State Health Insurance Exchanges

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1 Discussion paper: State health insurance exchanges Introduction One of the key provisions of the Patient Protection and Affordable Care Act (ACA) is the requirement that health insurance exchanges (exchanges) be established in every state by States have the option of establishing and operating their own exchanges, but if they choose not to do so, then the federal government is required to step in and operate a federal exchange in those states. According to the US Department of Health and Human Services (HHS), an exchange: (I)s a mechanism for organizing the health insurance marketplace to help consumers and small businesses shop for coverage in a way that permits easy comparison of available plan options based on price, benefits and services, and quality. By pooling people together, reducing transaction costs, and increasing transparency, exchanges create more efficient and competitive markets for individuals and small employers. 1 If implemented properly, exchanges have the potential to transform the health insurance market for consumers. Exchanges should be vital components in fulfilling the ACA s promise to make high-quality, affordable health care available to all Americans. However, there are numerous opportunities for legislative mischief in their establishment. As a result, Medicine must stay vigilant as states move forward on exchange issues. The ACA includes several requirements for how exchanges must be established, but it also provides states with discretion in numerous areas. This discussion paper, which will be updated as new regulations and regulatory guidance are issued, is broken down into four sections to assist state medical associations, national medical specialty societies and other physician and patient advocates as exchange implementation advances in the states: ACA requirements for exchanges (P. 2); Background on current state exchanges (P. 7); AMA policy (P. 9); and 1 HHS Initial Guidance to States on Exchanges; Issued November 2010; Available at: Copyright 2011 American Medical Association. All rights reserved.

2 Legislative recommendations and discussion (P. 10). ACA requirements for health insurance exchanges American Health Benefits Exchanges (AHBE) and Small Business Health Options Program (SHOP) 2 Under the ACA, states must have exchanges operational by January 1, 2014; however, HHS must certify that a state is willing and able to implement an exchange by January 1, Time is of the essence for state officials working on exchange implementation. 3 The ACA authorizes states to create American Health Benefit Exchanges (AHBE) and Small Business Health Options Program (SHOP) Exchanges. The AHBE exchanges will serve the individual market, and the SHOP exchanges will be established for small employers. The exchanges will be administered by governmental or non-profit entities. US citizens and legal immigrants will be able to purchase coverage through the exchange as long as their employer does not offer affordable coverage. Incarcerated individuals are not eligible. Individuals who purchase health insurance through the AHBE exchanges and earn between percent of the Federal Poverty Level (FPL) will be eligible to apply for premium credits and cost-sharing subsidies to assist with the purchase of coverage. The SHOP exchanges will allow employees of businesses with up to 100 employees to purchase health care coverage. States may expand the exchanges to large businesses in 2017, and they may combine the AHBE and SHOP exchanges, as long as there are adequate resources to assist individuals and small employers. States may establish exchanges based on region or allow multiple exchanges to operate within a state, provided that the exchange serves a distinct geographic area. Exchange requirements The exchanges created by the ACA must fulfill certain requirements and duties, including: Implement procedures for certifying, decertifying and recertifying Qualified Health Plans (QHPs); Provide for the operation of a toll-free phone line to assist participants; Maintain a Web site that allows potential enrollees to compare policies and rates; Assign a rating to each QHP based on quality and price; Utilize a standard format for presenting health benefit options; 2 Act Sec of the ACA 3 AcademyHealth has prepared an excellent exchange implementation timeline for state policymakers to utilize. It is available at: Copyright 2011 American Medical Association. All rights reserved. 2

3 Provide information to possible enrollees who are eligible for Medicaid and other public health programs; Provide a calculator for potential enrollees to show them the costs of plans after tax credits and cost-sharing are factored in to the total; Certify for the Internal Revenue Service that an individual is exempt from the individual mandate based on the lack of affordable health coverage through the exchange or employer sponsored plan, or that the potential enrollee meets the requirements of another exemption, and transfer this list to the IRS; Provide to employers the names of employees who drop coverage from a QHP during the plan year; and Establish a navigator program to assist with enrollment. Stakeholder input As part of the exchange implementation process, states are required to consult with: Health care consumers enrolled in QHPs; Individuals/entities who are experts in enrollment in QHPs; Representatives of small business and self-employed individuals; State Medicaid offices; and Advocates for enrolling hard to reach populations. 4 Qualified health plan (QHP) requirements To participate in an exchange, a health insurance plan must be a QHP. QHPs must (1) be certified by the state exchange; (2) provide a package of essential health benefits; and (3) be offered by a health insurance issuer that: Is licensed and in good standing in the exchange state; Agrees to offer at least one Silver and one Gold plan; Agrees to charge the same premium for each QHP of the health insurance issuer whether the plan is offered through an exchange or offered directly from the health insurance issuer or through an agent; and Complies with HHS and exchange regulations. 5 HHS is expected to issue rules and guidance on exchanges, QHPs and the essential health benefits package in 2011 and HHS will determine what qualifies as a QHP, and it will also define what constitutes the essential health benefits package. Under the ACA, QHPs must also (1) provide adequate provider networks; (2) meet various marketing requirements; (3) maintain contracts with essential community providers; 4 Act Sec. 1311(d)(6) of the ACA 5 Act Sec. 1301(a)(1) of the ACA Copyright 2011 American Medical Association. All rights reserved. 3

