Federal Judge Strikes Down Part of Obamacare Law

Zefram

An exchange has numerous capabilities, potential services and functions that it can integrate with the existing health policy apparatus. We know that on a basic level it's a marketplace that allows for apples-to-apples comparisons between all available plans. But expanding on the 11 required base functions can be done (and in many states it will make sense to do so) . You seem to be taking a very limited view of an exchange's potential capabilities so it's worth thinking through some of them:

• Outreach/marketing. This goes beyond simply establishing and figuring how to make best use of navigators, it involves actively targeting historically uninsured groups. In some states it will make sense to do this by geography, in others by ethnicity, and so on. States generally have certain goals built around expanding coverage within certain populations and exchange marketing is going to become one of the primary ways to achieve those goals in the next few years.
• Eligibility and enrollment. This gets at the intersection with existing health programs and systems. States have tools for determining eligibility for public programs and managing enrollment but, with a more fully integrated and more standardized eligibility structure, now there's a chance to streamline the process for a significant chunk of state populations such that the confusion and inconvenience of churning between eligibility statuses is minimized. The decisions on how to bridge the gaps between existing health e&e systems (and potentially integrate them horizontally with similar human services functions also being served by states) are going to be very sensitive to local conditions.
• Customer Service. This is the part that seems to be of the most interest to you, though it's certainly not the only function served by exchanges.
• Reporting and plan performance. Data-driven improvement on the provider side is a huge part of ACA but data-driven improvement on the payer side can be achieved using exchanges. Which data is going to be collected and who's going to be collecting it are the primary questions that need to be answered on that front. Presumably different states will be focusing on things like fraud detection, quality measures, customer satisfaction, etc. Continuous improvement programs in exchanges are a good example of something that will be best designed at a more local (i.e. state) level.
• Plan management. Someone has to determine which plans are going to be in the exchange. What are the guidelines for that process? How will Medicaid managed care organizations in the state be incorporated (will the state use the opportunity to try and bring down its managed care expenses)?
• Employer relations. The relation of the individual market to the small group market needs to be determined (should they be merged?). Not only will decisions about the size of employers allowed and encouraged to enter the small business exchange have to be made, links between the exchange and the local business community will need to be fostered and the services provided by the small business exchange will need to be determined.
• Provider relations. Links between the exchange and the provider community are also crucial, particularly in encouraging provider participation/buy-in.
• Actuarial analysis. Plan standardization into actuarial tiers will require actuarial analysis on the part of whoever is operating the exchange; the same is true of premium rate increase oversight (which is subject to state-designed standards).
• Financial management. Exchange sustainability and transparency is going to be a crucial issue once exchanges start gearing up for operation.

So what's the difference between one national exchange and smaller state-based exchanges? State-based exchanges have flexibility in approaching these problems, meaning each one is likely to look different as it adapts to address local conditions (in the same way that all 51 Medicaid programs are unique, even though each is subject to the same base federal guidance). Provider and employer relations, for example, require local interaction between local leaders. Integrating exchange information systems with other state systems (e.g. the state's Medicaid information systems) takes on a very different character if the state owns or contracts out the exchange.

The governance of exchanges is very different under a state-based model. Policy decisions and operational guidance of the ACA's exchanges will occur at the regional level, or within a state's existing Health Authority or other state HHS structure (or, potentially, even within an Insurance Department), or a state might hand exchange governance off to a public-private or private entity. The combination of decisions made by the local exchange governance body and the authorizing legislation passed by the state legislature will determine the capabilities and character of the exchange.

You could create a grid with an exchange's capability model (from thin to robust capabilities) on one axis and its market characteristics on the other (i.e. competitive to regulated). Then each quadrant gives you a different model that an exchange might take. Competitive exchanges with relatively thin capabilities are characterized as information aggregators, in that for the most part they simply collect and present information to consumers in an organized fashion. This exchange will likely allow any plan meeting minimum federal standards to be sold through it. At the opposite extreme (robust capabilities with heavier regulation), you get a market curator model, which has a significantly more robust end-to-end consumer experience and likely selects participating plans in the exchange in some fashion. The other quadrants give you purchaser- and retailer-oriented exchanges with varying levels of functionality.

A single national exchange obviously doesn't allow for this level of variation. Nor would local governance entities dominate under a national exchange. You would, in all likelihood, get simplified standards and an exchange with much more limited potential functionality. And it certainly wouldn't be tailorable to meet the particular health policy goals of each state and build upon previous efforts. It would still most likely not be particularly attuned to local concerns. For reference, the national exchange proposed last year was an active purchaser of health plans governed by a new subdivision of HHS. If the state-based exchanges decide to be active purchasers (California's exchange, for example, will be), bids are submitted to and evaluated by local authorities, not officials in HHS.

So yes, ACA's exchanges offer substantially more local autonomy and variation than simply letting state people answer the phones.

WhoWee

Typically, anything that increases bureaucracy will increase cost - would you agree?

