The Sacramento Bee: California health exchange seeks to make buying insurance a breeze

By Kevin Yamamura

Published Tuesday, Jul. 17, 2012

Peter V. Lee wants to make buying health insurance “as easy as buying a book on Amazon.”
He heads the nascent California Health Benefit Exchange, the cornerstone of the state’s effort to put in place the federal health care overhaul. Lee envisions that 15 months from now, uninsured California residents will log onto any computer to shop for health care the same way they purchase novels.
The poorest residents will receive Medi-Cal. Those above the poverty line will find a menu of subsidized private options at different prices, from a “platinum” plan with higher premiums but lower deductibles down to a “bronze” selection that has lower premiums but requires the buyer to accept more risk.
All told, the exchange expects to connect about 2 million Californians with health insurers by 2019. Starting in 2014, it will be California’s vehicle to deliver subsidized care to people who earn income up to four times the federal poverty level, currently $92,200 for a family of four.
The largest share will be people who lack insurance now, though hundreds of thousands who purchase health care on the open market or receive it through work will also use the exchange, according to a simulation conducted by the UC Berkeley Center for Labor Research and Education and the UCLA Center for Health Policy Research.
None of it existed two years ago.
“We’ve been moving ahead full-throttle even before the Supreme Court decision,” Lee said, referring to the U.S. Supreme Court opinion last month that upheld most of President Barack Obama’s health care law. “This doesn’t really change things for us. It changes things in the eyes of others, who are now saying, ‘Wow, this exchange thing is going to be real.’ ”
California was the first state to establish a health care exchange after Obama signed the Patient Protection and Affordable Care Act in March 2010. Then-Gov. Arnold Schwarzenegger, who signed the state legislation, supported universal health care and had tried to establish a California program along the same lines in 2007, but could not overcome political opposition.
A state board of five high-powered appointees oversees the exchange, including two former top Schwarzenegger aides, while Lee is responsible for day-to-day operations. The exchange must tackle three major areas in the coming months: attracting potential subscribers, building the enrollment system and selecting the health insurers and the plans they will provide.
The exchange will target working poor and middle-class Californians who earn too much to qualify for Medi-Cal but generally lack access to health coverage at work. In the past, they may have found costs prohibitive on the private market or been denied because they have high-risk medical problems.
The exchange is designed to help overcome those challenges. Under the new federal law, insurers are required to accept all patients regardless of pre-existing conditions. Federal subsidies are intended to reduce consumer costs below market prices.
The most significant challenge will be attracting enough healthy consumers to keep prices reasonable and provide enough income to health insurers. If the exchange draws only high-cost patients, insurers could walk away.
“How many healthy people can we get in the purchasing pool to make the economics work?” asked Susan Kennedy, an exchange board member who was Schwarzenegger’s chief of staff. “That’s the $64 million question no one can answer.”
PR may include sitcoms
Recruiting those people starts with a massive public outreach campaign next year. According to a new 124-page report, the exchange is considering multiple fronts, including ads in English and Spanish, Facebook banners and working with churches to distribute literature.
Also among the ideas: pitching popular television shows such as “Modern Family” and “The Biggest Loser” to incorporate health care changes into their story lines; recruiting Stevie Wonder as a pitchman; and hosting a “First Lady Summit” with first lady Michelle Obama to focus on health care for all.
Under the health care law, Americans must sign up for insurance or pay a penalty starting in 2014 – what the U.S. Supreme Court viewed as an allowable tax in its 5-4 decision. Health care advocates describe the federal subsidies as the carrot and the penalty as the stick in their effort to enroll consumers.
Diana S. Dooley, who serves on the exchange board as secretary of the California Health and Human Services Agency, said she believes the federal rebates will reduce cost concerns.
“We’re doing a lot of work at the exchange to understand what motivates people and what they’re worried about,” Dooley said. “We’re finding a lot of people want to have health insurance, but they simply can’t afford it.”
Under the federal law, all plans must provide 10 “essential benefits,” which include hospitalization, lab services, maternity care and prescription drugs.
Health insurers have motivation to participate because they can increase their customer base. But without knowing exactly who will sign up, they also worry that only those who need expensive care will join the exchange.
“This is an important new channel to sell their product,” said Marian Mulkey, director of the Health Reform and Public Programs Initiative at the California HealthCare Foundation. “But it doesn’t mean they will all arrive with the same enthusiasm, wanting to participate.”
Charles Bacchi, executive vice president at the California Association of Health Plans, said that in order to maintain reasonable risk pools, “it’s important that the exchange and outside marketplace look alike.”
The health exchange is also charged with creating a voluntary insurance program for small businesses, an attempt to give employers greater purchasing power by consolidating their workers in one pool. Owners of businesses with 25 employees or fewer are generally eligible for federal tax credits.
But John Kabateck, National Federation of Independent Business California executive director, remains skeptical about whether the exchange can reduce costs for small businesses. Kabateck’s national organization was the lead plaintiff in the legal challenge decided by the Supreme Court.
“We have long advocated for increasing access options and healthy competition for more affordable health care, but in this case the devil is in the details,” Kabateck said. “Small businesses feel both uncertain and frankly confused about the exchange.”
Signups set in fall 2013
To ensure it can open its doors in January 2014 with as many consumers as possible, the exchange plans to begin registering people in October 2013 with a system that can make health care enrollment as easy as Lee’s description of buying books online.
The exchange last month awarded Accenture LLC a multiyear contract worth $359 million, including $183 million to develop and install a statewide enrollment system over the next year.
The system has been the focus of health exchange discussions for the past year, drawing interest from a who’s who list of government contractors. Accenture spent $226,000 between January 2011 and March 2012 on lobbying a variety of state offices, including the Health and Human Services Agency, state reports show.
Federal funds will mostly pay for the system, and the exchange asked the Obama administration for a $196 million grant in June to finance the Accenture deal and keep the exchange operational over the next year.
To pay for the health care changes, the federal act will generate money by penalizing those who do not obtain insurance, imposing higher Medicare taxes on upper-income earners, taxing high-priced employer-sponsored health care policies and taxing different industries, from pharmaceuticals to indoor tanning.
It also counts on saving money from Medicare by reducing growth in provider reimbursements and smaller payments to Medicare Advantage plans.
Health care advocates who celebrated the Supreme Court decision acknowledge the federal program is not in the clear yet. The November elections loom large, and Republicans have indicated they will seek to repeal health care changes if they win the White House and Congress.
“The real risk to the exchange is the loss of the subsidies, which would be a real attraction for millions of Californians,” said Anthony Wright, executive director of Health Access California, which advocates for low-income, uninsured Californians. “The exchange could operate without those subsidies, but it wouldn’t be as attractive to as many people.”

