Less is more?

Fewer choices in state ex­changes than ex­pected

Modern Healthcare - - THE WEEK IN HEALTHCARE - Jonathan Block

“Why risk the po­lit­i­cal and cus­tomer back­lash for hik­ing rates and maybe not be­ing able to is­sue an en­roll­ment card on Jan. 1?”

—Robert Laszewski, Health Pol­icy and Strat­egy As­so­ciates

Hav­ing a va­ri­ety of prod­ucts to choose from is usu­ally good for con­sumers, and in Chicago, that means a choice of deep dish pizza from Gino’s East, Gior­dano’s, Lou Mal­nati’s or Pizze­ria Uno. But can cus­tomers have too many choices? Michael Gelder, who has spent many years in the Windy City, says yes.

Gelder is a se­nior health­care pol­icy ad­viser to Illi­nois Gov. Pat Quinn, a Demo­crat who last week an­nounced that six car­ri­ers have ap­plied to of­fer 165 qual­i­fied health plans on its health in­sur­ance ex­change. It’s far fewer than of­fi­cials pre­vi­ously pro­jected, but Gelder said it’s enough.

States are be­gin­ning to get a han­dle on how many choices they’ll of­fer con­sumers this fall as the Pa­tient Pro­tec­tion and Af­ford­able Care Act’s ex­per­i­ment with cre­at­ing com­pet­i­tive in­sur­ance mar­kets out of whole cloth takes shape. Early ev­i­dence sug­gests com­pe­ti­tion may not be as ro­bust as the law’s drafters in­tended, at least not at first. Some com­pet­i­tive bar­ri­ers will re­main, and even the na­tion’s largest car­ri­ers will sit on the side­lines in some states to see what hap­pens next year.

Of­fi­cials in Pres­i­dent Barack Obama’s home state had an­tic­i­pated 260 health plans would be of­fered by 16 in­sur­ance car­ri­ers, based on a sur­vey the Illi­nois Depart­ment of In­sur­ance con­ducted last fall. Gelder, though, said he is pleased with the level of in­ter­est. There have to be enough in­sur­ers so that prices are com­pet­i­tive, but not so com­pet­i­tive that car­ri­ers can’t gain mar­ket share and make money, Gelder said. And, he added, “not so many plans it be­comes over­whelm­ing for con­sumers.”

Gelder also noted that it’s not clear at this point how many of the plans sub­mit­ted in Illi­nois will be ap­proved as qual­i­fied health plans for the Illi­nois ex­change af­ter the state Depart­ment of In­sur­ance eval­u­ates them. Illi­nois, along with New York and Cal­i­for­nia, is one of three large states that have elected to run their own health in­sur­ance ex­changes.

Cal­i­for­nia has re­ceived ex­pres­sions of in­ter­est in par­tic­i­pat­ing in its mar­ket­place from 33 car­ri­ers, said Peter Lee, ex­ec­u­tive di­rec­tor of the Cal­i­for­nia Health Ben­e­fit Ex­change. Lee de­clined to say how many in­sur­ers for­mally sub­mit­ted ap­pli­ca­tions to of­fer plans in the mar­ket­place, though he added that the state aims to an­nounce ten­ta­tive cer­ti­fi­ca­tion for plans se­lected for the ex­change around May 23.

The Golden State’s mar­ket will be di­vided into 19 re­gions, and not all plans se­lected will be avail­able in each area. How­ever, Lee said he be­lieves all the re­gions will have com­pet­i­tive mar­ket­places.

Mean­while, in Ver­mont, a state that has ag­gres­sively em­braced health­care re­form, two car­ri­ers have sub­mit­ted ap­pli­ca­tions and rates for ex­change plans for 2014 so far, Blue Cross and Blue Shield of Ver­mont and MVP Health Care. Ver­mont Health Con­nect Di­rec­tor of Ed­u­ca­tion and Out­reach Sean Shee­han said the state is in the midst of re­view­ing a fil­ing from a third player, the Ver­mont Health Co-op.

