.
Utah’s exchange takes any willing plan, so long as they meet some minimal requirements, and doesn’t constrain the products they offer. In 2010, there were 146 plan options for 436 enrollees. So many options, in fact, that a survey of employers who registered but did not ultimately enroll found that 55% cited the process for choosing a health plan as the reason they walked away.
But in other ways the stereotype breaks down. For example, the Massachusetts Connector has yet to turn away a plan that expressed a wish to participate. And for its unsubsidized population, including small businesses, it does little to negotiate prices with plans – it simply doesn’t have the leverage to do so.
And in Utah – after the exchange struggled early on because of high prices, low enrollment and the limited number of available plans, the state enacted new regulations that require the same rating practices for plans inside and outside the exchange, and limit rating factors that plans can use. And they moved to penalize insurers who do not participate in the exchange by barring them from joining later. Yet of the top five insurance carriers in the state (based on market share), only three are currently participating.
Some other key findings of the paper include:
- Exchanges can be effective market innovators. For both exchanges, perhaps the most innovative contribution to the landscape is the web-based mechanism through which consumers and small business owners can make informed comparisons among health plans. Massachusetts’ Connector in particular has used decision-support tools and a streamlined set of benefit packages to help make consumers’ purchasing decisions simpler and easier. And giving consumers confidence that they are choosing among quality products, i.e., through certification or a “Seal of Approval,” can promote the selection of lower cost plans.
- Effective “active purchasing” requires market knowledge and nimbleness in the face of consumer demands. Even without the leverage of premium subsidies, the Massachusetts Connector has effectively streamlined the insurance products on its shelves in part through market research that provided clear data that consumers were demanding greater standardization of products. However, being an active purchaser requires staff expertise and resources. As one observer put it, “If you want to take ‘any willing plan,’ it’s a lot easier. But then you don’t add much value, either.”
- You get what you pay for. While the Connector’s $30 million budget is dramatically more than what the Utah Exchange spends for administration, it reflects both substantially higher enrollment (approximately 220,000 vs. 2,200) as well as a much broader scope of responsibilities. In addition, the lack of budget and staff has made it difficult for the Utah Exchange to respond and adjust to problems as they arise.
- Exchanges without associated subsidies can do little to make insurance more affordable. Premium and cost-sharing subsidies will be critical for most individuals and will help exchanges attract and sustain their enrollment. But for those who are unsubsidized, such as small business purchasers, exchanges will likely struggle to provide a product that is more affordable than what is available in the outside market. The ACA’s small business tax credit will help small group exchanges with enrollment, but it is narrowly targeted and limited to three years.
- Public outreach and simple enrollment are keys to success. Exchanges must attract a critical mass of enrollees early on to be sustainable. Extensive public education about consumers’ new rights and responsibilities will be necessary, as well as one-on-one assistance to help those who are new to the process. And if the eligibility and enrollment process is burdensome and time consuming, it will discourage many from participating, particularly those not eligible for subsidies (including small businesses).
In the end, perhaps the most important element for both exchanges is the commitment of their political leadership to their long-term success and sustainability. Both states have demonstrated a willingness to be flexible and pragmatic in making the legal and administrative choices necessary to innovate, adjust to market changes and respond to customer feedback. As other states begin the hard work of creating their own exchanges, they’d be wise to view the Utah and Massachusetts models not as ideological “bookends” but rather as continually evolving entities that should be designed to meet the needs of real people – rather than fueling an already overheated and often “fact-free” political debate.