Colorado is moving closer to the establishment of the health insurance exchanges mandated under the sweeping reforms passed this year.
Required by federal law to be in place by 2014, the exchanges are a new tool that will add a measure of competition in health care and, if they live up to their billing, drive down insurance premiums by acting as retail shopping malls for anyone in the market for insurance.
Just how much competition will be allowed is one of the big questions now under debate in Colorado.
Whatever happens, in the end consumers will be able to compare policies, get rates and apply for federal subsidies all in a single location.
The Congressional Budget Office predicts that by 2019, about 24 million people will have insurance through such exchanges, with four-fifths of them eligible for federal subsidies that average $6,000 a year per person. People with incomes up to four times the poverty level (about $88,000 a year for a family of four) will be able to apply for the subsidies.
In passing the sweeping reforms of this year, Congress provided $49 billion to the states to set up the exchanges. While insurance can still be sold outside the exchanges, the 300,000 people in the state who will be eligible for federal subsidies must use the exchanges to purchase their coverage.
Colorado isn’t waiting for the federal 2014 deadline; a broad coalition is taking the first steps in creating the exchanges, bolstered by a $1 million grant from the federal government. The group — made up of nonprofit consumer advocacy groups and branches of state government — has been meeting around the state this fall, gathering ideas on how best to proceed from consumers and business alike.
“We think we’ll have these in place well before the deadline,” said DeDe DePercin, executive director of the Colorado Consumer Health Initiative, one of the groups involved in developing the exchanges. “Certainly by 2012, they will be in place.”
It won’t be easy. Setting up the exchanges will involve dealing with complex insurance policies, gobs of technology, and will require hiring new people to work within state government who are savvy about health policy and insurance programs.
“We have a long way to go, but we’ve gotten a pretty good start,” DePercin said.
That’s good, because the federal government will step in and run exchanges for any state that doesn’t have a plan ready to be implemented by 2013.
Not surprisingly, not everyone is a fan of the insurance exchanges.
Independent brokers who earn commissions from selling policies offered by various companies are especially nervous.
“There’s a lot of uncertainty out there,” said broker Scott Crist. “And part of that uncertainty is the role these exchanges will have. It could affect our business so severely that we have to close the doors.”
Crist believes there should be a role for brokers in the exchanges.
“It seems like these exchanges can’t provide the same information we do — the industry is just too complicated,” he said. “We know about state programs available for people who are out of work, about what kind of insurance suits an individual family best. Exchanges just aren’t going to be able to provide that sort of individual attention.”
“People who don’t have insurance — have never had it — are going to be confused by all the choices,” Crist continued. “They’re going to be at the mercy of the state. Brokers are definitely needed to guide them through the system, whatever system is in place.”
Insurance brokers have already taken a big hit, thanks to health care reform. The law’s medical cost ratios — the amount of money insurers are now required to spend on medical treatment — means lower commissions, he said.
“Some companies cut my commission by 50 percent, some by 25 percent. Another hit, and I just can’t afford to keep doing this,” he said.
The Colorado Consumer Health Initiative, DePercin said, is aware of these concerns, and many others.
That’s why its work includes figuring out how the exchange will influence the market, and what role it can play in helping consumers and small businesses understand, compare and purchase insurance, DePercin said.
“To be successful, we’ll have to develop a plan that connects people to the coverage,” she said. “And it can’t be just on the Internet. Some of the people seeking insurance aren’t going to have computers, and the elderly just aren’t savvy enough.”
But the work doesn’t end there. DePercin said the group will have to establish certification criteria for insurance plans offered through the exchange — making sure the plans are affordable as well as stable.
Consumers — including both large and small businesses — will benefit from the exchanges, DePercin said. Because the exchanges will create a very large, very stable risk pool, that should drive down premiums over time.
“It’s good for consumers, but insurance companies will benefit too — they’ll have more customers,” she said.
The public-private partnership charged with creating the exchanges in Colorado won’t have to start from scratch.
They can borrow, where they see fit, from insurance exchanges already in place. The coalition is paying close attention to states like Massachusetts and Utah.
Those two plans actually have few similarities — Massachusetts’s is under greater state control, while Utah’s is ruled more by free enterprise ideals.
Utah’s less-structured plan seems to be the model for Colorado’s own exchange, at least so far. Utah’s plan is pretty much open to all insurers and allows consumers to compare a wide variety of health plans over the Web. This is the model favored by Crist, as it allows him to keep his business running.
The Massachusetts plan, though it is more selective about which insurers can participate in its exchange and negotiates for the best rates, appears to be working in many respects, too. More than 95.6 percent of Massachusetts residents are covered by health insurance, compared with 83.3 percent of the nation as a whole.
Whatever form Colorado’s exchange takes, it’s a safe bet that Colorado lawmakers will be paying attention. The law requires that they all get their health insurance from the exchange.