Reuters Health: Poorer hospitals may suffer from Medicare changes

July 16, 2012
By Genevra Pittman

NEW YORK (Reuters Health) – Under upcoming changes in Medicare and Medicaid payment policies, hospitals largely treating the poor and uninsured may be hit extra hard if patients continue to rate their experiences there lower than at other hospitals, according to a new study.
So-called safety-net hospitals take in a lot of patients on government insurance – which doesn’t pay as much for services as private insurance – or without any insurance at all, leaving them often under financial stress and struggling to stay open, researchers said.
Under the Affordable Care Act, a small proportion of Medicare and Medicaid funding going to hospitals will be determined by performance measures, including how patients rate their experiences there.
That’s not a bad idea in general, said Dr. Ashish Jha from the Harvard School of Public Health in Boston, who worked on the study. But, he added, “We don’t actually know how the safety net is going to fare under those payment changes.”
His new research, published Monday in the Archives of Internal Medicine, suggests patients treated at safety-net hospitals consistently rate their in-hospital experiences – including their communication with doctors and how their pain is managed – as slightly worse than patients at other hospitals. That finding is based on surveys in 2007 and 2010 of people treated at 3,096 hospitals – about a quarter of them safety-net hospitals.
When it came to rating the hospitals overall, 64 percent of patients treated at a safety-net hospital gave it a 9 or 10 out of 10, compared to almost 70 percent giving that score to non-safety-net hospitals. Patients at safety-net hospitals also rated nursing services, discharge information, communication about medications and noise at the hospital as worse than at other facilities.
The study didn’t measure any specific medical outcomes, such as the number of patients who died in the hospital or had complications.
Jha told Reuters Health that patient experiences at safety-net hospitals may be especially important, as poor and minority patients are known to have more distrust for the healthcare system.
Although those patient differences could explain some of the way they rate their care, “the bottom line remains that these hospitals are then going to get penalized,” Jha said. And adding hits to hospital budgets that are already stretched thin could have wide implications.
“They’re the one set of hospitals that will take care of anyone who comes through their door no matter what their ability to pay,” Jha said. “When safety-net hospitals shut down, it has huge effects on the entire marketplace.”
He said Medicare officials could reach out to safety-net hospitals and give them resources to improve patient care, including overall hospital experience – then reward them if they successfully make those changes.
The authors of a linked editorial agreed that penalizing struggling safety-net hospitals may not be the most effective strategy to improve care.
“The Centers for Medicare and Medicaid Services (CMS) and state Medicaid agencies should design incentive programs that reward SNHs (safety-net hospitals) for improving patient experience and quality with the goal of closing the gap between SNHs and non-SNHs before implementing penalties,” according to Dr. Katherine Neuhausen of the University of California, Los Angeles and Dr. Mitchell Katz, from the Los Angeles County Department of Health Services.
Holding hospitals accountable for the care they provide is important, Jha emphasized – but it has to be done in a way that doesn’t push safety-net hospitals into bankruptcy.
SOURCE: Archives of Internal Medicine, online July 16, 2012.