Health Insurance Connectors:

Lessons from Massachusetts

Nancy TurnbullHarvard School of Public Health

and Board Member of Massachusetts Health Insurance Connector Authority

May 11, 2009

The Roles of the The Roles of the Massachusetts ConnectorMassachusetts Connector

Runs Commonwealth CareRuns Commonwealth Care Program of subsidized coverage for people Program of subsidized coverage for people

up to 300% FPLup to 300% FPL Administers Commonwealth ChoiceAdministers Commonwealth Choice

Non-subsidized program for individualsNon-subsidized program for individuals Small employer plan “pilot”Small employer plan “pilot”

Policy making bodyPolicy making body Individual mandateIndividual mandate

Facilitates expansion of coverage in the Facilitates expansion of coverage in the state through information, outreach and state through information, outreach and marketingmarketing

Four LessonsFour Lessons from the Connector in from the Connector in

MassachusettsMassachusetts1. Connector is just one piece1. Connector is just one piece

Public/subsidized coverage for people with low Public/subsidized coverage for people with low and moderate income and moderate income

Individual mandateIndividual mandate

2. Must be built on strong foundation of 2. Must be built on strong foundation of insurance market reforminsurance market reform

3. Exclusivity enhances the value of 3. Exclusivity enhances the value of ConnectorConnector

4. Setting benefit standards is important for 4. Setting benefit standards is important for adequate coverage and informed choiceadequate coverage and informed choice

““Actuarial value” standard is insufficient Actuarial value” standard is insufficient

432,000 Newly Insured: 432,000 Newly Insured: Sept 2008Sept 2008

Employer Groups

+148,000 members

Commonwealth Care

+169,000 members

Individual Policies

Outside Connector

+20,000 members

Medicaid

+76,000 membersSource: Division of Health Care Finance and Policy

Commonwealth Choice+19,000 members

57% of newly insured in subsidized

programs

43% of newly insured thru the Connector

Strong Foundation of Strong Foundation of Insurance Market ReformsInsurance Market Reforms

Small group in 1989; individual market in 1996Small group in 1989; individual market in 1996 Guaranteed issue and renewalGuaranteed issue and renewal No rating on gender, health status, medical claimsNo rating on gender, health status, medical claims Modified community rating: 2:1 rate bandsModified community rating: 2:1 rate bands Self-employed in small group marketSelf-employed in small group market Same risk pool for all products at each insurerSame risk pool for all products at each insurer

2006 reforms2006 reforms Merger of small group and individual marketsMerger of small group and individual markets Same insurance rules inside and outside ConnectorSame insurance rules inside and outside Connector One rating pool for people inside and outside One rating pool for people inside and outside

Connector at each insurerConnector at each insurer Young Adult Plans can be sold only by carriers with Young Adult Plans can be sold only by carriers with

5,000+ lives and only through the Connector5,000+ lives and only through the Connector

Connector Plays 2 Very Connector Plays 2 Very Different RolesDifferent Roles

Commonwealth CareCommonwealth Care ExclusiveExclusive Active purchaserActive purchaser Standardized productsStandardized products Aggressive price negotiatorAggressive price negotiator

Commonwealth ChoiceCommonwealth Choice Non-exclusive distribution channel Non-exclusive distribution channel Same products and prices inside and outside Same products and prices inside and outside

ConnectorConnector Insurers with 5,000+ small group members Insurers with 5,000+ small group members

must offer plans through the Connectormust offer plans through the Connector

Exclusivity Enhances Value Exclusivity Enhances Value of Connectorof Connector

Maximizes enrollment and ability to be active Maximizes enrollment and ability to be active purchaserpurchaser

Easier for consumers to understand and navigate Easier for consumers to understand and navigate Prevents gaming by insurersPrevents gaming by insurers

Can compete based on risk selection by offering Can compete based on risk selection by offering different plans outside the Connectordifferent plans outside the Connector

Forces broader pooling of riskForces broader pooling of risk Spreads benefits of younger people buying coverageSpreads benefits of younger people buying coverage

Enables risk adjustment across carriersEnables risk adjustment across carriers Lowers administrative costsLowers administrative costs Allows innovation without concerns about impact Allows innovation without concerns about impact

on/response of market outside of Connectoron/response of market outside of Connector

Connector’s Current Connector’s Current Market PowerMarket Power

0

5

10

15

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35

40

BMC Fallon Network NHP0

5

10

15

20

25

30

35

40

BCB

S

Fallon

HN

E

HPH

C

NH

P

Tufts

Commonwealth Careas % Total Insurer

Members

Insurer

Commonwealth Choiceas % Total Insurer Members

As of 12/31/08; non-Medicare members

Connector Potential Market Connector Potential Market PowerPower

0

5

10

15

20

25

30

35

40

BMC Fallon Network NHP0

5

10

15

20

25

30

35

40

BCB

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Fallon

HN

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HPH

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NH

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Tufts

Commonwealth Careas % Total Insurer Members

All Individual as % Total Insurer

Members

Connector Potential Market Connector Potential Market PowerPower

0

5

10

15

20

25

30

35

40

BMC Fallon Network NHP0

5

10

15

20

25

30

35

40

BCB

S

Fallon

HN

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HPH

C

NH

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Tufts

All Individual and Small Employer <50

as % Total Insurer Members

Commonwealth Careas % Total Insurer Members

Benefit Standards inBenefit Standards inCommonwealth ChoiceCommonwealth Choice

Connector awards Seal of Approval to Connector awards Seal of Approval to plans that are “good value” and “high plans that are “good value” and “high quality”quality”

Statute expressly allows limited network Statute expressly allows limited network plans to encourage lower cost, high plans to encourage lower cost, high quality productsquality products

Designed 4 benefit tiers: Gold, Silver, Designed 4 benefit tiers: Gold, Silver, Bronze, YAPBronze, YAP

Plan designs in each tier must meet Plan designs in each tier must meet “actuarial value” standard“actuarial value” standard

Carriers must offer all product 4 tiersCarriers must offer all product 4 tiers

The Limits of Actuarial The Limits of Actuarial ValueValue

Premiums for 50-year-old resident of Boston for effective date of June 2009