The Affordable Care Act: How States Can Reach the Finish Line with a Health Insurance Exchange

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1 The Affordable Care Act: How States Can Reach the Finish Line with a Health Insurance Exchange By: David Sodergren Director, Government Accounts 2013 First Data Corporation. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.

2 Introduction In June 2012, the U.S. Supreme Court issued a ruling that affirmed the constitutionality of the Patient Protection and Affordable Care Act of 2010, collectively referred to as the Affordable Care Act (ACA). Every state must comply with several ACA mandates, including establishing a public Health Insurance Exchange that provides a competitive marketplace for individuals and small employers to directly compare available private health insurance options. The ACA provides for several business models of an Insurance Exchange. A state-based Exchange is developed and administered by a state and can be highly tailored to the needs of that particular state. The ACA provides significant flexibility in developing a state-based Exchange, as long as the state meets the Federal standards contained in the law. At the other end of the spectrum, a Federally-facilitated Exchange (FFE) is set up and administered by the Federal government on behalf of the states that are not developing their own Exchange. Because the Federal government is driving the development of an FFE for numerous states, there is no leeway for tailoring this type of Exchange for a particular state s needs. The final business model for an Insurance Exchange is an FFE Partnership Exchange in which a state uses the core elements of the Exchange provided by the Federal government but takes responsibility for the state s own plan management and/or consumer assistance and outreach programs. An FFE Partnership Exchange recognizes that some functions of an Exchange are best handled on a local level to account for unique demographic and geographic needs. The Federal government is recommending this approach to the states not developing their own Health Insurance Exchange. Regardless of which business model a state has chosen for its Exchange, time is running short. As of February 15, 2013, the Kaiser Family Foundation reported that for the 2014 calendar year, 17 states and the District of Columbia have declared for a state-based Exchange; 7 states are planning for an FFE Partnership Exchange; and 26 states plan to default to a Federally-facilitated Exchange 1. Those states that are relying on the FFE business model for the 2014 calendar year can still plan to have an FFE Partnership Exchange or even a state-based Exchange at some future time to provide a more customized solution for their residents in the 2015 calendar year. Regardless of which business model a state has chosen for its Exchange, time is running short. The ACA mandates that all state Exchanges must be ready to begin enrolling consumers into coverage on October 1, 2013 and must be fully operational on January 1, States have already declared their Health Insurance Exchange model in order to be ready to go live in 2014, but there is still much work to be done, even (or especially) for those states where the Federal government will facilitate the development of an Exchange. There is no time to waste; planning and implementation must be underway now in order to provide a serviceable Health Insurance Exchange for state residents and to secure the best possible level of Federal grants while such funding is still available. What s more, states should be planning how they want to operate their respective Exchanges in the years ahead. Given the enormity of the task ahead, most states need the help of a strategic planning partner to meet the mandated 2014 go-live date for their Health Insurance Exchange and to prepare for 2015 and beyond. This paper looks at the critical planning and implementation challenges states are facing and delineates the third-party expertise that is needed in a strategic partner in order to be ready for 2014 while at the same time planning for firstdata.com 2013 First Data Corporation. All rights reserved sponsored by the Kaiser Family Foundation

3 The Challenges of Building a Statewide Health Insurance Exchange There is inherent complexity in developing a Health Insurance Exchange, regardless of the administrative approach a state chooses. An Insurance Exchange is intended to be an organized public marketplace where any resident of a state can shop for and purchase a health insurance plan that is tailored to that state s residents. The goal of an Exchange is to make health insurance affordable, adequate, understandable and available to everyone regardless of their health status, and to promote competition among insurance providers. Ideally, an Exchange would promote insurance transparency and accountability; facilitate enrollment and the delivery of subsidies; and play a role in spreading risk (i.e., ensuring that the costs associated with those with high medical need are shared broadly) and containing costs 2. While the goal of an Exchange is certainly admirable, the path to attain that goal is long and bumpy. Many parties Federal and state agencies, private insurance companies and their associated agents, consumer watchdogs, and others have a vested interest in how a state s Exchange will function. Unfortunately, the interests of the various parties may conflict or be rife with political undertones. With all 50 states plus the District of Columbia now mandated to build and operate an Insurance Exchange, the scale of disruption of business as usual in the health insurance market is unprecedented. Many states are likely to encounter the following challenges in these final few months before the first impending deadline. Demanding Timeframes: Time Waits for No One President Obama signed the Affordable Care Act on March 23, 2010 fully three years ago. The law specifies that every state must have an Insurance Exchange that is available to enroll consumers into affordable health insurance coverage beginning October 1, By that date, each state s residents should be able to use their Exchange to get information about the plans available to them in their area, and to enroll for coverage that begins on January 1, The law specifies that every state must have an Insurance Exchange that is available to enroll consumers into affordable health insurance coverage beginning October 1, Few states jumped into action to plan and develop their Exchanges when the law was first signed three years ago. Given the controversy of the Affordable Care Act, many states delayed their activity until the legality of the law was settled. Now that the issue is resolved, time marches on, and there are specific timelines and looming deadlines that must be managed to. This includes when an Exchange must be operational, and how long Federal funding will be available. Now, time pressures are bearing down on everyone. Given all that needs to be done planning, development, testing, qualification of insurance providers and their health plans, integration with Medicaid systems, public education and outreach, quality assurance a reasonable implementation timeframe is typically 15 to 18 months in advance of a go-live date. States that have had a slow start have quite a lot to accomplish in a very short amount of time. firstdata.com 2013 First Data Corporation. All rights reserved. 3 2 Linda J. Blumberg and Karen Pollitz, Health Insurance Exchanges: Organizing Health Insurance Marketplaces to Promote Health Reform Goals, April 2009