4 (4) contract with navigators for outreach and enrollment purposes; (5) be accredited based on quality and performance measures; (6) use a uniform enrollment form and standard format to present plan information; and (7) report information on: Claims payment policies; Enrollment/disenrollment; Amount of claims denied; Cost-sharing requirements; Out-of-network policies; and Enrollee rights. Benefit categories Under the ACA, QHPs must provide coverage of essential benefits at one of the following levels: Bronze plan (minimum coverage plan) - covers 60 percent of benefits costs including out-of-pocket limits equal to the HSA limit; Silver plan - covers 70 percent of benefits costs including HSA out-of-pocket limits; Gold plan - 80 percent of benefits costs including HSA out-of-pocket limits; or Platinum plan - covers 90 percent of the benefits costs including HSA out-of-pocket limits. 6 The fifth option is the catastrophic plan, and the ACA requires that it shall (1) be available only in the individual market; (2) be available to individuals age 30 or younger or to individuals exempt from the requirement to purchase coverage; (3) be provided only with coverage levels set at HSA law levels; and (4) exclude prevention benefits and coverage for three primary care visits from the deductible. 7 Based on HSA limits being $5950/individual and $11,900/family, out-of-pocket limits for those with incomes up to 400 percent of FPL will be as follows: percent FPL - 1/3 of HSA limits ($1,983/individual and $3,967/family); percent FPL 1/2 of HSA limits ($2,975/individual and $5,950/family); and percent FPL 2/3 of HSA limits ($3,967/individual and $7,933/family). 8 Essential health benefits package QHPs must include at least an essential health benefits package that meets criteria established by HHS. The HHS rule on the essential benefits package is expected in late 2011 or early The Institute of Medicine and the US Department of Labor are also involved in the 6 Act Sec. 1302(d)(1) of the ACA 7 Act Secs. 1302(e)(2-3) of the ACA 8 Act Sec. 1402(c)(1)(A) of the ACA Copyright 2011 American Medical Association. All rights reserved. 4

5 process. Under the ACA, the package must include a comprehensive set of services, limit costsharing and provide certain levels of coverage. The comprehensive list of services includes: Ambulatory patient services; Emergency services; Hospitalization; Maternity and newborn care; Mental health and substance abuse disorder services; Prescription drugs; Rehabilitative and habilitative services and devices; Laboratory services; Preventive and wellness services (including chronic disease management); and Pediatric services (including oral and vision care). 9 HHS is charged with defining and annually updating the benefits package. The scope of benefits covered must be equivalent to the scope of benefits provided under a typical employer sponsored plan. QHPs in the exchange must also comply with requirements for guaranteed issue, premium rating and prohibitions on pre-existing condition exclusions. Under the ACA, states may add further required benefits for QHPs, but they will be responsible for picking up the additional costs. 10 This allows states to maintain their current benefits mandates that may not be included in the ACA-required essential health benefits package, but states will be responsible for the cost of such additional coverage. This could lead to political battles over which state benefit mandates remain in place and which ones are eliminated. QHP transparency QHPs must disclose to the exchange, the HHS Secretary, the state insurance commissioner and the public: Claims payment policies and practices; Periodic financial disclosures; Data on enrollment/disenrollment; Data on denied claims; Data on rating practices; Out-of-network payment practices; Information on enrollee rights/responsibilities; and Other information as required by HHS Act Sec. 1302(b)(1) of the ACA 10 Act Sec. 1311(d)(3) of the ACA 11 Act Sec. 1311(e)(3) of the ACA Copyright 2011 American Medical Association. All rights reserved. 5

