Funding HealthSource RI may be easier than it seems

So HealthSource RI is up and running. At least comparatively speaking, it seems quite successful at this early stage, too, managing encouragingly high traffic, facilitating registration, and even enrolling new subscribers. In the first week of operation, the site enrolled about as many new subscribers as neighboring Connecticut, which draws from a much larger population. It would seem that Director Christine Ferguson and her small but intrepid staff deserve at least preliminary kudos for the frenetic effort needed to get the massive project off the ground on time.
Reform advocates see the exchange as a powerful tool in the struggle to rein in future health costs, and as a result, the escalation of health premiums that have bedeviled the business community for years, spiraling upward at double the rate of inflation for more than two decades.
But of course there are always detractors, the glass half-empty folks who raise questions and issues about what could go wrong. They also serve an important purpose of course, keeping the effort focused not only on what has been accomplished, but what remains to be done. They point out that as neither an insurer nor provider, the exchange is another intermediary. It must prove that its value to the system exceeds the cost of operation.
At the recent Publick Occurrences event on Obamacare at Rhode Island College, a spokesperson for the broker community was sharply critical of the exchange, pointing out that it will cost the state about $25 million annually to run after federal funding runs out in 2015. To date, no self-sustaining funding source for the exchange has been identified.
Of course there are ideas, the most obvious being a fee or tax of some sort on the premiums of policies purchased, or a charge on claims made under those plans. Since both of these functions already occur in the present system, the fees to the exchange would add to current costs. Since the savings benefit of streamlining and the group-purchasing effects of the exchange are yet to be quantified, this leaves the question of the exchange’s value proposition open.
An important piece of the mission of the Affordable Care Act from which the exchange was created is to expand health-insurance coverage in order to reduce the enormous burden of uncompensated care in our system today. In Rhode Island we know that our hospitals spent more than $160 million at their cost (not charges) last fiscal year providing this care. Presumably other health providers suffer proportionately from treating patients that can’t or don’t pay. Interestingly though, the cost of providing care to the uninsured is only about two-thirds of this staggering sum. The remainder, or roughly one-third, results from uncollected copays and deductibles of insured people.
As the use of copays and deductibles have increased, either to control premiums for employers or to influence utilization by subscribers, the cost of bad debt in the system has tracked right along. Insurers imposed the burden of collecting these fees from the patients at the point of treatment, a cumbersome, inefficient, and often futile process that has added considerable administrative complexity as well as write-offs to the already-struggling provider community. It was an unfair deal in the first place. If insurers want to use this technique to control their costs, they should collect the copays and deductibles themselves and pay the providers in full. Needless to say, they have resisted this argument from providers successfully for years.
Since the exchange will be collecting premiums from its subscribers, it could also collect copays and deductible payments that are incurred at the same time. Subscribers would have to pay to maintain coverage, now required by law. The exchange would get the billing information from its claims-processing contractors, the insurers, and then simply bill copays and deductibles incurred as part of the routine billing relationship with customers. It’s a much simpler and more-efficient process than having every hospital, doctor’s office, clinic, etc. trying to collect them at the point of service or chasing them afterward.
Providers would then get paid in full for their services on every claim, minus a nominal fee to cover the operating cost of the exchange. If the hospitals alone have more than $50 million in write-offs of copays and deductibles, and the operating costs of the exchange are half that amount – this seems like a no-brainer.
It will be far cheaper for the exchange to perform this service than the cost of how it is done now. This provides a savings opportunity clearly sufficient to fund the exchange operation and streamlines the current process at the same time. It would require no new taxes or fees. •


Ted Almon is president and CEO of the Claflin Co. and co-chair of the executive committee of HealthRIght, as well as a member of the Expert Advisory Panel of HealthSource RI.

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