HealthSource RI: Rhode Island s Health Insurance Exchange Issue Brief January 22, 2015 The Patient Protection and Affordable Care Act (the ACA or Obamacare ) is a federal law designed to expand health insurance coverage and improve health care delivery services. The ACA provides critical tools for states to drive their own reforms, including health insurance exchanges, Medicaid expansions, requirements for insurance companies to cover essential health benefits and pre-existing conditions, and incentives for innovation to improve how health care is provided and paid for. Despite the ACA s progress in expanding health insurance coverage, the need for health care reform remains. High health care costs continue to hurt small and medium businesses and stunt their growth. 1 For Rhode Island, one key feature of the ACA is the requirement that states enable their residents to purchase health insurance through an exchange. States were given the choice to establish and manage their own exchanges, or to pay the federal government to run the exchanges for them. In 2011, Rhode Island s Governor Lincoln Chafee signed an executive order to establish a state-based health insurance exchange, known as HealthSource RI. HealthSource RI is a one-stop system that allows individuals and small groups to access health insurance and to have choice over which plan they select through the individual market, small employer health options (SHOP) marketplace, and Medicaid. Rhode Island legislators and Governor Gina Raimondo will make critical decisions in 2015 about whether to maintain state control over the health benefits exchange. This issue brief provides an overview of: The services HealthSource RI provides Rhode Islanders The benefits of keeping local control of our health insurance exchange How other states are paying for their state-based exchanges How Rhode Island can pay for HealthSource RI What is HealthSource RI? HealthSource RI is Rhode Island s state health insurance exchange. HealthSource RI creates a streamlined and competitive market for health insurance by offering a variety of plans, setting basic health services coverage requirements, and providing information for Rhode Islanders to make more informed comparisons and decisions about their health insurance.
Since its launch, HealthSource RI has been recognized as one of the most successful state exchanges in the nation. HealthSource RI enables Rhode Island individuals and small businesses to compare and buy health insurance all in one place. Rhode-Island based consumer service representatives provide interested buyers with the information they need at in-person support centers, on the phone, or through the website (www.healthsourceri.com). HealthSource RI helps Rhode Islanders find out if they are eligible for federal tax credits to make their insurance more affordable or, in some cases, receive free coverage under Medicaid. Who does HealthSource RI serve? HealthSource RI offers health insurance plans for: Individuals and families: Based on their income, many employed individuals are eligible for tax credits to make insurance more affordable when their employer is unable to offer coverage. Small businesses. HealthSource RI s Small Business Health Options marketplace (SHOP) helps Rhode Island small businesses (<50 employees) provide health coverage to their employees. It is the only exchange in the country that allows employers to offer their employees full choice among all insurance plans and products on the exchange. Prior to the existence of the ACA, small employers often had to choose one plan, and hope that it was suitable and affordable for all their employees. Those who may be eligible for Medicaid. Through HealthSource RI, Rhode Islanders with lowerincomes can find out if they are eligible for tax credits or free insurance coverage. With the state s Medicaid expansion, anyone earning less than 138% of the federal poverty level can receive free coverage under Medicaid. How does HealthSource RI benefit Rhode Islanders? HealthSource RI increases consumer s choice and control over plans. HealthSource RI allows consumers to directly compare health insurance plans according to price and choose the best plan for them. Before the exchange, consumers were only able to obtain price quotes for plans one at a time. Now, HealthSource RI collects price information for all participating plans and allows side-by-side comparison of health plans. HealthSource RI provides Rhode Islanders with a one-stop shop for health insurance. HealthSource RI connects small businesses and individuals with affordable health care plans. It provides one-stop shopping, pricing and coverage information for Rhode Islanders to understand available health insurance options and decide on the plan that best suits their needs. As of August 2014, HealthSource RI has signed up 27,000 individuals for private insurance and an additional 64,000 people for Medicaid. 2 2
