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Vermont's challenges typical of states rushing to build insurance exchanges

By Jonathan Block
Posted: April 27, 2013 - 12:01 am ET

Vermont may have a reputation as a small, laid-back state best known for maple syrup and Ben & Jerry's ice cream, but the task facing Lindsey Tucker is almost as large as the state's Green Mountains. The deputy commissioner of the state's health insurance exchange, Vermont Health Connect, faces the daunting task of building a health insurance exchange that will be ready to begin enrolling residents in less than five months.

Late-arriving regulations from Washington have complicated her efforts to build an information technology system that can seamlessly exchange data with federal officials, who must approve applications for subsidies that will be available to low- and moderate-income residents looking to buy policies on the exchange. The state must also create a system that can channel new enrollees into the state's Medicaid program if they are eligible.

There is also the challenge of certifying health insurance plans' eligibility for listing on the exchanges and developing a statewide outreach campaign to encourage the uninsured to sign up. “The timeline is really the biggest challenge” for us, Tucker says. “Building a product, an interface of this size with, frankly, a changing landscape over the last year” has been difficult.

The difficulties facing a small state such as Vermont, which wholeheartedly endorses the goals of the healthcare reform act, mirrors problems now facing exchange officials in the 17 states and the District of Columbia that are building their own exchanges, and the seven that have formed partnerships with the federal government. The same issues confront officials in Washington charged with building a national system flexible enough to serve different market conditions in the 26 states that opted out of building their own exchanges. The total is far more than originally expected.

Signals that the federal and state systems won't be ready in time triggered a series of hearings on Capitol Hill, where one of healthcare reform's leading architects, retiring Sen. Max Baucus (D-Mont.) recently warned of a coming “train wreck.” His fear: On Oct. 1, uninsured individuals and families across the country will not be able to enroll in the health plans promised under the Patient Protection and Affordable Care Act.

Uncle Sam has perhaps the biggest hill to climb, especially since final guidance for federally facilitated exchanges has yet to be released. Not only does the government need to be involved in those states, but they also are required to operate a federal data hub, the huge IT system that will electronically communicate with states in determining Medicaid and Children's Health Insurance Program coverage as well as eligibility for premium tax credits

The state-run exchanges appear to be farther along in their exchange preparations, according to policy experts who have been following exchange process. Still, there is some concern about meeting the fall deadline.

“Oct. 1 might get pushed,” says Dan Schuyler, director of exchange technology at Salt Lake City-based consultancy Leavitt Partners. Schuyler, a former technology director for the Utah Health Insurance Exchange, thinks that systems such as the federal data hub as well as state systems that interact with it may not be ready in time, leading to a delay in open enrollment. Without a system to determine premium tax subsidies, “then you would have delayed eligibility verification,” he says.

That could discourage the uninsured from signing up. Medicare subsidies and tax credit determinations need to be made in real time. Applicants can't wait days, weeks or even months to find out whether they qualify for subsidies and how much they will get. Those determinations will factor heavily in their plan selections and could determine whether they sign up at all.

And even if they do sign up, “if (the determination) gets too far down the line, say past 90 days, then an enrollee won't have effective coverage on Jan. 1,” Schuyler says.

HHS insists that exchange preparations are running according to schedule, and open enrollment will begin in all 50 states Oct. 1. HHS Secretary Kathleen Sebelius told members of the Senate Finance Committee this month that “we are definitely going to be open for open enrollment starting Oct. 1 of 2013.”

Last week, Gary Cohen, director of the CMS' Center for Consumer Information, told the House Energy and Commerce Subcommittee on Oversight and Investigations that the federal data hub recently began testing its connection to state IT systems and expressed confidence that the crucial link would be ready by Oct. 1 to provide real-time subsidy and Medicare eligibility decisions.

The CMS this month began accepting applications from health insurers to participate in the federally facilitated exchanges, and Cohen says it has already received more than 140 applications. In state-run exchanges, the process will be done by local regulators, typically the state's department of insurance.

