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What Do You Tell Clients About PPACA?

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Major components of the Patient Protection and Affordable Care Act (PPACA) are starting to take shape this year, but all many individual consumers and small business owners really know about the act is that it’s supposed to provide individual health coverage and that many people dislike it.

Even some busy health insurance brokers have a hard time keeping track of all of the many complicated things the act is supposed to do.

If something gets in the way of PPACA implementation, all bets are off.

In the meantime, here is a PPACA implementation primer, to help brokers organize their thoughts about the act and come up with clear, concise explanations for their clients.

One key part of PPACA that has been in the news lately — the health insurance exchange provision — mandates that all U.S. states and territories must establish and launch their own health insurance exchange by Jan. 1, 2014, or default to a federal fallback program.

More immediately, by Jan. 1, 2013 the U.S. Department of Health and Human Services (HHS) must determine whether a state’s exchange is in compliance and may provide either “conditional” or “full approval” depending on progress toward meeting established federal requirements. With that deadline now less than 9 months away, 2012 is shaping up to be a critical year in the evolution and awareness of health insurance exchanges.

Health insurance exchanges create an online, one-stop shopping mall where consumers, employers, insurance brokers and others can easily view competing health plans side by side, comparing benefits, costs, provider networks and other features. With this transparency, eligible employers and individuals are expected to be able to pick the plan that best meets their needs and budget.

This concept is not new. Some public exchanges, for example, are already up and running. A private exchange affiliated with my company, CaliforniaChoice, has been serving the market for 16 years. CaliforniaChoice now provides coverage for 10,000 employers and 150,000 individuals. What is new is the mandate requiring every state to either establish its own exchange or use the federal model by 2014.

It is already apparent that different states will take different approaches. Some states will elect to build and manage their own exchange, some will opt for the federal program, and some may adopt the federal program in 2014 while they continue to develop their own exchange to introduce at a future date.

Those states that have decided to build their own are currently looking at outside resources to assist with the project. Working with a vendor that is already experienced in exchanges and who can offer a turnkey approach to building and managing the state exchange makes sense to many given the complexity of the undertaking coupled with the looming deadline.

Also this year, regulators in every state must determine which elements to include in their “essential health benefits” (EHB) package. PPACA guarantees that health insurance plans offered in the individual and small group markets must offer the EHB package.

These benefits must include preventive, diagnostic and therapeutic services in at least 10 categories of care, such as hospital, emergency, maternity, pediatric, drug, lab services and other care. While the authority was given to HHS to define the EHB package, late last year HHS Secretary Kathleen Sebelius decided to defer this decision to the individual states, meaning that each state now has the authority to define which medical benefits insurance companies will have to offer starting in 2014.

The introduction of state-run health insurance exchanges is expected to result in more people being able to avail themselves of affordable, accessible healthcare. Small business owners who have not provided health insurance in the past due to cost may find that exchanges offer them the means to do so for two fundamental reasons.

The first reason involves shifting their health plan-purchasing model from “defined benefit” to one of “defined contribution.” Under defined contribution, employers specify how much they are comfortable contributing to each employee’s health benefit and then each employee can choose from the multiple carriers and plan types participating in the exchange.

The second reason is that small businesses that purchase coverage through state-based exchanges will be eligible, under the Small Business Health Option Program (SHOP), for annual tax credits. All of this combined means that employers will be able to offer health insurance coverage for their employees in a way that makes fiscal sense while providing ease of administration.

At the same time, individuals may find health insurance purchasing through an exchange more affordable and certainly more value-based thanks to the varied benefit levels and price points from which to choose. Among these options will be a high-deductible plan for those individuals who want the lowest possible premium and the highest possible personal accountability for use of their healthcare dollars. And to make purchasing through an exchange even more attractive, the federal government subsidies will be available to qualifying individuals.

Certainly one of the issues looming over all of this is how the U.S. Supreme Court will rule on PPACA individual health insurance ownership mandate provision.

The court is scheduled to hear the case later this month and issue an opinion in June. But even if the mandate is struck down, many states are still going to move forward with an exchange, and those people who need insurance and qualify for subsidies will still go to the exchange for their coverage.

In the middle of all of this are the health insurance brokers who are currently trying to sort out what all of this means and how it will affect their livelihood. What we can expect from them this year is a renewed focus on continuing to build their book of business in the individual and group markets. 

Brokers know that these are the same people and groups that two years from now will be exploring what they might be eligible for and reviewing their options relative to state-run exchanges.

Brokers who are effective in building their books now will be the resource individuals and groups turn to in 2014 for advice and guidance.

The Congressional Budget Office estimates that more than 8 million people will buy insurance through exchanges in 2014 and the Deloitte Center for Health Solutions foresees an exchange market of as many as 46 million members in 2019 if PPACA is implemented without major changes or surprises.

While that milestone is a few years away, 2012 is the time that important developments are taking place and an opportunity to understand and prepare for the changes that health insurance exchanges will undoubtedly bring. 


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