Next month, the Supreme Court is expected to hand down its opinion regarding the individual mandate contained in the Patient Protection and Affordable Care Act. Their ruling on the constitutionality of requiring every American to purchase health insurance may affect how health reform moves forward. But, one thing the ruling will not significantly alter, in all likelihood, is the development of state-run health insurance exchanges. That's because regardless of the individual mandate, employers and individuals will still be looking for a vehicle that provides affordable health insurance that meets their needs - and exchanges may indeed be the answer.
PPACA mandates that all states and territories establish and launch their own health insurance exchange by Jan. 1, 2014, or default to a federal fallback program. These exchanges will create an online, one-stop shopping mall where consumers, employers, insurance brokers and others will view competing health plans side by side. By doing so, exchanges are designed to provide more value-based purchasing, more affordability and greater choice.
As the marketplace continues to evolve, we already know that different states are taking different approaches in complying with this mandate. Some states will build and manage their own exchange, others will opt for the federal fallback program, and still others may adopt the federal program in 2014 while they continue to develop their own exchange to introduce at a future date.
The Congressional Budget Office estimates that more than eight million people will buy insurance through exchanges in 2014 alone. Some of these will be small businesses which, by purchasing coverage through a state-based exchange, become eligible under the Small Business Health Option Program for annual tax credits. With this change on the horizon, here are five things to know:
1. Employers participating in a public or private exchange achieve cost predictability, budget controls and ease of administration. They also remove themselves from the impossible task of trying to select one health plan that works for everyone. And for some employers who in the past were unable to provide health benefits because of rising premiums, they will now be able to provide this benefit in a way that makes financial sense.
2. All exchanges will offer multiple carries and multiple plans at various benefit levels and price points. Among these options will be platinum, gold, silver and bronze plan types that are designed to provide a wide range of benefits for individuals and families. That assortment will empower employees to choose a health plan, benefit structure and health care provider that best meet their needs and budget.
3. PPACA guarantees that health insurance plans offered in the individual and small group markets include a comprehensive package of services known as "essential health benefits" (EHB). These benefits must encompass preventive, diagnostic and therapeutic services in at least ten categories of care. While the authority was given to the Department of Health and Human Services to define the EHB package, late last year HHS Secretary Kathleen Sebelius decided to defer this decision to the individual states, meaning that each state now has the authority to define which medical benefits insurance companies will have to offer starting in 2014. Regardless of the plan or benefit level an individual chooses, all plans within a state's exchange must offer the defined standard EHBs.
4. Exchanges will be sold directly through brokers and through a still-undefined network of navigators. As is the case today, it will continue to be advantageous for employers to purchase their health insurance coverage through a trusted, licensed and qualified broker. In fact, the broker's expertise and knowledge will be more important than ever in providing the information and unbiased recommendations employers and benefit managers need to make well-informed decisions as well as to provide service for everything from routine issues to serious policy interpretation issues.
5. Experience has shown that health insurance exchanges can work. Some public exchanges are already up and running while the country's most successful private exchange, CaliforniaChoice, has been successfully serving the market for 16 years, currently providing coverage for 10,000 employers and 150,000 individuals. It is no wonder then that the Deloitte Center for Health Solutions foresees an exchange market of as many as 46 million members by 2019 if PPACA is implemented without major changes.
With health insurance exchanges mandated to take effect in 2014, it's not too soon to discuss this model with clients.
Goldstein, CLU, is president and CEO of CHOICE Administrators.
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