4 At the same time that states work toward the 2014 execution date, they must look beyond 2014 and plan for 2015 and ensuing years. Many states are likely to change or enhance their Exchanges going forward, and there are specific times when this can be done. The ACA requires that an Insurance Exchange be locked-in for a year, with changes only occurring once a year. Now is the time to be planning and developing for the future form of an Exchange for 2015 and beyond. Another key consideration for doing much of this work sooner rather than later is that Federal funds that are available to support and augment this work are only available by request through States will want to secure their share of grant money to create and promote their Exchanges before Federal funding dries up. Stakeholder Engagement: All In for Success Developing an Insurance Exchange is a tall order that is unprecedented for most states. An intense level of coordination is required within a state, even if it is using an FFE model. People and agencies that have never worked together before must collaborate on making decisions, sharing information, and assigning roles and responsibilities. Success depends on everyone getting on board early and sharing a common goal. For example, one of the roles of a Health Insurance Exchange is to determine who is eligible for a government-subsidized health insurance policy (i.e., Medicaid). This means that Human Services leadership within a state s Medicaid office must be actively involved because they have a wealth of knowledge and experience pertaining to eligibility for public programs for large volumes of people. At the same time, a state s Insurance Department commissioner and directors must contribute their expertise to the Exchange planning process, as these people are experts on working with private insurance carriers and brokers and healthcare providers. In normal circles, the Medicaid officials would have little to no interaction with insurance department directors. However, these two groups and others as well must work closely to define the requirements of how a single public Exchange should work to accommodate the needs of both buyers of private health insurance and buyers of government-subsidized insurance. A state s team must include all stakeholders with a professional interest in how the Insurance Exchange will work and who it will serve. This group of stakeholders is diverse, and their interests may conflict. Nevertheless, one of the team s responsibilities is to set policy and make decisions for the state, even if the state is deploying a Federally-facilitated Exchange. Getting the group to agree and cooperate can be slightly more challenging than herding cats, but the group s teamwork is essential for success, especially in such a short timeframe. They must make decisions on coverage, eligibility, enrollment, health plan certification, outreach and other aspects relating to the operations of the state s Insurance Exchange. A state s team must include all stakeholders with a professional interest in how the Insurance Exchange will work and who it will serve. IT Systems All states have some basic IT infrastructure to support state-run health insurance programs today typically the system that is used to run a state s Medicaid program. The existing infrastructure must be evaluated to determine the scope of integration necessary to tie it to the Federal Exchange infrastructure that is under development at this writing. States that have revamped their Medicaid IT systems in recent years may be ahead of the game for the integration, whereas states with very old legacy systems have more work to do. However, they may be able to use Federal grants to cover some of the costs of system enhancements. The next step is the actual development and integration work to tie into the new Federal infrastructure. The scope of this work will obviously depend upon the results of the technology evaluation. Regardless of the amount of work to be done, the IT systems behind a state s Insurance Exchange are expected to be fully operational by the end of October firstdata.com 2013 First Data Corporation. All rights reserved. 4

