Success in health market is not clear

BIG CHOICES: HealthSource RI insurance specialist Al Ferandes talks with Maria Bolarinho and her daughter, Denissa, through the choices available on the state’s health insurance exchange at the agency’s Providence walk-in office. / PBN PHOTO/RUPERT WHITELEY
BIG CHOICES: HealthSource RI insurance specialist Al Ferandes talks with Maria Bolarinho and her daughter, Denissa, through the choices available on the state’s health insurance exchange at the agency’s Providence walk-in office. / PBN PHOTO/RUPERT WHITELEY

One year on and the final verdict is not yet in on HealthSource RI, Rhode Island’s health insurance marketplace. Or at the very least, the verdict depends on who is making the judgment.
The broker community, for one, is divided on the question of whether HealthSource RI has encouraged choice in the open health insurance marketplace, something that many believe will help bring down the cost of insurance.
Besides, many feel, it’s not clear that should be one of the measuring sticks of the exchange.
“It’s not really their job to create competition,” said Kevin Lovett, senior vice president of employee benefits at East Greenwich-based Gencorp Insurance Group. “They’re just a portal.”
For her part, former HealthSource RI Executive Director Christine C. Ferguson, who has identified the cultivation of a competitive and choice-rich marketplace as a key exchange goal, pointed to growth in products on the exchange as early hallmarks of success in November interviews.
“We have plans offered in both [the Small Business Health Options Program] and the individual market that … cost less than last year. We have more carriers in the individual market,” Ferguson said. “We have more plan options and designs. … I am incredibly encouraged and excited about the changes that have been achieved in just a year.” (Ferguson is being replaced by Anya Rader Wallack, who was not immediately available for comment.)
Some health insurance brokers, however, remain critical, and have questioned the need for the SHOP program and whether HealthSource RI is sticking to its original mandate.
It this current year, the exchange is offering 20 plans for individuals, an increase from 12 in 2014, thanks in large part to the participation of UnitedHealthcare of New England, which previously only offered plans on the SHOP exchange.
In SHOP, 20 plans are now available, four more than last year. HealthSource RI’s goal for the small-business program was to cover 2,500 lives by the end of 2014, according to Ferguson. By the end of December, 3,157 had enrolled.
The exchange aims to cover 7,000 lives through SHOP by the end of 2015, and 14,000 lives the year after.
But whether HealthSource RI has met its goal of increasing competition is difficult to gauge.
“HealthSource RI has not increased competition nearly as much as [former] Director Ferguson or I would have liked,” said Sam Slade, employee benefits practice leader for USI Insurance Services’ Rhode Island office.
Slade mentioned the fact that HealthSource RI was able to draw Neighborhood Health Plan of Rhode Island to offer commercial plans last year, and pointed out that NHP lowered its rates for 2015.
“Both of those things are victories,” Slade said. “Neighborhood Health Plan, while a fine and worthy plan, serves primarily the Medicaid population. Whether they will see significant traction with the business community remains to be seen. … Beyond that, [Ferguson] has not attracted any new insurers or health plans to our state.”
Ferguson said she agreed with Slade – to a point.
Competition can’t be solely measured on the number of competing carriers on the exchange, Ferguson said. Instead, she wants to see more options in health-delivery systems as well as in finance structuring.
“What I want to see is real competition,” Ferguson said. “Having more carriers for the sake of having more carriers – that’s not the goal.” All the players agree, however, that one piece of the insurance puzzle has been altered. The full employee-choice option for small business, in which employers can define their contribution to insurance plans – all 20 of them on the exchange – but their employees can decide to pay more or less for various types of plans, according to their own needs, is a new concept entirely.
“Fundamentally, we’ve shifted where the decision point of what kind of plan is from the employer to the employee,” Ferguson said.
The model has helped lower the barrier to market entry for potential new carriers by leveling a playing field that, up until now, has been dominated by Blue Cross & Blue Shield of Rhode Island, Ferguson said.
Al Charbonneau, executive director of the Rhode Island Business Group on Health, said lowering barriers to entry by creating artificial market conditions makes it impossible to judge the true measure of HealthSource RI’s impact on the competition in the state. He pointed to the federally subsidized “three R’s” programs slated to run through the end of 2016: risk-adjustment, reinsurance and risk corridors. Supporters of the programs say they ease entry into the market and, over time will create a more competitive market.
“In the normal market, what would happen is that there wouldn’t be those subsidies, so that competing with startup insurers or new insurers coming into the region would have to have adequate reserves to sustain themselves in the early days,” Charbonneau said. “That’s not the case in the federal subsidies because those risks are taken away for a couple years. … Our point of view, the business community’s point of view, when we talked about HealthSource, is that it will be much, much better for HealthSource to not proclaim that all these things are working and to be cautious about its statements about competition is working.”
Charbonneau questioned whether temporarily lowered premium costs will be sustainable over the long run, and said the question may be one reason no new insurers have come to Rhode Island yet.
“When they decide to enter a state, they look at the competition they’ll be facing from insurers, and they look at the cost-structure of the state. They basically want to know, can we sustain ourselves, can we add to the bottom line of the company and its reserves by doing this in Rhode Island,” he said. “Otherwise they find themselves in a bounce-up-and-down market and that’s not something that leads to peaceful sleeps at night for health insurer CEOs.”
While an insurance model that allows employees to choose from the full list of on-exchange products has been a talking point for HealthSource RI, not everybody supports the model. When companies opt for full employee choice, their employees choose from all the 20 available plans.
