Contra Costa Times, By Sandy Kleffman –
August 1, 2012: It has been described as a cross between Amazon and Expedia, but for health insurance, instead of books or travel.
Imagine comparing insurance policies through an easily navigated online store. That’s the promise of the California Health Benefit Exchange, set to open in 2014 as a key element of the national health reform law.
Several million people and thousands of small businesses will be able to weigh competing plans, buy the one best for them and see if they qualify for subsidies to offset premium costs.
Exchange managers will negotiate the terms of those policies with insurers, bringing benefits to individual insurance buyers that only big businesses get today.
The state is moving rapidly to set up the exchange and will have a major advertising campaign next year to bring it home to Californians, most of whom in two years will be required to have health insurance or pay a penalty.
“It will be a huge step forward for consumers who right now are left alone at the mercy of big insurers in the individual market,” said Anthony Wright, head of Health Access California, a consumer group.
“This will be an exchange that can negotiate with insurers for the best value.”
But critics wonder if it will be more like the often-overburdened Department of Motor Vehicles than a consumer superstore.
“I don’t know of a government agency that works like Amazon.com,” said John Graham, director of health care studies for the Pacific Research Institute.
Soon after the national health reform act became law in 2010, California was the first state to begin setting up an exchange. Many states with Republican leadership have rejected the idea of an exchange or taken no action. The federal government will run exchanges in states that opt out.
For people who don’t have insurance through a job or government program, the exchange will be like a company’s human relations department in vetting plans and selecting options, said exchange director Peter Lee.
“We’re going to be kicking the tires of the plans,” Lee said. “We want to make sure people have good choices.”
Within the first few years, nearly 2 million Californians are expected to purchase insurance through the exchange. Among them will be those who are now uninsured because pre-existing conditions disqualified them for coverage. That will change in 2014 when insurers no longer can reject people with health problems.
Subsidies in the form of tax credits will be available to people who earn up to 400 percent of the federal poverty level. This year, that would be up to $44,680 for an individual and $92,200 for a family of four.
An additional 300,000 small-business employees are expected to obtain coverage on the exchange.
Benicia resident Curt Heimbach is looking forward to seeing what it will offer. Like many who buy insurance on the individual market, the 55-year-old self-employed woodworker has watched his family premiums jump dramatically.
“Pretty soon, it’s going to cost me more for health insurance than my mortgage,” he said. “It’s crazy.”
In 2007, Heimbach paid $434 a month to cover himself, his wife and his daughter. By 2010, his bill had more than doubled to $995.
After his daughter married and dropped out of their plan, his bill went down but rose again when he turned 55. Today, he pays $1,289 a month for himself and his wife.
“This is ridiculous,” he said. “It’s too much. I can only produce so much. I’m one man. I can’t be raising my prices because everything else is going up. I won’t get the job.”
For Californians in Heimbach’s situation, it can be a herculean task trying to figure out the best deal among the myriad plans, each with different deductibles, co-pays, benefits and restrictions. By standardizing the options, exchange leaders hope to make comparisons easier.
“One of the benefits the exchange could provide is to be sort of a Good Housekeeping seal,” Wright said.
Supporters believe the exchange can also help transform the broader health insurance industry.
State lawmakers made the exchange an “active purchaser,” meaning that it can set criteria, negotiate with insurers and decide who can offer plans on it.
Among the 16 states creating exchanges, only a handful have such power. Many state exchanges will offer all plans available, making them “the equivalent of the yellow pages,” said Kim Belshé, a member of the California exchange board and former secretary of the state Health and Human Services Agency.
“To be an active purchaser means that we have the ability to say we are trying to drive better value,” Belshé said. She noted that the exchange can select plans based on quality, price and the adequacy of the provider network.
“No single purchaser alone is going to transform the marketplace,” she said. But by joining with other large purchasers, she added, the exchange can try to improve health care delivery in the state.
Others believe the exchange will have a different effect.
“You’re going to have much less choice,” said Graham of Pacific Research Institute, a San Francisco-based free-market think tank. “The health insurance available to you will be limited by what they selectively contract. Amazon is not governed by five political appointees.”
Graham worries about the cost of establishing the exchange, and he predicts that many employers will drop company plans and send workers to it instead.
“It’s going to cause a lot of problems,” he said. “Do we need another government agency?”
The exchange intends to begin pre-enrollment in October 2013. Thirty-six people have been hired, it has awarded a $300 million contract to set up the online system, and it is planning a major marketing campaign next year. One of the goals will be to ensure that enough healthy people sign up to offset the cost of those with chronic illnesses.
“We will invest in the best technology to make it simple and seamless,” Lee said.
Source: John & Rusty Report via Word & Brown