Reform Update: Four state exchange heads resign as other sites thrive

On Tuesday, April Todd-Malmlov resigned as executive director of Minnesota's health insurance exchange.

The personnel move followed a steady flow of bad news about the MNsure marketplace in recent weeks. Insurers have reported receiving inaccurate or incomplete information about enrollees. Individuals calling the state's helpline have been put on hold for more than an hour. Brokers complain that they can't sign people up for coverage without spending hours on the process.

“Brokers and agents are at a point where they have to turn away customers who want to use MNsure,” Alycia Riedl, president of the Minnesota Association of Health Underwriters, said at a MNsure board meeting on Wednesday.

Todd-Malmlov is the fourth top official of a state-run insurance exchange to depart since Oct. 1. She was preceded by executives for the Oregon, Maryland and Washington exchanges. That's a quarter of the 16 exchange directors nationwide. The online marketplace in Oregon remains inoperative with no timeline set for when individuals will be able to enroll through the website. Maryland Gov. Martin O'Malley said this week that the technology problems plaguing the state's exchange had largely been fixed, but insurers continued to report difficulties signing people up. There's even talk of Maryland switching over to using the federal HealthCare.gov website.

State Sen. Michelle Benson, a key Republican legislator on healthcare issues in Minnesota, said the state exchange problems have been exacerbated by a lack of candor from Minnesota officials about the problems. “I think the fact that they didn't acknowledge serious problems months ago has put them at a point where it's too late to fix a lot of things that need to be (fixed),” Benson said.

Todd-Malmlov stepped down after getting criticism over a trip to Costa Rica while problems with the exchange festered.

But many other states running their own exchange have fully functioning exchange websites and are reporting a surge in signups in recent weeks. On a call with reporters Wednesday organized by Families USA, a supporter of the Patient Protection and Affordable Care Act, officials from exchanges in California, New York, Washington, Kentucky and Connecticut reported an almost entirely positive experience.

Peter Lee, executive director of Covered California, said individuals were signing up for coverage at a pace of 15,000 a day as of the previous week. In New York, the pace was 4,500 signups a day, while in Connecticut roughly 1,400 individuals were selecting coverage each day.

Lee also said his exchange has been sharing data successfully with insurers and hasn't had problems with the back-end transmittal of enrollment data. "We have a good-looking back end, so to speak," Lee said.

In Kentucky, 92,000 individuals have signed up for coverage, although 70,000 of those were enrolled in Medicaid. Carrie Benahan, executive director of the Office of the Kentucky Health Benefit Exchange, said 29% of those signing up for private health plans were under the age of 35, a significantly higher proportion than in other states that have released preliminary demographic data. Experts say it's critical for exchange plans to sign up a substantial share of younger and healthier people to keep premiums affordable in 2015.

Washington state reported that 180,000 individuals had signed up for coverage as of the end of November. Of those, 54,000 enrolled in private health plans, but only 18% of those customers were under age 35.

The biggest problem reported by officials in the five states was unexpectedly high call volume. Washington reported receiving four to six times as many calls as anticipated. Connecticut officials have increased call center staffing by more than 50% in response to demand.

Lee stressed that some startup troubles are inevitable. “We've all built something very quickly,” he said. “This is the beginning of a historic change to the marketplace for the next generation of healthcare.”

The gravest concern over the troubled rollout of state and federal exchanges has been that the marketplace could collapse in a “death spiral.” That scenario would result from the enrollment of a sicker pool of subscribers, with higher medical costs, than anticipated by insurers when they set their 2014 premiums. That would potentially cause companies to sharply raise premiums in 2015 and consequently draw fewer healthy customers in future years, creating a vicious cycle. Eventually, the entire marketplace would collapse.

But a report issued Tuesday by the Kaiser Family Foundation suggests that the risk of a death spiral has been greatly exaggerated. Kaiser points out that 40% of the potential customer base for the exchanges is under the age of 35. If such customers only end up being 33% of the customer base, costs for insurers would exceed premiums by 1.1%, according to Kaiser's analysis. Even if enrollees under age 35 make up only 25% of exchange customers, costs for insurers would exceed revenues by only 2.4%. So even if insurers lose money in 2014, they would not need to hike premiums significantly to avoid losses in future years.

Follow Paul Demko on Twitter: @MHpdemko