As some state-run ex­changes have be­gun to eval­u­ate plan sub­mis­sions from car­ri­ers, some of the largest U.S. in­sur­ance com­pa­nies are giv­ing luke­warm signals about their in­ter­est.

Dur­ing quar­terly earn­ings calls last week, Aetna Pres­i­dent and CEO Mark Ber­tolini and Hu­mana Chief Op­er­at­ing Of­fi­cer James Mur­ray each said his com­pany would likely of­fer

plans in only 14 states. And Unit­edHealth Group Pres­i­dent and CEO Stephen Hem­s­ley told in­vestors last month that the com­pany would be “very se­lec­tive in where we par­tic­i­pate and do not be­lieve the ex­changes will be a sig­nif­i­cant fac­tor for us.”

Wel­lPoint, a Blue Cross and Blue Shield li­censee in 14 states, said it would likely com­pete in all of those ex­changes. Chief Fi­nan­cial Of­fi­cer Wayne Deveydt told in­vestors in an April 24 call that the com­pany had nearly fin­ished its plan de­sign and pric­ing for each of those mar­kets.

But just how com­pet­i­tive each state’s ex­change will be will vary state-by-state, ac­cord­ing to Joel Ario, man­ag­ing di­rec­tor of Manatt Health So­lu­tion in New York and for­mer di­rec­tor of HHS’ Of­fice of Health In­sur­ance Ex­changes. Ario said that greater com­pe­ti­tion among car­ri­ers is likely to be seen in larger states, rather than smaller ones, which are dom­i­nated by a few car­ri­ers.

The ex­changes may change that dy­namic, Ario said. “In smaller states, the ex­change has low­ered bar­ri­ers to en­try for (a car­rier) look­ing to break­ing into a smaller mar­ket,” Ario said. How­ever, he added, in 2014 many smaller in­sur­ers will wait to see how the ex­changes per­form, de­lay­ing en­try un­til 2015 or 2016. Ario also sees a role for con­sumer-ori­ented and -op­er­ated plans, bet­ter known as CO-OPs, in ex­changes, even though the re­main­ing $1.4 bil­lion in fed­eral fund­ing for the $6 bil­lion pro­gram was cut in Jan­uary as part of a deal to avoid the fis­cal cliff. “They’re go­ing to get (more) at­ten­tion than their size would oth­er­wise war­rant.”

But oth­ers are du­bi­ous that the ex­changes will fun­da­men­tally change the com­pet­i­tive dy­namic in many mar­kets.

“I am see­ing many health plans de­cid­ing to just pass on en­ter­ing the ex­change states that are not in their core mar­kets—at least for the first year,” Robert Laszewski, a for­mer in­sur- ance ex­ec­u­tive and pres­i­dent of the con­sult­ing firm Health Pol­icy and Strat­egy As­so­ciates, wrote in a note to clients last week. “Why risk the po­lit­i­cal and cus­tomer back­lash for hik­ing rates and maybe not be­ing able to is­sue an en­roll­ment card on Jan. 1? Why take on more of an IT headache then they al­ready have?”

John Holahan, di­rec­tor of the Ur­ban In­sti­tute’s Health Pol­icy Re­search Cen­ter, wrote in a re­port last fall that in “mar­kets with many in­sur­ers and a dom­i­nant hos­pi­tal, at­tract­ing plan en­rollees gen­er­ally re­quires the in­clu­sion of the hos­pi­tal sys­tem in the net­work.”

Smaller in­sur­ers, Holahan wrote, will still strug­gle to ne­go­ti­ate prices with those dom­i­nant providers. “In mar­kets where there are many in­sur­ers and many hos­pi­tals, out­comes re­main hard to pre­dict, but the po­ten­tial for greater com­pe­ti­tion on price will be en­hanced by the man­aged com­pe­ti­tion struc­ture in­her­ent in the” re­form law.

AP PHOTO

“Even if we do ev­ery­thing per­fectly, there will be glitches and bumps, and that is pretty much true of ev­ery govern­ment pro­gram that’s been set up,” Pres­i­dent Barack Obama said of health in­sur­ance ex­changes at an April 30 news con­fer­ence.

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