6 Rate review The exchange must require health insurance issuers seeking certification as a QHP to submit a justification for premium increases before they are presented to enrollees. 12 Exchanges shall take this information into account prior to certifying a health insurance issuer to offer a plan on the exchange. HHS is providing funding to the states to assist them with strengthening their rate review processes. The AMA has commented to both HHS and the National Association of Insurance Commissioners (NAIC) calling for health insurance issuer transparency in the rate review process. Multi-state, subsidiary and combined exchanges Under the ACA, exchanges are permitted to operate in more than one state. In order to do so, an exchange would need permission from each affected state and permission from HHS. States may also establish a subsidiary exchange in the state if it serves a geographically distinct area and meets certain rating area requirements. 13 States may also combine the AHBE and SHOP exchanges if the state has resources to assist such individuals and employers. 14 Federal grant funding HHS is providing significant financial resources to states to assist with exchange implementation. HHS has provided planning grants to 48 states and Washington DC for work on exchanges. Only Alaska and Minnesota refused the planning grant funding initially, and Minnesota announced plans to reverse this decision after a change in administrations. However, several states, including Florida, Louisiana, New Hampshire and Wisconsin, have decided to return the planning grant funds to HHS. HHS has also announced early innovator grants to assist states with the information technology (IT) issues that they will face in trying to reconcile their Medicaid and Children s Health Insurance Program (CHIP) programs with the exchange. The intent of the grants is to help these states to establish prototype programs and to work through any problems, so that the successful IT models can be shared with other states. The grant recipients are: Kansas Insurance Department - $31 million; Maryland Department of Health and Mental Hygiene - $6 million; Multi-State Consortia UMass Medical School - $35 million; New York Department of Health - $27 million; Oklahoma Health Care Authority - $54 million; Oregon Health Authority - $48 million; and Wisconsin Department of Health Services - $37 million Act Sec. 1311(e) of the ACA 13 Act Sec. 1311(f) of the ACA 14 Act Sec. 1311(b)(2) of the ACA 15 More information available on HHS Web site: Copyright 2011 American Medical Association. All rights reserved. 6

7 Notably, after Oklahoma lawmakers tabled efforts in that state to establish an exchange, Governor Mary Fallin indicated that she intends to have the state return the funding received for the early innovator grant. Interested states are now in the process of applying for Level 1 and Level 2 establishment grants to assist with their implementation efforts. The next round of federal funding is intended to help states as the January 1, 2013 certification date approaches. Center for Consumer Information and Insurance Oversight (CCIIO) guidance The Center for Consumer Information and Insurance Oversight (CCIIO) is the center within HHS that handles many of the ACA implementation activities. On November 18, 2010, CCIIO released initial guidance to states on exchanges. 16 The guidance serves as a primer for states on various issues in establishing and running an exchange. Of significance, is that CCIIO indicated that both active purchaser (Massachusetts) and open marketplace (Utah) models would be acceptable. According to CCIIO, States have a range of options for how the Exchange operates from an active purchaser model, in which the Exchange operates as large employers often do in using market leverage and the tools of managed competition to negotiate product offerings with insurers, to an open marketplace model, in which the Exchange operates as a clearinghouse that is open to all qualified insurers and relies on market forces to generate product offerings. HHS is expected to issue a proposed rule on exchanges in July, AMA will analyze the rule and provide comments to HHS on it. Please watch the AMA Web site for further developments. State level exchanges Massachusetts and Utah established health insurance exchanges prior to the enactment of the ACA. They represent the two ends of the spectrum for how states can implement exchanges. Massachusetts has an active purchaser exchange, while Utah has implemented an open marketplace exchange. California was the first state to enact an exchange after the ACA was enacted. More information on these options follows. Massachusetts In 2006, Massachusetts passed health reform laws mandating that most individuals acquire health insurance coverage. Additionally, the state required employers with 11 or more employees to either provide coverage to their employees or pay a fine to the state for not doing so. 17 In order to implement such reforms, the state launched the Massachusetts Health Copyright 2011 American Medical Association. All rights reserved. 7

8 Insurance Connector Authority ( Connector ), a quasi-governmental agency, that arranged for small businesses and individuals unable to obtain health insurance from their employers to purchase affordable health insurance. 18 To make these mandates possible, the Connector established two exchanges: Commonwealth Care (CommCare) and Commonwealth Choice (CommChoice). CommCare is a subsidized program accessible to those without access to health insurance from their employer and earning 300 percent of the FPL and below. Coverage under CommCare is based on an individual s income level. Those earning 100 percent of the FPL are given a dental benefit and only have co-payments for prescriptions. 19 Individuals with incomes less than 150 percent of the FPL have co-payments for all health services and no dental coverage. Individuals with income greater than 150 percent of the FPL are required to pay premiums that increase with income levels. 20 Until July 30, 2009, CommCare limited the carriers who could participate in the exchange to four carriers who already provided services for Medicaid recipients. Now, CommCare is open to other insurance companies who wish to bid for participation. CommChoice is an unsubsidized exchange offered to those with income levels higher than those covered under CommCare. CommChoice selected six carriers in January 2007 and established gold, silver and bronze benefit plans. Additionally, there is a fourth plan offered to young adults offering limited coverage. Unlike individuals eligible for CommCare, those eligible for CommChoice may enroll in the exchange or choose to purchase a plan outside the exchange. Whether one decides to enroll in CommChoice or not, carriers offering plans through the Connector also offer the same plans at the same premiums outside the Connector. The Connector is known as an active purchaser model because it negotiates with health insurance issuers to allow them to participate in the exchanges. Connector staff review bids submitted by the interested companies and then recommend a list of recommended companies to the Connector board who make the final determination. This results in some health insurance issuers being shut out of the Connector. More information on the Massachusetts Connector is available on the Connector Web site. Utah In August 2009, Utah launched a health insurance exchange Web site in order to provide individuals and small employers with helpful information about their health care and health care financing; provide a mechanism for consumers to compare and choose a health insurance policy that meets their needs, and provide a standardized electronic application and enrollment system. 21 The Utah Health Exchange was signed into law in March 2009, and focuses on 18 ContentDeliveryServlet/Health%2520Care%2520Reform/How%2520Insurance%2520Works/Issue_Brief.pdf Copyright 2011 American Medical Association. All rights reserved. 8