HealthSource RI offers local customer service to help Rhode Islanders choose the best plan for them. A call and walk-in center is open 7 days a week in Providence to answer questions, help people understand their health care and insurance, and manage enrollment. The HealthSource RI call and walkin center connects consumers with customer service representatives who live in the community to explain different health insurance options and how they shape their access to health care and other health assistance programs. HealthSource RI gives employees the ability to use their employer s health insurance contribution to select any plan available on the Small Business Health Options marketplace ( SHOP ). Employees can use set contributions from their employers deducted from their paycheck before tax to purchase plans that are less expensive than what their employer offers or more expensive for a more comprehensive plan than their employer offers. For the first time, employees may select coverage from among competing insurers forcing insurance companies in RI to compete to provide the most valuable plans for employees. HealthSource RI helps small business predict health insurance costs. The Small Business Health Options marketplace (SHOP) provides small employers with reliable health insurance cost estimates to better predict financial budgets. Without HSRI, many small employers do not know the cost of next year s coverage, one of their biggest budget items, until one or two months before they start their renewal process. However, HSRI publishes its rates up to a year in advance and provides tools for employers and brokers to get their renewal quotes with far greater lead time. HealthSource RI is a tool to decrease health care costs in RI. When Rhode Islanders can see differences in prices among insurance plans, their choices put pressure on insurers to compete to provide more valuable plans. Research has shown that as more insurers enter a market (especially markets with few insurers, such as Rhode Island), competition between insurers lowers premiums. 3,4 Establishing HealthSource RI as Rhode Island s insurance exchange and encouraging insurer participation may therefore help to lower premiums and control health care costs. 3
Why should Rhode Island keep control of HealthSource RI instead of moving to the federal marketplace? Maintaining HealthSource RI empowers small businesses and consumers to make more informed decisions about their health insurance. A state-based exchange can also encourage collaboration between RI insurers and providers to deliver care more efficiently and lower costs for everyone. Transitioning from HealthSource RI to the federal marketplace would mean losing key functions of the current state-based exchange. In addition, moving to the federal marketplace is not without cost the federal government will require Rhode Islanders to pay a fee to use the federal exchange, and will set the fees and insurance packages according to the needs of the national community, as opposed to what Rhode Islanders need. Figure 1 summarizes the key differences between a state-controlled exchange and a federally facilitated marketplace. Figure 1: Comparison of services between HealthSource RI and the federally facilitated marketplace. 5 Service HealthSource RI Federally Facilitated Increased insurer competition Provider-Health Plan Collaboration Small Business Sales + Full Employee Choice Consumer Tools + Call/Walk-in Help Center Basic Call Center Eligibility Determination System Enrollment Application Keeping HealthSource RI in state also provides key financial benefits for the state. Keep Rhode Island dollars in Rhode Island: A 3.5% user fee is charged on all plans offered through the federally facilitated marketplace. Because insurers are required to keep prices the same inside and outside of the marketplace, participating insurers must spread this cost across all of their individual and small group market subscribers. By switching to the federally facilitated marketplace, the state would see its taxpayer dollars spent on running an exchange in Washington instead of one in Rhode Island. Keep federal dollars in Rhode Island: This spring, the US Supreme Court will hear a case (King v. Burwell) that would take away federal tax credits for people who live in states that use the federally facilitated marketplace. Giving up HealthSource RI could mean losing at least $60 million in federal tax credits, which currently help keep coverage affordable for middle class Rhode Island families. 6 4
How are other states paying for their health insurance exchange? Seventeen states are running state-based health insurance exchanges either on their own or in partnership with the federal government. Figure 2 shows how other states are paying for their exchanges. Most states charge fees ranging from 1% to 3.5% of monthly premiums for plans sold through their exchanges (the federally facilitated marketplace fee is 3.5%). These states have instituted fees on plans offered in and/or out of their state marketplaces. Figure 2: Financing mechanisms for state-based marketplaces 7 Long-term Revenue Source Fees only on plans offered inside the marketplace Fees on plans offered inside and outside of the marketplace State appropriations only Long-term financing mechanism not finalized States