Insurance exchange board faces criticism, scrutiny

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Concerns about bias, undue industry influence and conflicts of interest have been raised by consumer health groups as the state’s newly created health insurance exchange board prepares to hold its first meeting Monday.

The board is responsible for creating the health insurance exchanges by 2014, the year they will be fully implemented.

Created by the Affordable Care Act, exchanges are essentially marketplaces in which small businesses and individuals can compare and purchase health insurance.

Although mandated by federal law, each state can decide how it wants to set up its marketplace. Massachusetts and Utah already have health insurance exchanges, and Colorado started this year when it passed the law to form a board that will guide the process.

Gov. John Hickenlooper named the board of directors last week, and that’s when the process hit a snag. Immediately, consumer groups sounded the alarm.

The board appointments include representatives from four insurance companies — Anthem Blue Cross, United Healthcare of Colorado, Rocky Mountain Health Plan and Colorado Health Partnerships. Another board member has direct ties to the health insurance industry and the sole doctor on the exchange has campaigned against any insurance regulation.

Of the nine board members, only three represent the people using the exchange, a small business owner and two consumer representatives.

That troubles DeDe DePercin, executive director of the Colorado Consumer Health Initiative, representing more than 500,000 Coloradans.

“We are concerned that a majority of the appointees on the board have strong ties to the health insurance industry,” she said. “These existing loyalties may conflict with creating an exchange that best serves Colorado’s struggling individuals, families and businesses.”

DePercin said she isn’t sure whether her organization will take action to block some of the members of the board, particularly those who CCHI might believe don’t have the best interest of consumers in mind.

“We’re still doing research,” she said.

CCHI isn’t the only group expressing concern.

The Colorado Law and Policy Center believes some of the appointees might actually violate the conflict of interest portion of the statute.

“Many consumers had hoped the board would not include any insurance industry representatives, given the significant conflicts of interest that will almost certainly arise in the process of designing a health insurance marketplace for Colorado,” said Elizabeth Arenales, health care director for CCLP. “It’s troubling there is an industry bloc which might have a substantial effect on the board’s deliberations. It’s troubling as well that so many members of the board are likely to be unable to vote on many issues because of conflicts.”

Arenales believes that the exchanges can’t be effective if they are “disproportionately influenced by the health insurance industry.”

DePercin agrees.

“How can you create a brand-new marketplace by using representatives of the current marketplace that is broken?” she asked. “How can it be effective if it’s the same people who have a huge financial stake in the process?

One of the newly appointed members of the board, Republican Eric Grossman, has already made his stance on exchanges publicly known. He is the vice president of Trizetto, an Englewood-based company that provides information technology solutions to health insurance companies. His company is connected to more than half the U.S. insured population through insurance companies.

Grossman wrote about the exchanges in the trade publication Managed Care Outlook, saying the good part of the health insurance exchanges was the number of people that would have access to health insurance through the exchanges — about 55 million Americans. However, there’s a flipside.

“The individual and small-group markets used to be highly profitable,” he wrote. “Now, in a new system with ground rules dictated by the government, profits likely will drop significantly.”

He sees exchanges not as a way to provide health insurance, but as a way to manage risk — and segregate high-risk enrollees.

“…payers will need to segment exchange enrollees and triage high risk case early … given that underwriting based on pre-existing conditions have been disallowed,” he said. “Value-based insurance designs will prove an additional, highly effective way to differentiate and segment risk.”

But the apparent conflict of interest doesn’t stop merely with what Grossman thinks. His company’s board of directors includes CEOs of Blue Cross/Blue Shield.

Grossman was unavailable for comment, based on recommendations from the state’s Department of Health Care Policy and Financing.

Another member of the board also has strong feelings about the Affordable Care Act, health care exchanges and the role of regulation in the insurance industry. Dr. Michael Fallon of Denver ran against Rep. Cara DeGette in the last Congressional race. His platform: opposing health care reform.

All this points to several problems, Arenales said.

“Our concerns are about the transparency and openness of operation, the question of the conflict of interest and how it will be answered goring forward, the undue influence of the insurance industry on the exchange and how all this might affect voting on issues,” she said. “Right now, that’s what we’re focusing on.”