The greatest current obstacle to a free market (competitive pricing) is state controlled regulation - every state currently has it's own rules. An insurance carrier that wants to insure people in 50 states needs (at a minimum) 50 duplicate compliance departments.

Now, the Federal Government is heaping regulations on top of this pile and mandating an expansion of coverage.

How (other than cut backs in service) can this possibly save money?

Sometimes the answer is to UNRAVEL the tangle and start over - this is one of those opportunities. If the intention is reform - then we need to simplify, untangle, streamline, and taper the whole regulatory process - not complicate it to the point that an agent and a recordskeeper need a law degrees.

Zefram

This is a bit bewildering. It sounds like you're arguing for simplification and standardization of insurance market rules, which at the very least would require a base, uniform federal standard. Then every state would be operating under the same rules. That, of course, is what's happening here. Exchanges will organize the individual market which, by and large, will be something of a simplification. One of the main goals of an exchange is to encourage competition on price and quality alone, instead of allowing insurers to compete on risk (thus limiting access, as well).

Same thing with the actuarial tiers and essential benefits package. Austin Frakt put it well a few weeks ago (he was talking about Medicare voucher proposals here but the principle is the same):

The whole point of a market-based system is to harness the power of consumer choice. But consumers can’t send meaningful signals if the market has an incomprehensible structure. One of the conditions for a competitive market is fully informed participants. The notion that seniors–or anyone–can meaningfully shop in a market with an unlimited number of plans that vary in all possible ways is ludicrous. (There is already evidence that beneficiaries don’t optimally select among the scores of Part D plans available now and that reducing the number of available plans would increase welfare.) The Medicare supplement (Medigap) market is a good model of competition within standardization. Making products more similar encourages competition. Allowing them to vary along a small number of dimensions helps consumers make sensible comparisons consistent with individual preference. Isn’t that the point?

As I went through above, state exchanges will have different functionalities, they'll look a bit different in different states, but they'll still be enforcing virtually the same set of rules. Setting up uniform minimum standards is a necessary first step toward allowing plans to be sold in other states' exchanges, should states wish to allow that (although it's worth noting that certain multi-state plans will be offered in exchanges immediately). I suspect that many states will be considering that in a few years; even now, several states are considering the possibility of participating in a multi-state exchange. If Maine's experience is characteristic, though, there's likely some dissension within those states. In Maine the legislature is intrigued by the idea of a multi-state exchange (which I think would be interesting to see in New England), but the executive branch folks who would be involved in operating and interacting with that exchange prefer one limited to just their own state.


There's a lot going on with the ACA but at the center of it is the attempt to balance increased access, quality improvement, and cost growth reduction. The exchanges are a piece of the puzzle but obviously they're the piece (along with the simplification and expansion of Medicaid eligibility) that's aimed primarily at access. A degree of quality improvement is built into exchange functionality, though as I mentioned above how much of a degree will be up to the state operating the exchange. The cost control strategy revolves around simplifying the consumer's experience, providing (to steal Frakt's phrases) a comprehensible market structure that allows for meaningful choice, and promoting competition on the price and quality of plans only.

I think something along those lines is a necessary step if you want to try and slow cost growth but, again, the primary goal of the exchanges is to get more people covered in a well-functioning market. The larger cost control attempts appear in the rest of the ACA, outside of the insurance reform piece. Those are aimed more at improving the way we deliver care, though the excise tax is also expected to be a large cost control in the long run.

WhoWee

The "base rules" were already well established before the recent legislation. Medicare sets the reimbursement schedules. HHS and HIPPA/MIPPA control all information. The state and federal agencies control provider services, training, product, techniques, reporting, and general administration. The state departments of insurance control the carriers and their products, operations, marketing and administration.

I look at the insurance code in the same way a contractor looks at building codes. If you build to the highest code - every building will be compliant.

Simplification could mean raising the standard - while reducing the administrative costs.

Zefram

Was your complaint not specifically that "every state currently has it's own rules" ?

Indeed. That's exactly the aim here.

WhoWee

Let me start by disclosing that I work with these rules on a daily basis. Further, IMO, Medicare and the CMS should not be the models for moving forward.

With the exchange plan, we have an opportunity to streamline and simplify insurance regulation. This is an opportunity to shrink government and bureaucracy AND reduce legal, administrative, and operating expenses at the carrier level.

However, if all 50 states design their own custom exchange (in addition to their existing 50 departments of insurance) - it will further complicate administration and compliance. It will also expand the size of Government and increase legal, administrative, and operating expenses at the carrier level.

mheslep

Visibly the states never have for health care in modern times. How are you able to now say that they will, with no certain rule in place in PPACA that allows individuals to go buy care across state lines as is granted in Patient's Health?

Zefram

There's a trade-off that has to be made. Opting for complete standardization and centralization instead of granting states more autonomy would be attacked as a federal power grab, with bureaucrats in Washington ignoring the boots on the ground in the states who understand local conditions and needs. Granted, the exchanges that were authorized in the ACA often don't get credit for what they are anyway, but I think the benefits of this structure can outweigh the drawbacks, if they're implemented with the intent of achieving various health policy goals pursued by the states. After the last election, in many states that's far from certain.