9 making the health insurance market more transparent and policies more affordable and accessible. Specifically, the law gives employers the option to deposit money into employees health savings accounts, which then allows employees to purchase a plan on the Web site that best fits their needs. Additionally, the exchange allows employees to move from job to job without forgoing health benefits, as the law mandates that carriers accept payment from a number of sources (e.g., different employers). Individuals and families who do not currently have health insurance through an employer may also purchase a plan on the Web site. 22 The Utah Health Exchange also allows enrollees to aggregate employer contributions, so that they can bundle contributions from several employers, possibly part-time employers, to purchase coverage. Utah does not negotiate with health insurance issuers to shape their offerings on the exchange. This is why it is known as an open marketplace or market organizer exchange. More information on the Utah Health Exchange is available on the Exchange Web site. California In 2010, California enacted two bills in response to ACA provisions related to exchanges. Assembly Bill 1602 establishes a Health Benefit Exchange (the Exchange) in California and creates an administrative authority to run the Exchange. 23 The bill gives the administrative authority many powers in order to help achieve the legislature s ultimate goals of reducing the number of uninsured Californians and strengthening the state s health care delivery system. California Senate Bill 900 requires the state to establish a health benefit exchange by January 1, The Exchange will be an independent public entity not affiliated with a state agency or department. It will be governed by an executive board comprised of five individuals, all residents of California. The governor appoints two of these board members and the Senate Committee on Rules and the Speaker of the Assembly each appoint one. The fifth board member will be the Secretary of California Health and Human Services or his/her designee, who will serve as an ex-officio voting member. The board members term lengths range from two to five years, depending on when and by whom they are appointed. The California exchange model is intended to be an active purchaser exchange. For more information the 2011 state legislative developments on exchanges, please visit the ARC health system reform Web site. AMA policy At the 2009 Interim Meeting, the AMA House of Delegates adopted the recommendations of Council on Medical Service Report 3-I-09, Health Insurance Exchange Authority and Operation, which included principles for the operation of health insurance exchanges (Policy H , AMA Policy Database): Copyright 2011 American Medical Association. All rights reserved. 9

10 Health insurance exchanges should maximize health plan choice for individuals and families purchasing coverage. Health plans participating in the exchange should provide an array of choices, in terms of benefits covered, cost-sharing levels, and other features. Any benefits standards implemented for plans participating in the exchange and/or to determine minimum creditable coverage for an individual mandate should be designed with input from patients and actively practicing physicians. Physician and patient decisions should drive the treatment of individual patients. Actively practicing physicians should be significantly involved in the development of any regulations addressing physician payment and practice in the exchange environment, which would include any regulations addressing physician payment by participating public, private or non-profit health insurance options. Regulations addressing physician participation in public, private or non-profit health insurance options in the exchange that impact physician practice should ensure reasonable implementation timeframes, with adequate support available to assist physicians with the implementation process. Any necessary federal authority or oversight of health insurance exchanges must respect the role of state insurance commissioners with regard to ensuring consumer protections such as grievance procedures, external review, and oversight of producer practices, training and conduct, as well as physician protections including state prompt pay laws, protections against health insurance issuer insolvency, and fair marketing practices. By adopting the recommendations of CMS Report 3-I-09, the AMA House of Delegates also reaffirmed its support for patient choice and empowering patients with incentives and understandable information about fees and prices; transparency among all health insurance issuers regarding covered services, cost-sharing obligations, out-of-pocket limits and lifetime benefit caps, and excluded services; health insurance issuer transparency and publication of their payment policies, rules, and fee schedules for physicians; and physician freedom of practice. 25 Overall, the AMA urges that insurance coverage options offered in a health insurance exchange: (1) be self-supporting; (2) have uniform solvency requirements; (3) not receive special advantages from government subsidies; (4) include payment rates established through meaningful negotiations and contracts; (5) not require provider participation; and (6) not restrict enrollees access to out-of-network physicians. 26 AMA legislative recommendations and discussion Exchanges are a major undertaking for states to implement. There are numerous issues and questions that states are grappling with as they head toward the 2014 implementation deadline. 25 Policies H [2], H [4], H and H , AMA Policy Database 26 Policy H Copyright 2011 American Medical Association. All rights reserved. 10

