Massachusetts regulators have been tinkering with the design of their state’s health insurance exchange.
Glen Shor, executive director of the state’s Commonwealth Health Insurance Connector Authority, talked about the authority’s Web-based Commonwealth Choice exchange recently at a hearing in Boston on health care costs organized by the Massachusetts of Health Care Finance and Policy.
The authority’s exchange helped influence the drafters of the federal Patient Protection and Affordable Care Act of 2010 (PPACA). One PPACA section requires states and the U.S. Department of Health and Human Services to set up a system of health insurance exchanges by 2014. The exchanges are supposed to provide a “one stop shopping system” that individuals and small groups can use to buy high-quality health coverage with new federal health insurance tax credits.
Commonwealth Choice — an exchange for Massachusetts residents who earn too much to qualify for Medicaid — now serves about 40,000 people, Shor said, according to a written version of his testimony provided by the Massachusetts Office of Health and Human Services.
Unlike the PPACA exchange program, which would offer access to tax credits, Commonwealth Choices offers no pricing advantage over consumers buying coverage through traditional channels, Shor said.
“Along these lines, no individual or small business is effectively limited or assigned to shopping through the Health Connector,” Shor said.
One lesson exchange managers learned was to avoid giving consumers too many choices.
Originally, Commonwealth Choice offered 37 different benefit packages, grouped in terms of actuarial value, or the percentage of routine care costs paid , rather than benefits package designs.
“Through subsequent focus groups, we found that our customers liked having some degree of choice but were overwhelmed by the blizzard of offerings on our shelf at that time,” Shor said. “In response to this feedback, we moved in January of 2010 to a reduced number of standardized benefit packages, currently 10, to cut through the confusion while still offering a reasonably diverse number of benefit choices.”
Like the designers of the PPACA exchange system, Commonwealth Choice managers have faced concerns about adverse selection, or the risk that sicker consumers might flock to certain plans and throw off their medical loss ratios.
Commonwealth Choice has allowed carriers to offer some plans with narrow, low-cost provider networks, or “limited network products,” but, to prevent carriers from using the limited network products to scare off sicker consumers, exchange managers require the carriers to offer the limited network products together with comparable broad network products, Shore said.
The Commonwealth Choice exchange has had trouble with attracting small employers, and managers are revamping the small group program to create a new Business Express program, Shor said.
Massachusetts will try to lure small groups by eliminating up-front fees for groups with 1 to 5 employees and offering some small businesses a free wellness program and a 5% premium subsidy.
Also at the hearing:
- Deborah Chollet of Mathematica Policy Research, Princeton, N.J., reported that private insurers provide coverage for only about 43% of Massachusetts residents with health insurance. Medicaid covers 26% of insured residents and Medicare covers 31%.
- Stacey Eccleston, assistant commissioner of the Division of Health Care Finance and Policy said the prices paid to the highest-paid hospitals are about 70% higher, overall, than the prices paid to the lowest-paid hospitals.
- Karen Teseng, an assistant attorney general, noted that, from 2005 to 2008, the more expensive Massachusetts hospitals gained market share while less expensive hospitals lost share. National policymakers have hoped that replacing fee-for-service provider payments with a strategy for bundling payments could help hold down health care costs, but, in Massachusetts, 3 of the 5 most expensive hospitals are paid using some kind of “global” arrangement.