In Michigan, a countdown to healthcare reform

The biggest risk for Obamacare in 2014 is that millions of uninsured individuals mandated to purchase health insurance on Jan. 1 will have difficulties using the new health insurance exchanges under development in each state.

In Michigan, state government officials and participating health insurers are working to develop the information technology infrastructure and policies to make sure the exchange works without glitches.

Open enrollment begins Oct. 1 for people looking to shop on the federal exchange, now called the health insurance marketplace.

But will the exchange in Michigan be open for business on time? And, more importantly, will it work as advertised?

A recent survey of health information technology executives found that 75 percent of respondents are concerned about readiness of the exchange by Oct. 1. They also worry that health insurers will have problems reconciling premiums, enrollment, federal subsidies, appeals and payment records, said the Chicago-based Healthcare Information and Management Systems Society.

Many health insurers in Southeast Michigan will be ready, said Kirk Roy, vice president of health reform with Blue Cross Blue Shield of Michigan, and Marti Lolli, director of health reform at Priority Health.

Roy and Lolli say their organizations will be ready to enroll and collect premiums from policyholders through the exchange. They also are developing systems to recover subsidies from the IRS and U.S. Department of Health and Human Services through separate electronic links.

Data to verify identities also will come from the Social Security Administration and the Department of Homeland Security, Lolli said.

"We have very technical interfaces and exchanges of data coming from several federal agencies," Lolli said. "We have asked them if they will be ready. All the information we are hearing is that the exchange will be up and running by Oct. 1. They have not changed their answer to that question."

Lolli said Priority Health is one of 12 plans nationally that are working with federal officials to test how the insurers' IT systems connect with federal marketplaces. Other insurers are expected to test their systems based on their readiness, she said.

Roy said the tests, if successful, will ensure the technology works for customers and insurers.

"We are developing a backup plan to make sure we can enroll people if the exchange isn't ready," said Roy, adding that Blue Cross can later send enrollment records to the exchange when it is up and running.

In addition to IT preparation, Rick Murdock, executive director of Michigan Association of Health Plans, said another challenge for insurers is how they will market plans to the public when surveys show most people are unaware of exchanges and the availability of subsidized insurance.

Murdock said insurers will be advertising and marketing plans to "people who have never purchased health insurance before."

Chris Priest, senior strategy advisor with Gov. Rick Snyder's office, said several state agencies are developing policies and procedures to connect the state's Medicaid program with the federal marketplace.

"We will begin testing our connection between state government and the federal hub in the next month or two," said Priest, adding that the state is waiting on final federal rules before completing its IT work.

Several challenges remain for the state, including developing a rules engine in the Medicaid application system that will determine modified adjusted income for eligibility.

"Then we need the account transfer itself (the application for health insurance)," Priest said. "One of the biggest risks is the federal government standing up their functionality. We are proceeding as if we will be ready by 10-1-13."

The Obama administration last week delayed until Jan. 1, 2015, the mandate that business owners with 50 or more full-time employees offer health insurance or pay a $2,000 per qualified employee penalty.

Employer groups had complained their members didn't have enough time to comply with the complex regulations. Their chief problem was developing accounting systems to track all hourly employees to determine if their aggregate workforce would trigger the mandate or penalty.

Under Obamacare's employer mandate, a full-time employee is defined as averaging 30 or more hours per week over a 60-day period. The first 30 employees are excluded from the penalty. For example, an employer with 75 employees would pay the penalty for 45 workers, or $90,000.

Experts said the change would have little impact on expanding health coverage because 94 percent of employers with more than 50 workers offer health insurance.

At Blue Cross, Roy said 150 workgroups with more than 100 people are dedicated to making sure the Blues' IT system connects with the exchange's IT system.

Lolli said Priority Health has 12 significant projects that have IT components related to the exchange infrastructure. The projects range from interacting with the exchange for enrollment data to revenue reconciliation, which ensures companies collect enough premiums from members and subsidies from the government to cover costs.

Lolli estimated 15 percent of Priority's 1,000 employees are actively engaged in preparing for the exchange.

Created to allow comparison shopping online for affordable coverage, the federal health insurance marketplace will present four tiers of coverage -- platinum, gold, silver and bronze -- that will offer different cost-sharing levels and benefits.

For example, while each plan must offer 10 essential benefits, a platinum plan could offer more benefits and lower out-of-pocket costs than the least expensive bronze plan. But the platinum plan will cost more upfront. The exchange also will offer lower-cost catastrophic plans for those under age 30.

Last month, 14 insurers submitted applications to participate in the state exchange. Federal rules require participating insurers contribute 3.5 percent of total marketplace premiums written to fund exchange operations.

Lolli said it is unclear if the 3.5 percent fee paid by insurers is too much or too little. "Michigan's is about average," she said. "Some states are charging 8 percent."

Murdock said the 3.5 percent fees are about the same that insurers pay agents for commissions.

Some of the fees will help fund the "navigators," or people who will provide advice to people on how to use the exchange. The state of Michigan also has allocated $1.9 million in grant money for health insurance exchange navigators.

"Nonprofit entities will apply for grant funds, and they will hire the navigators," Lolli said. "Existing insurance agents will have a role to help consumers."

But Lolli said insurance agents can't be navigators if they want to receive commissions from health plans for selling the policies. Agents can still sell the same policies offered in the exchange in the open market. However, people purchasing those policies wouldn't receive subsidies, even if they are eligible.

Rep. Gail Haines, R-Lake Angelus, chairwoman of the House Health Policy Committee, has submitted H.B. 4576, which requires licensing for navigators. It also describes duties and restrictions.

Another problem now for individuals and businesses trying to decide whether to purchase policies in the exchange is the lack of premium information. Businesses have more time to weigh options as the Obama administration said last week enforcement of the employer mandate is postponed until 2015.

Premiums will not be known until Oct. 1 because plans must be reviewed for compliance with federal and state laws, said R. Kevin Clinton, director, Michigan Department of Insurance and Financial Services.

However, Murdock said he expects some health insurers will start marketing their plans for the exchange with premium prices sometime in September.

Murdock said federal rules require that health insurers with products on the exchange also offer the same product outside of the exchange on the open market.

"What we don't know is (the amount of the subsidies)," he said.

While California's state-approved exchange is slightly different than Michigan's federal one, premiums quoted for plans in California were lower than expected.

The most affordable silver plan in California will cost $276 per month, before subsidies, which could cut the premium to as low as $104 per month. Under Obamacare, uninsured people are eligible for two subsidies. The first is the "advanced premium tax credit," which is based on an individual or family income.

The second subsidy is the "cost sharing subsidy." It is designed to improve benefits for lower-income people at 100 percent to 250 percent of the federal poverty level.

For example, if an insured person qualifies for the cost sharing subsidy, then the insurer could enroll that person in a different health plan with greater benefits and fewer out-of-pocket costs.

People will shop on the exchange by completing online registration and providing income and family information. The exchange will show the plans available and show premiums at the estimated subsidized amount.

Once selected, the enrollment file would be sent to the insurer that offered the plan or to the state Medicaid program.

Three of the biggest challenges for insurers will be receiving patient enrollment files for each plan chosen, devising a method to calculate the subsidy for each individual or family and handling appeals of people rejected for the subsidy or Medicaid enrollment, Roy said.

Final regulations haven't been issued on how exchanges or insurers should handle appeals of people rejected for Medicaid coverage or for subsidies, Lolli said.

"Countdown to health care reform" originally appeared in Crain's Detroit Business.