Health Insurance Connectors:

1

• Health Insurance Connectors
• Lessons from Massachusetts
• Nancy Turnbull
• Harvard School of Public Health
• and Board Member of Massachusetts Health
  Insurance Connector Authority
• May 11, 2009

2
The Roles of the Massachusetts Connector

• Runs Commonwealth Care
• Program of subsidized coverage for people up to
  300 FPL
• Administers Commonwealth Choice
• Non-subsidized program for individuals
• Small employer plan pilot
• Policy making body
• Individual mandate
• Facilitates expansion of coverage in the state
  through information, outreach and marketing

3
Four Lessons from the Connector in Massachusetts

• 1. Connector is just one piece
• Public/subsidized coverage for people with low
  and moderate income
• Individual mandate
• 2. Must be built on strong foundation of
  insurance market reform
• 3. Exclusivity enhances the value of Connector
• 4. Setting benefit standards is important for
  adequate coverage and informed choice
• Actuarial value standard is insufficient

4
432,000 Newly Insured Sept 2008
Commonwealth Choice 19,000 members
Employer Groups 148,000 members
43 of newly insured thru the Connector
Commonwealth Care 169,000 members
57 of newly insured in subsidized programs
Individual Policies Outside Connector 20,000
members
Medicaid 76,000 members
Source Division of Health Care Finance and Policy
5
Strong Foundation of Insurance Market Reforms

• Small group in 1989 individual market in 1996
• Guaranteed issue and renewal
• No rating on gender, health status, medical
  claims
• Modified community rating 21 rate bands
• Self-employed in small group market
• Same risk pool for all products at each insurer
• 2006 reforms
• Merger of small group and individual markets
• Same insurance rules inside and outside Connector
• One rating pool for people inside and outside
  Connector at each insurer
• Young Adult Plans can be sold only by carriers
  with 5,000 lives and only through the Connector

6
Connector Plays 2 Very Different Roles

• Commonwealth Care
• Exclusive
• Active purchaser
• Standardized products
• Aggressive price negotiator
• Commonwealth Choice
• Non-exclusive distribution channel
• Same products and prices inside and outside
  Connector
• Insurers with 5,000 small group members must
  offer plans through the Connector

7
Exclusivity Enhances Value of Connector

• Maximizes enrollment and ability to be active
  purchaser
• Easier for consumers to understand and navigate
• Prevents gaming by insurers
• Can compete based on risk selection by offering
  different plans outside the Connector
• Forces broader pooling of risk
• Spreads benefits of younger people buying
  coverage
• Enables risk adjustment across carriers
• Lowers administrative costs
• Allows innovation without concerns about impact
  on/response of market outside of Connector

8
Connectors Current Market Power
Commonwealth Care as Total Insurer Members
Commonwealth Choice as Total Insurer Members
Insurer
As of 12/31/08 non-Medicare members
9
Connector Potential Market Power
Commonwealth Care as Total Insurer Members
All Individual as Total Insurer Members
10
Connector Potential Market Power
All Individual and Small Employer Insurer Members
Commonwealth Care as Total Insurer Members
11
Benefit Standards inCommonwealth Choice

• Connector awards Seal of Approval to plans that
  are good value and high quality
• Statute expressly allows limited network plans to
  encourage lower cost, high quality products
• Designed 4 benefit tiers Gold, Silver, Bronze,
  YAP
• Plan designs in each tier must meet actuarial
  value standard
• Carriers must offer all product 4 tiers

12
The Limits of Actuarial Value
Premiums for 50-year-old resident of Boston for
effective date of June 2009