11 This section of the discussion paper addresses some of the key issues and questions that states face in this process. The legislative recommendations below are drawn from AMA policy and comment letters and from staff review of the exchange bills being considered in state legislatures. The ACA and federal regulations will establish baseline requirements for states on many of these issues, but states will have the opportunity to add additional requirements if they deem them to be appropriate. These points provide state medical associations with options on how to enhance exchanges for physicians and patients in their states. Exchanges should include actively practicing physicians and patients in their governance structure and not categorically exclude physicians who may provide care to Qualified Health Plan (QHP) enrollees based on conflict of interest provisions. QHPs should be allowed to participate in the exchanges in order to increase competition in state health insurance markets. QHPs sold on the exchanges should be transparent in their operations and provide necessary information to patients. QHPs should be required to maintain adequate physician networks and not restrict enrollees access to out-of-network physicians. QHPs should include payment rates established through meaningful negotiations and contracts and result in adequate physician payment levels. Exchanges should not mandate physician participation in Medicaid or QHPs. QHPs should be self-supporting, have uniform solvency requirements and not receive special advantages from government subsidies. Exchanges should not tax physicians to fund the exchange. QHPs should be required to follow the AMA Health Insurer Code of Conduct Principles. Quality measures included in QHPs should be true quality measures and not costcontrol measures that bear a quality label. QHPs should follow administrative simplification procedures, including fully complying with the Health Insurance Portability and Accountability Act (HIPAA) Transactions and Codes Sets rules and otherwise work to reduce administrative burdens on physician offices. Exchanges should develop systems to allow for real-time patient eligibility information or develop short term solutions until real-time information is available to address patient churn. Enrollment procedures should assist patients to find out which QHPs include their physician(s) in the QHP physician network. States should not mandate the involvement of a producer (i.e., broker or agent) in the purchase of a QHP. Exchanges should help states to address health care disparities including calling on QHPs to cover the cost of interpreter services. If an exchange certifies a multi-state plan to participate as a QHP, the multi-state plan must follow the patient and physician protection laws in the state where the patient resides and be subject to the enforcement authority of the state where the patient resides. Copyright 2011 American Medical Association. All rights reserved. 11

12 High-deductible plans, coupled with health savings accounts, may fit a patient s financial situation and should be considered as an option in exchanges. State insurance commissioners should maintain their authority to enforce patient and physician protections. States must employ robust risk adjustment mechanisms that maintain a level playing field in the individual and small group markets and ensure that physicians are not penalized for utilization of health care services which is beyond their control. The rest of this section provides more detail on these recommendations. Governance structure The AMA urges states to include actively practicing physicians and patients in the governance structures of the exchanges. Including physicians and patients will be essential in numerous aspects of exchange implementation, including, but not limited to: benefit structures, QHP certification, marketing practices and adequate physician payment. Exchanges will need input from numerous stakeholders, but input from patients and physicians is critical to ensuring the success of exchanges. They will be able to provide important information in the establishment of the exchanges, and they will be able to offer frontline feedback once the exchanges are operational, including helping them to change course as needed. Also, if exchanges are established as independent entities, then patient and physician input is even more necessary to ensure that they are accountable to the patients that they serve. There has been an effort in 2011 in several states to exclude physicians from the governance structure by either not including them on the governance list or by excluding them through onerous conflict of interest provisions. State medical associations should fight these efforts. States could allow physicians in a governance structure to recuse themselves at appropriate times during deliberations of the exchange board to quell any conflict of interest concerns. If states are unwilling to expressly include physicians in the governance structure, then state medical associations should push for inclusion of members of the governing board who have health care expertise and/or expertise in the delivery of health care to patients. As a final backstop, state medical associations should seek inclusion of actively practicing physicians on the advisory task force that exchanges are establishing to assist with stakeholder input. Active purchaser or open marketplace options At this point, the AMA encourages states to establish open marketplace exchanges, such as the one in Utah, versus active purchaser exchanges, such as the Massachusetts Connector. As stated above, AMA policy envisions exchanges as maximizing health insurance issuer choice for individuals and families purchasing coverage, and further, QHPs should provide an array of choices, in terms of benefits covered, cost-sharing levels, and other features. The most likely type of an exchange to accomplish this is the open marketplace exchange. If state officials are negotiating price and other issues with plans seeking to be QHPs, then they are likely to eliminate certain options for patients and may restrict the benefit structures or cost- Copyright 2011 American Medical Association. All rights reserved. 12

