California, with a state government as vast and complex as many developed nations, is posed to take on a new role as the blueprint for a new distribution mechanism for health insurance. It is all part of the sweeping federal healthcare reform package signed into law earlier this year.
One of the many mandates in the reform called for the creation of a system of online portals–a virtual marketplace–that would allow healthcare consumers to find affordable coverage plans. While this initiative has been broadly described as being analogous to an Expedia or Travelocity for health insurance, it is in fact a more complex system than that, and one that places health insurance agents squarely in a battle to remain relevant to their customers.
Marian Mulkney, Director for California Healthcare Foundation describes that, “each exchange will vary from state to state, but the broad approach of the exchange is that it offers subsidy opportunities and more health insurance options at better prices for the small business owner and for individuals looking to purchase their own insurance by joining the exchange.” She continues, “The exchange also provides a more organized healthcare structure.”
Brian Jones, Vice President of the Southwest Region for Digital Insurance Inc. believes that the exchanges can be a valuable solution for consumers, providing them access to information in a single environment. “However, simply offering the information in electronic format isn’t enough,” he says. “The role of an advisor will be critical in helping consumers navigate the marketplace and make smart informed choices.”
Once the Patient Protection and Affordable Care Act (PPACA) law goes into effect, each state will have to manage their exchange by creating a member board that will be responsible for selecting the insurance providers for the exchange. Or, they can ask for an exchange to be managed by the federal government.
Although the PPACA does not completely go into effect until January 2014, California has already begun the process of setting up its healthcare exchange, and state legislators have been hard at work trying to get two bills signed that would give the exchange program an official go-ahead.
The two bills for California’s Health Benefit Exchange are the SB 900 and AB 1602. SB 900 describes what the exchange does–namely, making available health plans to individuals and to employers. AB 1602, known as the companion bill, is the regulatory aspect of the exchange. Both bills have been approved by the California legislature and are waiting for a signature from Gov. Schwarzenegger. If signed, California will be the first state to have an exchange created under the PPACA.
The California exchange is not just attempting to facilitate health insurance options, but it is also designed to act as a negotiating forum between consumers and those healthcare providers that opt to join the exchange.
Once California’s exchange is fully operational, and if it proves successful, other states may quickly follow suit.
One state that is already looking to adopt the California blueprint is Colorado. Currently, Colorado has set up forums to discuss its options as well as get input from stakeholders and consumers based on California’s health exchange approach under SB 900 and AB 1602.
Jones, vice president of the southwest region for Digital Insurance Inc. believes that in order for the exchange to be successful, the board will need to provide a variety of choices and implement long-term cost controls. “If California tries to force plan designs and pricing, causing carriers to operate at a loss, the state risks creating a marketplace with options that consumers will not use,” he says.
Not all states may follow the blueprint of California. States like Massachusetts and Utah, which already launched state exchanges prior to PPACA, may choose to stick with their systems that are currently in effect.
Neil Crosby, vice president of public affair for the California Association of Health Underwriters believes that relatively few states will look to California as a model when developing their own exchanges. “Many states do not have as many national insurers as California does,” he says. “With California’s narrower scope in selecting carriers, it will become a matter of who is willing to lower their rates.”
While California will not be the first state to create a health exchange, the scope of what it is building will surely impact design decisions by other states, both positively and negatively. But at this point, nothing is certain. With the November elections around the corner, the exchange bill itself might be subject to change if it is not signed into law by the Governor.