5 Choosing a Partner to Help Drive the Process The enormity and complexity of developing a Health Insurance Exchange not to mention the extremely tight time frame at this stage of the game dictates the need for states to team up with a strategic partner to pull everything together. This partner must have a laser focus on what needs to be done and how to do it, and bring to bear the experts and experience to help a state complete its Exchange by the October 2013 deadline and plan for enhancements in ensuing years. Here s what to look for in a strategic partner: Experience with Exchanges There is no time for a learning curve. Any partner that is chosen to lead a state s Exchange development and execution must have deep knowledge of the full range of ACA requirements, including the reforms imposed on the insurance market. Ideally the partner would have experience from driving Exchange development in other states and know first-hand how to navigate through the issues and break the log jams when stakeholders have conflicting agendas. What s more, the partner should know which stakeholder agencies and other players are essential for inclusion in the process. Any partner that is chosen to lead a state s Exchange development and execution must have deep knowledge of the full range of ACA requirements, Regardless of the administrative model of the Exchange State-based, FFE, or FFE Partnership the strategic partner must understand how to help a state maximize its capabilities with the resources, funds and time still available. This includes how to tailor an Exchange for a given state s needs now, and with foresight for the future to take the Exchange from FFE to FFE Partnership to State-based in order to better meet the state s long-term needs. This partner must be able to help the state through the delicate process of obtaining legal authority to operate an Insurance Exchange within the state. This authority may require a grant by the state s governor or legislature, or by the state s insurance commissioner or other legal authority group. Another critical task of the strategic partner is the ability to lead a state through its review by the Center for Consumer Information and Insurance Oversight (CCIIO). This is sometimes called the CMS review, with CMS being the Centers for Medicaid & Medicare Services. The CCIIO has to approve a state s plans and policies for its Exchange before the state can get the Federal funds and acknowledgement to proceed. The strategic partner also should have experience with technology planning to support a state s Exchange. As outlined above, the information technology systems to support an Exchange will be complex and will require integration of legacy systems with new development. These systems are the very embodiment of the Insurance Exchange; they are crucial for directing residents and small business employers to the health plans that are appropriate for them. Experience in the Insurance Exchange arena is so critical because there is no time to waste. Federal funding will disappear soon and then states will be responsible for all costs. firstdata.com 2013 First Data Corporation. All rights reserved. 5

6 A Strong Background in Human Services A strategic partner chosen to lead a state s Exchange development project should have a strong background in human services for two reasons. First, Health Insurance Exchanges are set up to be closely tied to existing Medicaid and other human services eligibility systems and processes. This means the partner needs to understand how the Medicaid program and other public programs within that state operate. Second, there is a large public outreach aspect of an Insurance Exchange. This is referred to as the Navigator Program in Federal parlance. The intention is to send consultants into communities throughout a state to talk to and educate and mentor residents to help them gain access to the Insurance Exchange and to select an appropriate plan. Full public participation in buying health insurance is a crucial pillar for the success of any Exchange. This is what will help to spread the costs and risks of insurance policies and theoretically, at least make health insurance affordable to all. In a State-based or FFE Partnership Exchange, the state is responsible for all the consumer outreach. In a pure FFE business model, the Federal government will handle the outreach because it still needs to be done to enroll residents into insurance plans. However, it s much preferred by all that the state handle its own outreach because the state much more so than the Federal government knows the specific needs and concerns of its residents and how best to reach them. The Ability to Provide Oversight and Project Management Development of an Insurance Exchange is a big effort for any state. There will be many stakeholders, agencies, contractors and consultants involved. The strategic partner chosen to lead the coordination effort must have the ability to manage all other third parties as well as coordinate all internal parties, and to cut through the politics that could derail the entire project. Enterprise project management experience and capabilities are a must-have trait. The partner must be able to work well with the executive staff and policy makers of the state, to help them get up the curve of knowledge on how to operate an effective Health Insurance Exchange. A Breadth of Services and Expertise The strategic partner should understand all aspects of what needs to be accomplished and coordinated to bring a state s Insurance Exchange to fruition. This partner may be called upon to fill in the gaps where expertise is needed; for example, writing and submitting grants for Federal funding, negotiating contracts, developing requests for proposal (RFPs), evaluating proposals, and so on. This partner must have the ability to deliver general professional services to the state leadership. Quality Assurance Expertise As the oversight lead, the partner must be able to provide quality assurance by critiquing the work done by the systems integrators. This could come in the form of evaluating the way they are gathering requirements, evaluating their analysis and design techniques, performing user acceptance tests, and evaluating the system architecture to identify security risks. This partner must have the ability to identify risks and issues that may jeopardize the successful implementation of the project and to pull it back on track when necessary. firstdata.com 2013 First Data Corporation. All rights reserved. 6

7 Conclusion Federal law calls for every state to develop and execute a Health Insurance Exchange by the end of Time is running short for meeting critical deadlines. States that are not well into implementation at this point need help to get them to the finish line. Even those states that are defaulting to a Federally-facilitated Exchange need help to develop policies and procedures and make decisions that the Federal government will not or should not make on their behalf. A knowledgeable, experienced strategic partner can cut through the big challenges, not the least of which is ensuring that all the right stakeholders are fully engaged and working toward the same goal. Any state that is looking to engage a strategic planning partner should consider the company s knowledge of and experience with other Exchange implementations; depth and breadth of services and capabilities; and expertise in human services. These qualities are essential for helping the state develop an Exchange that will meet its residents needs as best as possible while working within the state s budgetary and resources constraints. A knowledgeable, experienced strategic partner can cut through the big challenges, not the least of which is ensuring that all the right stakeholders are fully engaged and working toward the same goal. The Global Leader in Electronic Commerce Around the world every day, First Data makes payment transactions secure, fast and easy for merchants, financial institutions and their customers. We leverage our unparalleled product portfolio and expertise to deliver processing solutions that drive customer revenue and profitability. Whether the payment is by debit or credit, gift card, check or mobile phone, online or at the point of sale, First Data helps you maximize value for your business. firstdata.com 2013 First Data Corporation. All rights reserved