13 sharing levels available to patients, and these actions could limit patient choices regarding health insurance coverage options. AMA research indicates that many insurance markets across the country are dominated by one major health insurance issuer. 27 Patients and their physicians face limited choice in those markets. This market concentration creates an imbalance in the negotiating power between physicians and health insurance issuers, which leads to a host of problems for physicians and patients. Exchanges can help to correct this imbalance by creating a marketplace for new entrants to sell health insurance products and for patients to shop for and compare health insurance products. And the best option for accomplishing this goal is an open marketplace exchange. Such an exchange would force health insurance issuers to compete based on price, quality and transparency, and it would allow smaller health insurance issuers to challenge the monopolies that large health insurance issuers have in many markets now. One caveat to the recommendation that states should allow all QHPs to offer their products in an exchange is the assumption that HHS will issue regulations related to QHPs that require them to include strong patient and physician protections. If HHS regulations are not stringent enough, then states may wish to revisit this issue. QHP transparency The AMA calls for a high level of transparency for all health insurance plans, and QHPs participating in the exchanges should not be an exception. To make an informed health care purchasing decision, patients need to know how their premium dollars will be spent, what their cost-sharing and co-payment responsibilities will be, which pharmaceuticals will be available to them, and how health insurance issuers will conduct appeals for denied claims, among other things. Transparency will afford patients the opportunity to review health insurance issuer practices and to make an informed choice regarding their health insurance decisions. Health insurance issuers should disclose all information necessary to determine the relative financial rights and responsibilities of all parties prior to the provision of a health care service to their patients, to their patients physicians and other health care providers and to health care facilities providing services to the patients. This includes full, complete transparency of the contract-specific payer fee schedule, payer medical payment policies, reimbursement rules and other payment reductions. The AMA urges states to make the health insurance issuer information that is available on exchange Web sites as patient-friendly as possible in order to comply with the ACA s intent to provide patients with accessible and transparent health insurance issuer information. A standardized comparison tool that allows patients to compare plans offered on the exchange is essential to fulfilling this goal. This concept has been included in legislation introduced at the 27 Competition in Health Insurance: A Comprehensive Study of U.S. Markets, 2010 American Medical Association Copyright 2011 American Medical Association. All rights reserved. 13

14 state level. 28 The Texas Medical Association (TMA) developed a template to accompany the legislation introduced in Texas. The template requires the reporting of: Monthly premium; Percent of expense paid by plan in-network; Percent of expense paid by plan out-of-network; Annual out-of-pocket cost (est.); Patient total annual cost (est.); Justified complaints; Premium to direct patient care ratio; Expected profit; and Benefit levels, including: Annual deductible; Annual family deductible; Annual in-network deductible; Annual out-of-network deductible; Out-of-pocket maximum; Office visit copayment (primary/specialist); Rx co-payment; Lifetime maximum benefit; Emergency room visit copayment; Mental health; Outpatient surgery copayment; and Inpatient cost sharing. The sample template from Texas is created to look like a soup can label in order to provide patients with a comfortable and familiar format. The Texas legislation also includes font and spacing requirements for the form to ensure that it is patient-friendly. The AMA believes that this is an excellent template for the exchanges to follow. Further, plans offered on an exchange should also be required to disclose additional utilization data on the exchange Web site for patients to review, including: Number of hospital admissions per thousand enrollees in the last year for outpatient, manageable, preventable conditions, including but not limited to community acquired bacterial pneumonia, asthma, and diabetes; Number of emergency department visits per thousand enrollees in the last year; Number of preventive services, such as immunizations, which reduce the need for later, costlier interventions; 28 Texas Senate Bill 815 of 2009 Copyright 2011 American Medical Association. All rights reserved. 14

15 Percent of out-of-pocket costs incurred by enrollees for emergency department visits as a percentage of total enrollee out-of-pocket costs; Number of visits to out-of-network providers per thousand enrollees in the last year; Percent of services received from in-network providers as a percentage of total services received by enrollees; and Percentage of total costs for in-network and out-of-network services received by enrollees which were paid for by the health insurance issuer. Finally, health insurance issuers should also be required to disclose their methodology for covering out-of-network care, including estimated amount of patient liability using a true usual customary and reasonable (UCR) standard each time a patient is to be treated by an out-ofnetwork provider. A useful legislative tool in this regard is the AMA s model bill, Health Insurance Premium Transparency Act. When a health insurance issuer places restrictions on patient choice of physicians, hospitals, other providers of care, or treatment options, such restrictions should be clearly, and understandably, identified to the individual prior to their selection of that health insurance issuer. These plans should also make available, in a standard format, to enrollees and prospective enrollees, information on the amount of payment provided toward each type of service identified as a covered benefit. Adequate networks A critical attribute of health care coverage is the network of contracted physicians and other health care providers (the provider network). The provider network is comprised of physicians and other health care providers who have contracted to participate by agreeing to abide by the network s rules and accept a specified discount off their retail charges. Because, for financial reasons, patients are most likely to obtain medical care from physicians and other health care providers who have contracted with a provider network to which the patient has a right of access. A provider network that does not have an adequate number of contracted physicians and other health care providers in each specialty and geographic region deprives patients of the benefit of the money they have paid for health care coverage. Inadequate provider networks also undermine the public health and welfare by forcing patients to reduce utilization of appropriate preventive services and to fail to obtain necessary medical care. This in turn leads to reduced productivity and increased work absenteeism, unnecessary illness and increased emergency department utilization. To assess the appropriateness of a provider network before selecting a particular health insurance plan, patients must have all the information relevant to the medical needs of themselves and their families, including: (1) whether their physicians and preferred hospitals are in or out-of-network, (2) whether these physicians and hospitals are still accepting new patients, and (3) what the likely wait-time is for an appointment. Patients also need access to a robust, up-to-date provider directory to enable them to determine which physicians, other health care professionals, and health facilities remain in the network as their medical needs change. An important component of an Copyright 2011 American Medical Association. All rights reserved. 15

