My take on state health insurance exchanges - Part 3

Regardless of whether or not the Supreme Court strikes down the individual mandate or the entire 2010 health reform law in June, state-based health insurance exchanges are a good idea and, if established, should benefit many working Americans who are too well-off to qualify for Medicaid but unable to otherwise afford health insurance coverage on their own. This is the last of three posts excerpted from an unpublished paper that I recently authored on this topic. You can read Parts 1 and 2 here and here.

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Exchanges will need to establish procedures for determining 1) citizenship or legal resident status; 2) income eligibility for premium tax credits and cost-sharing reductions; and 3) eligibility for the public insurance programs Medicaid and CHIP. Since the ACA also expands Medicaid eligibility, fluctuations in income over time will force millions of people to repeatedly transition from public insurance coverage to a subsidized exchange plan and vice versa, changing health provider networks and potentially disrupting continuity of care. Exchanges may help to facilitate these transitions by minimizing paper documentation, guaranteeing minimum eligibility periods regardless of interim income changes, and making it possible for at least some insurance plans to be offered under Medicaid and within the exchange (“dual certification”). As one expert advised, since the intent of the ACA was to expand insurance coverage, “Exchanges should see it as their responsibility to ensure the continued enrollment of eligible individuals and families for tax credits and public programs, rather than holding individuals responsible for continually having to work at maintaining their own eligibility.”

The Massachusetts Connector’s experience illustrates the challenges of managing transitions between private and public insurance plans, which often lead to gaps in coverage: “In particular, the dates for enrollment and disenrollment between public and private coverage are not aligned, so that individuals losing Medicaid eligibility early in a month must wait until the first of the following month to enroll in CommCare [exchange for individuals below 300% of the federal poverty line].” Consequently, California anticipated the problem of coordination with public insurance programs in the legislative language enabling its exchange, which requires that the governing board “ensure consistent eligibility and enrollment processes and seamless transitions between coverage.” However, the information technology needed to achieve this goal is still being developed. In December 2011, the Maryland Health Benefit Exchange Board set a goal of ensuring continuity of care between public and private programs by recommending: “The Exchange should require transition of care language in contracts as part of qualified health plan certification and work with Medicaid to promote reciprocal care transition provisions in the managed care organization contracts.”

In drafting the blueprints for their state health insurance exchanges, Maryland and California have largely followed the successful model of the Massachusetts Connector. Other states that are planning to set up their own exchanges will also need to grapple with the questions regarding governance; reducing adverse selection; making plan information available and accessible to consumers; determining eligibility; facilitating transitions between public insurance and subsidized private plans within the exchanges; and a host of other design issues.

Despite the similarities in the structures and functions of the three health insurance exchanges discussed here, characteristics of other state populations, local insurance markets, and existing regulatory institutions will likely lead to a diversity of other approaches. For example, Rhode Island, Utah and Vermont have located their exchanges entirely within state governments, while Hawaii has structured its exchange as an independent nonprofit. Reassuringly, a recent simulation study suggested that state-to-state variations in several critical exchange design elements (e.g., separating versus merging the individual and small-group markets) would have only small effects on overall coverage and cost outcomes nationwide. By establishing some basic requirements but granting states substantial leeway to operate (or not operate) their exchanges in accordance with local resources and preferences, the ACA will hopefully achieve its goal of providing access to affordable health coverage to millions of currently uninsured Americans.