State policymakers have more options than they may realize under the Affordable Care Act in how they create health insurance exchanges, according to a new white paper from the National Academy of Social Insurance and the Georgetown University Health Policy Institute.
“Active Purchasing for Health Insurance Exchanges: An Analysis of Options,” which was prepared to help states implement exchanges, notes that there are a wide range of policies that states can pursue, depending on local market conditions, to leverage higher quality, more affordable insurance for individuals and small businesses.
One of the bigger questions policymakers are grappling with is how strong a role the exchanges can or should take on behalf of individuals and small businesses to demand higher quality products at more affordable prices. Some believe the exchanges should have the power to selectively contract with insurers to set participation criteria and negotiate price discounts, while others believe the best approach is provide as broad a selection of plans as possible – what some dub the “Travelocity” approach.
"It shouldn't be an either/or choice. States have a lot of flexibility in how they design their exchange and how they set their market rules to promote higher quality, more affordable coverage," said Sabrina Corlette, co-author of the brief. "Our analysis also shows that states will have to empower their exchange to take on a minimal level of 'active purchasing' in order to meet the ACA's requirements and this includes the discretion to exclude a plan if it is not in the interest of enrollees."
Whether or not a state chooses to empower its exchange to be an active purchaser, the ACA requires exchanges to take on a number of activities that go well beyond the role of a passive clearinghouse.
The report notes that active purchasing encompasses a broad range of activities beyond simply determining whether a health plan can be included or excluded from an exchange. Some of thosee activities include:
- Setting additional certification criteria that reflect the state’s goals for such things as population health, plan quality, access to providers, delivery system reform and transparency;
- Using a selective contracting process to negotiate better prices and higher quality from plans;
- Managing product choices and setting parameters for cost-sharing;
- Leveraging quality improvement and delivery system reforms by encouraging participating health plans to implement strategies to promote the delivery of better coordinated, more efficient healthcare services;
- Aligning with other large purchasers in the state, such as large employer coalitions, the Medicaid agency and/or the state government employee benefits agency to send consistent purchasing signals to health insurance carriers and providers;
- Recruiting new insurance carriers, particularly in states with highly concentrated insurance markets. Such an approach could also include providing technical assistance to regional, home-grown or Medicaid carriers to help them become exchange participants; and
- Leveraging consumer decision-making through better information and web-based decision tools.
The level to which states pursue active purchasing in their exchanges is determined by each state’s individual market.
"There are also a number of environmental factors that could support – or undermine – active purchasing in the states," said co-author JoAnn Volk. "These include factors such as market concentration, market rules, the number and health of status of exchange enrollees and the exchanges' ability to recruit and maintain a leadership and staff free from conflicts of interest and with requisite expertise."
The white paper concludes that state exchanges may find their greatest leverage to affect value by providing incentives to health plans to deliver high quality care more efficiently.
“By consolidating individuals and small groups, potentially partnering with other large purchasers to align purchasing strategies and encouraging value-oriented consumer shopping, the exchange can encourage long-term delivery system reforms that can help improve quality and tackle the long-term challenge of unsustainable healthcare costs,” the report concludes.