16 up-to-date provider directory includes ensuring patients know the education and training of the physicians and other health care professionals within the network. This can be easily accomplished by including the full title of the relevant licensure description of the provider (e.g. medical doctor, nurse practitioner, physical therapist, etc.). Further, as mentioned later in this discussion paper, QHPs should disclose their networks for patients during the enrollment process, so that patients can access them prior to purchasing a policy. To ensure an adequate provider network, the AMA calls for the certification by the state department of insurance of the plan s provider network. States should establish a similar procedure for QHPs in the exchanges. The AMA has prepared the Meaningful Access to Physicians and other Health Care Providers: Network Standards Act to assist states develop a thorough certification process. The model bill calls on plans to disclose the geographic and population capacity of the provider network. The provider network certification shall be awarded only to the extent that the provider network offers the access to physicians and other health care providers reasonably necessary to ensure that all enrollees of a health insurance issuer product using the provider network will have timely access to all the medical care that they need on an in-network basis, including but not limited to, access to emergency services 24 hours a day, seven days per week. Another point of information for patients is if physician supervision of non-physicians is required in the state. HHS and states should require this disclosure from QHPs. Physician payment and physician participation There has been discussion among policymakers that one way to ensure adequate provider networks is to require physician participation in either Medicaid or QHPs as a condition of physician licensure. The AMA adamantly opposes any such requirement and has drafted model legislation (available upon request) to prevent this from occurring. The model bill states that: Licensure laws should only relate to requirements for admission to the practice of medicine and to assuring the continuing competence of physicians - not to achieving socioeconomic objectives; Conditioning physician licensure to participation in any public or private insurance plans, public health care system, public service initiative, or emergency room coverage unduly restricts a physician s freedom to practice; Forcing physicians to participate in certain plans eliminates a physicians ability to control their workload to ensure they are able to provide their patients with the care they need; Forcing physicians to participate in certain plans eliminates their ability to negotiate contracts fairly with the plans; Forcing physicians to participate in certain plans eliminates their ability to refuse to work for a plan that engages in abusive business practices or improperly interferes in the physician-patient relationship; Copyright 2011 American Medical Association. All rights reserved. 16

17 Physicians should not be forced to participate in the state Medicaid program because physicians participating in Medicaid must comply with additional federal and state laws and regulations and are paid at a lower level than most other insurance plans; and If physicians lose their license as a result of choosing not to participate in certain public or private insurance plans, public health care system, public service initiative, or emergency room coverage, they will be forced to stop practicing or leave the state as a result of their decision. This would have a detrimental impact on access to care in states with such requirements. Further, the payment issue will be critical for the success of exchanges. Physician payment in Medicaid programs is already being cut in many states due to state fiscal and budget crises. With Medicaid payment already lagging behind private health insurance issuer rates and Medicare rates, these cuts are placing an even larger burden on physicians who accept Medicaid patients. To maintain adequate provider networks and access for patients to physician services, reasonable physician payment levels need to be assured for mandated benefits in health insurance policies offered by QHPs. These payment rates should be established through meaningful negotiations and contracts. Physicians should also receive fair compensation for administrative costs when providing service to patients enrolled in QHPs. Adequate physician payment, particularly for primary care, is crucial to the success of exchanges. Exchanges will provide patients with an array of coverage options, but even the lower cost options will need to provide physicians with adequate payment in order to have robust, high-quality provider networks. Requiring physicians to participate in Medicaid and allowing QHP payment rates to be tied to Medicaid are misguided fixes that will not lead to the long-term viability of the exchanges or the Medicaid programs in those states. This is why it is crucial for QHPs to include payment rates established through meaningful negotiations and contracts and result in adequate physician payment levels. Exchange finances Exchanges must be self-supporting after the federal planning and establishment grants subsidize their creation and initial operations. There are many ways for states to accomplish this, including imposing fees on health insurance issuers, earmarking funds from general revenues and using proceeds from tobacco taxes. However, state medical associations must be wary of states seeking taxes or fees on physicians to pay for the exchange operations. Proponents of physician taxes or fees will argue that since more of their patients will have health insurance coverage after the ACA is fully implemented and the Medicaid expansion occurs, physicians will be in a better position financially and should bear the burden of funding the exchange based on this windfall. Such thinking is misguided because there is no guarantee that physicians will benefit financially, and further, the health insurance issuers are the most likely to benefit based on the number of new patients who will have to comply with the individual mandate and purchase a policy. Therefore, physicians should not be the funding source for an exchange. Copyright 2011 American Medical Association. All rights reserved. 17