Jim Moniz, senior vice president and employee benefits leader of East Providence-based Starkweather Benefits Solutions, a division of Starkweather & Shepley Insurance Brokerage Inc., believes the choices can be overwhelming to employees, some of whom haven’t dealt with choosing plans before.
“That’s just too many plans,” Moniz said.
Moniz said the model would be better if employers could limit the number of choices their employees have, while still allowing them to have some freedom. The full employee-choice model does put more pressure on brokers serving small businesses, Ferguson said. Brokers who used to have maybe one meeting a year with a particular client to explain their benefit package changes can now find themselves responsible for talking an entire staff through their individual choices – and the payment structure for brokers hasn’t changed.
“There has been a resistance among some brokers to this new approach and new model, which is perfectly understandable given the way that the money flow has worked,” Ferguson said. “But there are a whole bunch of other brokers who have embraced it whole-heartedly.”
But Ferguson disagreed with the idea that the amount of information was too much for consumers.
“The fundamental question is, do we think that employees and consumers are smart enough to understand what the difference is between plans and different designs?” she said. “When you give them the information side by side so they can make apples-to-apples comparisons, they ask really good question. … I don’t think it’s too many choices.”
Lovett said the financial incentives for small businesses to sign up through HealthSource RI – including a federal tax credit – are not appealing enough, considering that plan prices on the exchange aren’t any different than the plans in the open market.
“There’s no premium savings in going to the exchange in terms of the rates themselves,” Lovett said. “There’s just no incentive.”
Ferguson said that only looking at plan sticker cost was a “pretty narrow way” to evaluate the exchange’s value. While plans are priced the same on and off the exchange, she said HealthSource RI’s greatest value for small businesses is the insurance rates that it compiles and publishes early so that brokers and companies can access them up to 15 months ahead of renewal dates, allowing them to budget or change their plans.
“For the last 50 years basically, the broker would go to the carrier and get a quote 30 to 60 days before the business had to renew,” Ferguson said. “They couldn’t budget what their costs were going to be.”
Ferguson agreed, however, that the federal tax credit for enrolling in exchanges was not effective and, applying to only businesses with 25 or fewer employees with an average annual salary of less than $50,000, didn’t help many groups.
“For businesses that fall in that category, it’s great, it’s helpful,” she said. “I think that nationally, people were disappointed that more businesses didn’t qualify for it.”
Ferguson said that HealthSource RI has attempted to alleviate the extra burden on brokers by providing tools like the early notification of insurance rates, staff resources and the exchange website’s comparative price function.
“We are doing everything we can to try to support the broker community,” she said. “The fundamental goal of the exchange is not to have market share only using the exchange. It is to ensure that small businesses have the information they need to make choices.”
Lovett said that, in terms of a working relationship, HealthSource RI has a lot of work to do. He said only a small group of Gencorp employees works on the exchange, and he hasn’t been satisfied with its functions. “It’s just been a very cumbersome experience for us and for the client,” he said. “Their processes are not up to speed yet.”
Lovett said he doesn’t see the need for HealthSource RI to be involved in the small-business program at all, but should go after the uninsured population.
“I think that the exchange is an overly ambitious undertaking,” he said. “Not all states went after the group market, and the group market is being very well-served by the broker system.”
Moniz agreed that competition for the small-business market wasn’t lacking in Rhode Island.
“On the small-group side, that competition has always been there,” Moniz said. “Not a lot meaningful has been done to enhance competition.”
If HealthSource RI’s impact on the exchange’s market atmosphere is difficult to assess, its effects on the open market are even more difficult to track. In the past year, private health insurance marketplaces that are popping up all over the country are one indication that the private market may be taking a cue from the state-based and federal exchanges, although Slade said it’s difficult to draw a direct link.
Rhode Island has seen several private online markets appear.
Starkweather & Shepley launched the StarShep Private Exchange in October. The platform targets larger employers and offers comparison tools for plans from multiple insurers. Moniz said it doesn’t compete at all with HealthSource RI.
Earlier, in June, UnitedHealthcare launched Multi-Choice, a health insurance market for UnitedHealthcare products for small employers. Stephen J. Farrell, president and CEO of UnitedHealthcare of New England, said the motivation for Multi-Choice and the motivation for HealthSource RI came from the same place.
“It sticks to a theme, which is providing quality health insurance coverage and access to that health insurance coverage at affordable [prices],” Farrell said.
All UnitedHeatlhcare’s HealthSource RI products are also available on the open market, although not all the company’s plans are on the exchange, Farrell said.
Similarly, Blue Cross & Blue Shield of Rhode Island is working on a similar platform, although it has not released many details.
“We will have our own private exchange at some point in 2015,” said Corey McCarty, vice president of the company’s consumer segment.
But while growing enrollment on HealthSource RI is one indicator of success, numbers don’t tell the whole story, according to Ferguson. In 2014, a little more than 50,000 people used the exchange to search for plans on the individual market. Only about 26,000 had enrolled as of the beginning of November – a little more than half.
“That’s not an issue about the exchange,” Ferguson said. “That’s an issue about the product and the pricing and the value of health care from the consumer perspective.”
For this second year of the exchange, carriers saw the need for an evolved product and some adjusted accordingly, she said.
“We’re going to watch very carefully to see what those numbers look like as we go forward, because that also is going to drive the carriers and large provider groups and others in the provider community to really work on getting arrangements, plans and also how you get your care in a way that is more attractive to consumers,” Ferguson said. •

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