Health Insurance Exchange Finance Work Group 8/9/12 Agenda - PowerPoint PPT Presentation

Health Insurance Exchange Finance Work Group 8/9/12

Agenda • Overview of prior work from work group – Timeline – Funding Pros and Cons – High level recommendations/principles – Benefit Analysis (who benefits from Exchange) – Review of “unknowns” • Review Exchange budget model – Inputs, assumptions, output • Discuss next steps for Work Group

Exchange Financial Timeline 2011 2012 2013 2014 2015 2016 Operational Phase Start Up Phase System and Exchange enrolls members and may raise infrastructure development and staff hiring revenue Exchange must be self- Federal Grant Funding Available sustaining Transition Year

Financing Options - User Fee Assessment on products sold through the Exchange that is charged to enrollees. Essentially an add on to the premium . Pros Cons May discourage participation in Exchange • Works in all Governance structures • (dependant on cost level and transparency) Aligns costs to direct purchasers of • Potentially invisible to consumer if rolled into • insurance through the Exchange premium and looks like added costs of product Transparent • (Individual premiums inside the Exchange would Scalable to enrollment • be larger than outside) Collection could occur at the Exchange • Tied to enrollment - Hard to predict first few • via premiums years Cons Per person costs vary with number of • participants and the relation of fixed and Does not reflect all of the benefits an • variable costs Exchange may provide to other If no mandate, participation may be reduced consumers, insurers, providers and • causing higher costs per person (further navigators/brokers disincentive to participate)

Financing Options - Portion of Premium Exchange keeps some portion (percent and/or flat fee) of the total product premium . PROS Cons Acknowledges some but not all of the Works in all Governance Structures • • benefits an Exchange may provide to Would most closely relate exchange • other consumers, insurers, providers and business operations and market navigators/brokers relationships. May discourage carriers from participating • Premiums same inside and outside • in Exchange Exchange, would not discourage Tied to enrollment - Hard to predict first individual participation • few years Scalable to enrollment • Per person costs vary with number of Collection could occur at the Exchange via • • participants and the relation of fixed and premiums variable costs Medical Loss Ratio considerations • If no mandate, participation may be (possible con) • reduced causing higher costs per person (further disincentive to participate)

Financing Options: Fully Insured Market Assessment on fully-insured products sold by insurers. Could be similar to the MCHA assessment or insurer premium tax. Could be a percentage of premium or flat fee per policy or enrollee. PROS CONS Acknowledges that some services benefit Non-profit lack authority to assess non- • • consumers that do not participate in the participants Exchange (risk adjustment, comparative Require appropriation • information) Does not take into account consumers in Premiums inside and outside an Exchange • • self-funded plans and other stakeholders the same and thus not discourage Exchange participation (individual or such as providers and navigators/brokers plan). may also benefit from an Exchange Broader assessment, lower cost per • Further reduces link between exchange • person business relationship and funding source Predictable (known base, similar to • Not transparent, cost shift • current state revenues) Possibly creates competition between Tied directly to estimated budget (not • • Exchange and other product distribution directly to enrollment) Reduced impact from Supreme Court channels (brokers, plans, etc) • decision on mandate Not tied to enrollment – fixed revenue • Medical Loss Ratio considerations may lead to under or over collections, not • (possible con) adjust for unexpected participation changes.

Financing Options: Broad Based Market Fee An assessment like the provider tax or redirection of current health taxes and surcharges. CONS PROS Fully acknowledges Exchange may benefit Non-profit lack authority to assess non- • • participants a broad base of consumers and Require appropriation • stakeholders. Further reduces link between exchange • Reflects shift in marker as coverage business relationship and funding source • To extent a service is not covered within expands (potential for increased revenue • the Essential benefit set, service may still from current surcharges and taxes) be included in assessment. Premiums the same inside and outside the Not transparent, cost shift • • Potential interaction with other processes Exchange • (reinsurance, rate regulation, etc.) Broad base – lower cost per person • enhances uncertainties. Predictable (known base - similar to Possibly creates competition between • • Exchange and other product distribution current state surcharges and taxes) channels (brokers, plans, etc) Tied directly to estimated budget (not • Not tied to enrollment – fixed revenue directly to enrollment) • may lead to under or over collections, not Supreme court decision on mandate not • adjust for unexpected participation impact revenue source. changes.

Financing Options: Sin tax/other broad tax Use of a sin tax or other broad tax/fee that applies broadly to the population. Pros Cons Broad base – reduced costs per person Non-profit lack authority to tax • • Recognizes Exchange as a public good Further reduces link between exchange • • business relationship and funding source Spreads costs beyond health industry • Amount increased for Exchange may not May have public health benefit • • be large enough to impact behavior Premiums not impacted • Require appropriation • Predictable – known base • Raises taxes Tied directly to estimated budget (not • • directly to enrollment) Not transparent, cost shift • Not tied to enrollment – fixed revenue Supreme court decision on mandate not • • may lead to under or over collections, not impact. adjust for unexpected participation changes.

Financing Options: General Fund General fund: Appropriation to recapture of potential general fund savings Pros Cons Non-profit lack authority to tax Broad base – reduced costs per person • • Require appropriation • Recognizes Exchange as a public good • Further reduces link between exchange • Spreads costs beyond health industry • business relationship and funding source Premiums not impacted Not transparent, cost shift • • Appropriation is predictable Not tied to enrollment – fixed revenue • • Tied directly to estimated budget (not may lead to under or over collections, not • directly to enrollment) adjust for unexpected participation changes. Supreme court decision on mandate not • Savings may be difficult to isolate and impact revenue source. • recapture

Financing Options: Other Raise revenue through other mechanisms such as naming rights, website advertising, grants, etc. PROS CONS Non-profit would be able to raise revenue Funding may not be predictable or stable. • • Reduce or eliminate the need for fees and Questions on who could advertise, conflict • • assessments on consumers and of interest concerns. stakeholders. Exchange would need to compete and • Exchange could directly collect revenues show value to attract funding. • Supreme court decision on mandate not Could potentially harm the independent • • impact revenue source. nature of an Exchange. Not tied to enrollment –not adjust for • unexpected participation changes.

Financing Options: Medicaid Match Federal matching funds are available for activities necessary for Medicaid administration. PROS CONS Links costs of activities that benefit public Non-federal share may include public • • programs to the public program funds appropriated or transferred to the (Outreach, eligibility determination, and Medicaid agency or certified by a local managed care enrollment are generally unit of government as a Medicaid accepted types of Medicaid administrative expenditure. Private (non-profit) spending activities.) is not directly “matchable” by Medicaid. Reduces costs for other payers • Premiums not impacted • Predictable – tied to Medical Assistance • enrollment Scalable to public assistance participation • in the Exchange Cost allocation directly to Medical • Assistance

Financing Options: Combination Combine existing revenues, cost allocation and new assessments PROS CONS Provide flexibility and stability for the Increases complexity. – – exchange Recognizes business and public entity – sides of the exchange.