At present, federally-mandated across-state-lines purchasing is pushed by conservatives because it's designed as a mechanism for deregulation; for the same reason, it's opposed by most liberals. With uniform base regulations operating in every state's exchange, most of the left's rationale for opposing federal action to allow out-of-state plans to sell in state exchanges evaporates. It still can be used to get around state-set regulations that go beyond ACA's baseline but that's less worrisome, as that's very different than wholesale deregulation of the insurance market. Now, diluting the insurance market in an area isn't necessarily a good idea for bringing prices down but the free-for-all version of interstate purchasing being pushed by many conservatives will at least be more politically viable, as it's much less problematic in the presence of federal minimum standards.

I'm not sure what you're referring to with Patient's Health, but going back to Ryan's Patients' Choice Act, note that it doesn't allow blanket interstate purchasing (à la the Shadegg bill or the repeal-and-replace law). The only bit related to interstate purchasing in it concerns the exchanges:

(g) Regional Options-

(1) INTERSTATE COMPACTS- Two or more States that establish a State Exchange may enter into interstate compacts providing for the regulations of health insurance coverage offered within such States.
(2) MODEL LEGISLATION- States adopting model legislation as developed by the National Association of Insurance Commissioners shall be eligible to enter into an interstate compact as provided for in this section.
(3) MULTI-STATE POOLING ARRANGEMENTS- State Exchanges may implement a multi-state health care coverage pooling arrangement under this title.

If you've read the ACA, this concept should look very familiar.

mheslep

Yes ...Choice Act, but despite that reference I was actually thinking about the more recent proposal from Ryan here:

http://www.roadmap.republicans.budge...Healthsecurity

Al68

I don't want to speak for WhoWee, but the biggest obstacle to a free market caused by state regulations is not just that each state has different regs, but that citizens are not free to buy "out of state" insurance. Lifting that prohibition would end the necessity of each insurer having 50 different sets of regs to comply with, but would require no uniformity among state regs, or any federal standard. Each citizen could buy insurance from whichever state, and whichever company, he determined offered the best type of policy for him.

WhoWee

I think you've touched on the heart of the issue. The Federal Government already controls every aspect of health care (as I've explained in earlier posts). The individual states control insurance regulations - which restricts trade and increases costs. The Feds don't want to unravel/untangle the "mess" at the state level - because it will look like a power grab.

I agree, the boots on the ground - the people most familiar with the problems are (IMO - once again) ignored.

SW VandeCarr

I predict that in the future we will be required to get a license to operate our bodies.

nismaratwork

I predict that this Wednesday's vote to repeal the bill has been suspended already. Oh well, maybe next time someone won't snap in the reddest state on earth.

WhoWee

Here's a little update on health care reform progress. I think we can all agree the insurance industry has been portrayed as the bad guys - correct?

Also, I've disclosed in nearly every thread on the topic that I'm professionally active in the insurance industry.

Accordingly, (I can't post specific carrier information) effective January 1, 2011 - several carriers have issued pay cuts of up to 50% to their career agents. That is, the commission-only sales force was notified that compensation for new business would be paid at a much lower rate. One example was for direct appointment reductions from 20% to 10% on health insurance products - other sub-agent agreements have comparable cuts.

Again, these agents work on a commission only basis and work very hard to build a book of business.

But who knows, if this strategy works, perhaps the same formula can be applied to Government workers - a 50% reduction of pay (and benefits - they have them - insurance agents typically don't) could lessen the deficit.

nismaratwork

Whaaaaat? I don't think people hate insurance AGENTS... it's the system as a whole, the costs imposed, and profits made by the corporation as a whole. I imagine that salaries and benefits for the people selling plans probably is about the same as any job, and cutting it seems cruel and without any benefit except to those people who the public DOES hate; the C class execs, and other upper management, and major investors who get concentrated profit. After all, it's hard to blame TONS of faceless investors within the 401K range of investment.

btw, I didn't know that you worked in insurance. You have my condolences.

WhoWee

I wear many hats.

The trend I see (with respect to insurance agents) is towards a less educated, lower paid, higher turnover, telemarketing format. This model requires people call in and be enrolled by a faceless person who can't possibly gauge the individual needs nor tailor solutions that fit their clients in both the short and long term.

Assuming healthcare reform fixes ALL of the problems in the under age and Medicare eligible categories - greatest concern is Long Term Care. Medicare does not address the needs of person beyond the first 100 days in a skilled nursing facility. Needless to say, long term nursing home care care is expensive and most people have no protection - many sign over their homes and go on Medicaid - another problem surely.

nismaratwork

That's a disturbing trend... I can't see how under-educated employees will pay off for the consumer (not that such is the point). I'm sorry that your industry is changing in such an unfortunate way, and I know exactly what you mean about the lack of skilled nursing, the involvement required for nursing care, and frankly... just plain old NURSES. We are in trouble, whatever the cause (we don't need to agree), we can agree that trouble is-ah-comin'