18 AMA Insurer Code of Conduct The AMA recommends that states should be permitted to add requirements for QHPs beyond the baseline requirements that the ACA or HHS regulations require. Besides the transparency and network adequacy provisions discussed earlier, another recommendation is that states require QHPs to follow the AMA Health Insurer Code of Conduct Principles (the Code). The Code focuses on some of the worst health insurance issuer abuses and provides ways to correct them. The ACA addresses some of the most troubling insurer practices, such as rescission, but more work needs to be done. The Code calls on health insurance companies to adopt consistent corporate practices that will bring transparency and accountability to the multibillion-dollar health insurance industry. The Code developed by the AMA, and endorsed by 68 state and specialty medical societies, contains 10 clear principles critical to an efficient, patient-centered health care system. The principles shine light on health insurance issuer practices that influence the health care of patients, including cancellation of coverage, medical services spending, access to care, fair contracting and patient confidentiality, medical necessity, benefit management, administrative simplification, physician profiling, corporate integrity, and claims processing. The AMA recommends that states require all health insurance issuers to follow the requirements contained in the Code, including QHPs that will be sold on an exchange. However, if states do not require all plans to follow the Code, then that decision could create an uneven playing field that would favor plans being sold outside of the exchange. If those plans can operate with fewer restrictions, then they may be cheaper, and thus, more attractive to patients seeking coverage. This could cause adverse selection in the exchanges, which could make them struggle in the long term. State medical associations will have to decide how they want to balance placing more requirements on QHPs if such requirements do not exist for plans sold outside of the exchanges. Quality The establishment of exchanges creates a window of opportunity to improve the quality of health care provided to patients. However, states must guard against cost containment mechanisms which are euphemistically termed quality measures. The AMA supports the development and appropriate use of health insurance issuer performance standards and appreciates the value of assessing the quality of care that is delivered through health insurance issuers participating in the forthcoming exchanges. The AMA defines quality of care as the degree to which care services influence the probability of optimal patient outcomes. The AMA believes that the following noninclusive criteria for measuring health insurance issuers should be considered in evaluating a QHP s ability to meet that definition for quality: Copyright 2011 American Medical Association. All rights reserved. 18

19 Practicing physicians, physician organizations, and consumers are involved in the development, evaluation and refinement of the program measures (e.g. AMA Physician Consortium for Quality Improvement (PCPI) physician measures). 29 The measures shall be representative of the full range of services typically provided by health insurance issuers, including preventive services. The capabilities and limitations of the methodologies and reporting systems applied to the data to profile and rank physicians are publicly revealed in understandable terms to consumers. An analysis of health insurance issuer performance data collection and analysis methodologies, including establishment of statistically significant sample sizes for areas being measured, shall be developed. Performance data used to compare performance among health insurance issuers shall be adjusted for severity of illness, differences in case-mix, and other variables such as age, sex, and occupation and socioeconomic status. Health insurance issuer performance data that are self-reported by health insurance issuers shall be verified through external audits. The methods and measures used to evaluate health insurance issuer performance shall be disclosed to health insurance issuers, physicians and other health care providers, and the public. Health insurance issuers being evaluated shall be provided with an adequate opportunity to review and respond to proposed health insurance issuer performance data interpretations and disclosures prior to their publication or release. Effective safeguards to protect against the unauthorized use or disclosure of health insurance issuer performance data shall be developed. The validity and reliability of health insurance issuer performance measures shall be evaluated regularly. Health insurance issuers do not have requirements that permit third party interference in the patient-physician relationship. Health insurance issuers do not sponsor tiered and narrow physician networks that deny patient access to, or attempt to steer patients towards, certain physicians primarily based on cost of care factors. Health insurance issuers provide an array of choices, in terms of benefits covered, costsharing levels, and other features. Health insurance issuer benefits are designed with input from patients and actively practicing physicians. Treatment decisions are driven by the patient and physician. 29 The PCPI is a national, physician-led initiative dedicated to improving patient health and safety by: (1) identifying and developing evidence-based clinical performance measures and measurement resources that enhance quality of patient care and foster accountability; (2) promoting the implementation of effective and relevant clinical performance improvement activities; and (3) advancing the science of clinical performance measurement and improvement. The PCPI develops, tests, implements and disseminates evidence-based measures that reflect the best practices and best interest of medicine. Copyright 2011 American Medical Association. All rights reserved. 19