Exchanges Are Coming, Ready Or Not

By Linda Koco
InsuranceNewsNet

Under health care reform, workers who have no health insurance but who work for firms with 50 or more employees would have been able, starting in 2014, to obtain health care coverage from their employer. But last week, the White House put that provision of the Affordable Care Act (ACA) on delay for a year.

So what are those uninsured workers to do?

The answer that surfaced is: They can buy their own coverage through the new state health insurance exchanges. Exchanges are online insurance marketplaces, open to all. Created by ACA, they will begin sales in October for policies that go into effect Jan. 1.

While it is true that the exchanges are an option, it is also true that the exchanges are in various stages of readiness. As a result, shopping at an exchange could be fraught with confusion on the one hand, and cost/value uncertainty on the other.

Dubious

For instance, while some exchanges will offer lots of plans for consumers to consider, others may be fairly limited. Likewise with carriers. One state exchange may have only a couple of insurance companies issuing exchange policies, whereas the exchange in another state may boast 10 or more carriers and substantial variety in plan options.

When choices are limited, that typically puts upward pressure on pricing, which is not what ACA developers had in mind.

Naturally, the state insurance departments will keep watch over rates, but the pressure points will be there all the same. Meanwhile, consumers in states with only a few exchange players may question the value of the exchange.

Another problem is that some carriers have said they are limiting their offers, or choosing not to write business, through particular exchanges. The reasons may include: 1) the exchange environment is too new; 2) the insurers need to focus more on meeting ACA standards than on exchange involvement, and/or 3) the insurers are only small players in the market so why bother.

That also is not something the ACA developers had in mind; they envisioned many carriers scrambling to find a solid perch on the exchanges.

The implementation logistics are befuddling as well. Under ACA, states are allowed to set up their own exchanges, but 27 states have elected to let the federal government take on that task instead, according to the Center of Policy and Budget Analysis.

Decision-making over whether federal or state government would handle this dragged on for many months and even a year or more in some cases. That means some states were late to the exchange party and are only now scurrying to catch-up. It also means that consumers in those states may not have access to exchange resources for help with questions during the current ramp-up period.

Twists and turns

To get the flavor of all this, check out the following twists and turns from recent weeks:

In Iowa, six carriers applied to participate in the Iowa exchange but the state insurance commissioner’s office says only two carriers—Coventry Health Care of Iowa and CoOpportunity Health—are expected to offer statewide individual coverage. One of the two, CoOpportunity, also is interested in offering small group plans on a statewide basis.

For a while, it looked as if only one carrier was interested in Iowa’s exchange, so the set-up was touch-and-go for a while. “Now we know,” Insurance Commissioner Nick Gerhart said in a statement. “Now we can get to work on the next phase of processing the applications and getting the results to the federal agencies for their process.”

In Montana, only three insurers signed up to sell policies through the federally-facilitated exchange. The carriers are Blue Cross Blue Shield of Montana, PacificSource Health Plans, and the Montana Health CO-OP.

But Montana Insurance Commissioner Monica J. Lindeen is happy about one thing: A new study has projected that premium rates for exchange policies are lower than previously expected. For example, a Montana resident buying individual health insurance through the exchange can expect to pay an average of $273 a month for comprehensive health insurance (before deduction of any ACA-related subsidies). That compares to an estimated average of $290 a month had ACA not been enacted.

"A lot of Montanans have been worried about how Obamacare would affect the cost of health insurance," Lindeen said in a statement. "These preliminary figures show that rates haven't skyrocketed. Rates are actually lower than projections.”

In Washington state, it’s a different story. Several carriers—nine, in fact—signed up to provide individual and family coverages through the state exchange. But on the small business side of things, the state only received “limited participation” in the Small Business Health Options Program (SHOP) in certain counties.

In Colorado, the exchange stirred up a virtual whirlwind, comparatively speaking. A much larger group of carriers, 17 in all, submitted plans for the individual and small group markets, according to the Colorado Division of Insurance.

Of the 17 carriers, 13 submitted plans to be sold through the exchange. In fact, five of the 13 limited their submissions only for sale through the exchange.

Those numbers are eye-popping when compared the figures reported by the states mentioned earlier. The level of interest was high enough to spur then-Commissioner Jim Riesberg to comment on being “very encouraged” by the showing.

It should be noted that the Colorado numbers reflect submissions for individual and small group business, not just individual. Also, a preliminary review found that monthly premiums for the new health plans vary widely. You got it: Regulatory review is already underway.

In California, 13 plans will be offering products through the state’s new exchange. But missing among the 13 will be name-brand companies UnitedHealth Group and Aetna, both of which did not ask to participate in the California exchange and both of which have now said they will exit the state’s individual health care market at year-end.

Insurance Commissioner Dave Jones noted in a statement this week that the two soon-to-exit carriers have a “very small share” of the California market. Still, he predicted that more market consolidation will now occur among the state’s remaining health insurers. That “means an increased likelihood of even higher prices from those health insurers downstream,” he predicted.

Finally, in Vermont, there is a squabble going on over the state’s requirement that its new insurance exchange be the “only place” where individuals and businesses with 50 or fewer employees can get health insurance. Opponents say exchange purchases should be voluntary, not mandatory. Where this debate will go is just one more of the many questions that people have about exchanges.

Expecting a flood

The federal government is no doubt anticipating a flood of inquiries about all the above and more. It recently refreshed its website—www.healthcare.gov—to, as the website puts it, “help you get ready for the launch of the Health Insurance Marketplace on Oct. 1.”

The state insurance exchanges offer informational content, too, so the two-pronged assault on confusion might help. If not, questions will keep on spinning. How many choices will there be? Will exchange rates be higher or lower than outside the plan? What happens if carriers pull out? Is my state on the right track with this?

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com.