Despite the assurances from top federal officials, there is still a healthy amount of concern from stakeholders. “I think everyone is curious about IT systems and how they will work and function,” says Sarah Dash, a researcher at Georgetown University Health Policy Center's Center on Health Insurance Reforms. Dash, a former senior health policy aide to Sen. Jay Rockefeller (D-W.V.), says that for many states, a key priority will be “upgrading dinosaur-era IT systems.”

States are engaging in a multitude of ways to meet tight deadlines. Vermont's Tucker, for example, says her state has been working closely with exchanges in Washington state and Hawaii since they share a common IT vendor. Vermont is also collaborating with its New England neighbors to share ideas.

IT challenges aren't the only ones facing exchanges. Another concern, Schuyler says, is the work insurers have to do to get their offerings qualified for sale by state or federal regulators. “The problem is that the QHP (qualified health plan) requirements are pretty exhaustive,” he says. “Carriers have to go from (the current) 20-page document to a much longer document that is submitted to the state system to get qualified. It's a resource issue as it takes time to put that information together.”

The deadline for getting those plans to regulators is April 30.

And then there's the marketing challenge required to get potential enrollees, many of whom have never had health insurance in their lives, informed about the program and how to use the exchanges. Vermont, for example, hired GMMB, a Washington, D.C.-based strategic communications and advertising agency, to develop an outreach and education plan that supplements routine media coverage with advertising, stakeholder engagement, community outreach and even social media to get the word out.

The state has held a series of public forums. During last month's annual Town Meeting Day, a Vermont-institutionalized system for discussing local issues, exchanges were on the agendas. “Vermont is a little bit unique … (but we have a) really special long-term vision,” she says. “Some decisions we are making may not be applicable (to larger states) because of their size, but I think our approach to stakeholder engagement … making sure a diverse group of folks are at the table, helping think through what the exchange will look like and how it will be” operated will make the launch successful.

Another major issue looming for the exchanges is the level of competition among insurers. In January, UnitedHealth Group CEO Stephen Hemsley says the nation's largest insurer would offer plans in only a select number of states. “We will only participate in exchanges that we assess to be fair, commercially sustainable and provide a reasonable return on the capital they will require,” he says.

Should other insurers follow that lead, it might limit plan choices on the exchanges. In November, the American Medical Association released a study that found 70% of metropolitan areas examined lacked competition among insurers. And in more than two-thirds of those areas, at least one health insurer had a 50% market share or better.

“I think the whole question about competition is really going to be interesting to watch,” Georgetown's Dash says. “At this point, one state's exchange is very different from the other. … So you truly have 50 states with (unique) exchanges.”

The federal Multi-State Plan Program, administered by the White House Office of Management and Budget, is intended to provide that at least two health plans will be offered in every exchange. But those plans will not be available in every exchange for 2014.

And the situation may be worse for small businesses that seek small-group coverage through Small Business Health Options Program, or SHOP, exchanges. Last month, HHS says it would delay full implementation of SHOPs in states where exchanges are federally facilitated since it needed “additional time to prepare for an employee choice model.”

That should provide openings for smaller carriers to sell plans on the exchanges to the small group market, where they have traditionally found a niche. Yet many are still holding back, citing the lack of federal or state guidance.

HealthPlus of Michigan, a 20,000-member carrier based in Flint, for instance, says it won't participate in its state exchange, at least in 2014. “Probably the most important (factor) for us, and smaller plans, that (weighs) very heavily, is the quality of our products and the service we have historically provided,” says Graham Smith, director of Medicare programs and individual sales. “We didn't feel we could (participate) with changes in regulations and a lack of final regulations” from the federal government.

The Michigan health insurance market is now dominated by Blue Cross and Blue Shield of Michigan. While HealthPlus has competed well against the larger carrier by offering better service and quality, Smith says, it won't consider listing its products on the Michigan exchange until 2015 at the earliest. At that point, “we'll have a much better grasp of requirements (and) the IT integration between us and the feds,” he says.

Follow Jonathan Block on Twitter: @MHjblock

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