CA, HI, ID, MA, MN, NV, OR, WA CO, CT, DC, KY, MD NY NM, RI, VT Most state-based exchanges are projected to keep costs below the price set for the federal exchange. Figure 3 shows the fees that other states are paying for their exchanges. Regardless of the payment method, the Commonwealth Fund notes that the success of these exchanges depends on high enrollment numbers during the 2014-2015 open enrollment period and minimizing operational costs. Figure 3: Charge levels on Exchange health plans by state in 2015 8 * State Fee (% of premium or flat monthly fee per member) State Fee (% of premium or flat monthly fee per member) Federal Marketplace 3.5% Kentucky 1% California $13.95 Maryland 2% Colorado 1.4% + $1.25 Massachusetts** 2.5% Connecticut 1.35% Minnesota 3.5 District of Columbia 1% Nevada $13 Hawaii 2% Oregon $9.66 Idaho 1.5% Washington 2% + $4.19 *This figure reflects charges on health plans offered in the individual health insurance marketplace only. Some states have different charges for plans offered in small business (SHOP) marketplaces or for dental plans. **Massachusetts is charging a different fee of 3% for ConnectCare plans providing additional cost-sharing assistance for lower-income individuals. 5
How could Rhode Island pay for HealthSource RI? There are many affordable funding options for HealthSource RI, but there is a tradeoff between the size of per-person charges and the size of the population funding the exchange. By instituting charges on plans offered both in and out of the exchange as five other states are doing the state can maintain HealthSource RI s unique functions and benefits for Rhode Islanders at an affordable price. The benefits HealthSource RI brings to Rhode Island extend beyond those enrolled in the exchange and should be paid for accordingly. Figure 4 shows charges levels when drawing upon different groups of insured populations, all of which are lower than the federally facilitated marketplace s 3.5% fee. Figure 4: 2016 HealthSource RI estimated charges 9 Funding Scenario 1: Charge on fully insured individuals, small, and large group market Funding Scenario 2: Scenario 1 + self-insured market Funding Scenario 3: Scenario 2 + state employees Coverage population 306,420 551,118 590,868 Revenue Base (from insurance premiums) $903 million $1,782 million $2,016 million Required Charge 2.64% 1.34% 1.18% How does HealthSource RI fit into the bigger picture of healthcare reform? Price Transparency HealthSource RI makes it easy for consumers and small businesses to know exactly how much their plans cost, allowing them to make more informed buying decisions and encouraging insurer competition for lower premiums. Quality Transparency In collaboration with other state databases, HealthSource RI provides a platform for consumers to access information on how plans differ in provider networks and the quality of the providers they re paying for. Affordability HealthSource RI leads the way for more affordable health care coverage with Rhode Island consumers in mind, not just shifting costs from employers or insurers. The Right Plans for Rhode Islanders HealthSource RI can help customize minimum coverage standards with specific Rhode Island health needs in mind, not just requirements dictated by the federal government. HealthSource RI is a unique opportunity to create a more valuable health care system for our state and would position Rhode Island to become a model for reform across the country. 6
References and Endnotes 1 J. Gabel, R. McDevitt, L. Gandolfo et al., Generosity and Adjusted Premiums in Job-Based Insurance: Hawaii Is Up, Wyoming Is Down, Health Affairs, May/June 2006 25(3):832-843. Web. 2 Auer, Kaylen. "R.I. Medicaid Expansion Enrollees Reach 83% of 2015 Goal, as Nearly 65,000 Sign up - Providence Business News." Providence Business News. 3 Apr. 2014. Web. 3 Frakt, Austin. What Happens when Health Plans Compete. New York Times. 1 Sept 2014. Web. 4 Dafny L, Gruber J, Ody C. More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces. National Bureau of Economic Research Working Paper No. 20140 (May 2014). Web. 5 Rhode Island Public Expenditures Council (RIPEC). HealthSource Rhode Island: Status Updates and Upcoming Policy Choices. Rep. RIPEC, Oct. 2014. Web. 6 This $60 million figure represents our educated estimate. At various points in 2014, HealthSource had roughly 25,000 individual market enrollees. Federal data show that, in the states where the federal exchange operated, roughly 87% of enrollees were eligible for tax credits, at an average level of $264 per month. See ASPE Research Brief: Premium Affordability, Competition, and Choice in the Health Insurance Marketplace, 2014 (June 18, 2014), at http://aspe.hhs.gov/health/reports/2014/premiums/2014mktplaceprembrf.pdf. Applying these figures to an enrolled population of 25,000 yields an annual tax credit total of $68.9 million. 7 Dash SJ, Giovannelli J, Lucia K, Miskell S. State Marketplace Approaches to Financing and Sustainability, Commonwealth Fund, 6 Nov 2014. Web. 8 Ibid. 9 RIPEC. HealthSource Rhode Island: Status Updates and Upcoming Policy Choices. Oct. 2014. Web. 7