With the passage of insurance exchange legislation in California, and the release of a template for state exchange statutes by the National Association of Insurance Commissioners, many state eyes are turning towards the only existing exchange comparable to that required by PPACA: Massachusetts’ Connector.
The Connector, which offers Commonwealth Care subsidized coverage for those with incomes below 300 percent of FPL but not eligible for Medicaid, and Commonwealth Choice private plans for other families and individuals and small employer groups, has been touted as a major success by current and former Commonwealth officials and many national reform advocates.
But, after four years of operation, just how successful has the Connector really been? Has the Connector simplified health plan choice and enrollment, increased the number of insured, reduced marketing costs, created competition, or driven down premiums? It turns out that the answers are far less positive than the Connector’s boosters have admitted.
HAS THE CONNECTOR SIMPLIFIED PLAN SELECTION AND ENROLLMENT?
For some, at least.
For the 33,000-enrollee unsubsidized Commonwealth Choice program the answer is yes. Health plan selection and enrollment for CommChoice’s seven plans (with six levels of benefits each) is directly available via the Connector website, with simple well-designed screens and navigation, and easy comparison of alternatives. However, in spite of the ease of use, only half of Massachusetts’ post-reform non-subsidized insured have chosen coverage via CommChoice.
For the 155,000-enrollee subsidized Commonwealth Care program, enrollees face enough complications that a 13-page booklet is necessary to guide them through the process. Plan selection and enrollment for CommCare’s five Medicaid managed care plans (with multiple benefit levels depending on income) require applicants to first complete a benefit request form with income and other details; only after eligibility is determined by the state Medicaid agency is plan selection possible, either on-line or, for those without convenient web access, through submission of a paper form. Not only can this be a time-consuming process, but it’s one that is explained on the Connector website in language that may require a higher level of education than many potential applicants possess.
HAS THE CONNECTOR INCREASED THE NUMBER OF INSURED?
Only marginally, at best.
A few CommChoice enrollees may have purchased coverage as a result of the easy-to-use Connector enrollment procedures, but—given the pressures of the individual mandate and its associated penalties—most would otherwise have bought insurance through brokers or directly from carriers.
CommCare enrollees are even less likely to have acquired coverage because of the Connector’s capabilities. Most CommCare enrollees pay no premiums and presumably would have submitted applications for coverage regardless of the Connector.
Overall, although the Connector provides a useful source of information, most of Massachusetts’ post-reform insured were probably influenced more by media coverage of the individual mandate and other reform details than by the Connector. In fact, neither the media nor the Connector has persuaded all eligibles to become covered. The latest Census Bureau figures show Massachusetts—while having the lowest uninsured rate in the US—still with five percent uninsured, while a 2010 Robert Wood Johnson Foundation study estimates that almost half of these uninsured are eligible for either CommCare or Medicaid.
HAS THE CONNECTOR REDUCED MARKETING AND ENROLLMENT COSTS?
Probably not.
For CommChoice, the Connector’s costs (funded by a 4.5 percent levy on premiums, roughly equivalent to broker commissions) are additive to health plans’ own administrative costs. Although the plans presumably incur somewhat less enrollment effort as a result of the Connector, the volume of enrollees gained (less than 5 percent of total enrollment) isn’t large enough to influence plan costs significantly.
For CommCare, the Connector’s costs (funded by a 4 percent levy on premiums) also are additive to plans’ administrative costs. However, because the Medicaid managed care plans contracted by CommCare have cost structures that assume enrollment is a state function, plan costs are not affected by use of the Connector.
Connector administration costs to date are actually significantly higher than the premium levy amounts indicate, since initial implementation efforts were funded by a one-time $25 million appropriation.
HAS THE CONNECTOR CREATED A COMPETITIVE MARKET FOR COVERAGE CHOICES?
Only to a limited extent.
The Connector website allows applicants to compare costs of plans with similar benefits—essential for a competitive market. Initially, the Connector allowed choices between “actuarially equivalent” plans, but more recently has switched to offering plans whose benefits are almost identical in order to facilitate price comparison.
For CommChoice, price seems to have played a significant role in plan and benefit choice: most enrollees have chosen the lower Bronze or Silver benefit levels, with less costly plans being most popular. However, with CommChoice enrollees representing fewer than five percent of the individual and small group market, the Connector’s price-comparison capability is unlikely to have influenced overall market competition.
For CommCare, most enrollees pay no premiums so that price comparisons are meaningless. For the remaining CommCare enrollees, premium differences between plans are small and seem not to have been a major influence on plan selection.
HAS THE CONNECTOR RESULTED IN LOWER PREMIUMS?
Possibly, for the subsidized CommCare plans, but not for CommChoice.
Connector administrators have taken activist roles in attempting to control premium increases, especially for CommCare, rejecting plan proposals until lower rates have been offered. For CommChoice (whose plans are available in the general market), Connector administrators supported the state insurance regulators’ rejection of rate hikes that led to a brief “insurance strike” in the spring of 2010 and ultimately to reduced increases. What is not known for either program is the extent—if any—to which state pressures on individual market premiums may have resulted in cost shifting elsewhere.
Although Connector officials have claimed in Congressional testimony that CommChoice’s creation led to a dramatic drop in non-group premiums, the reality is that this was primarily due to the state’s combining of the small group and individual markets, something that also resulted in premium increases for small groups. The very small CommChoice enrollment is simply too little to influence the overall Massachusetts market (which has the highest health insurance premiums in the nation): the tail does not wag the dog.
SO, DOES THIS MEAN PPACA INSURANCE EXCHANGES WILL BE EQUALLY UNSUCCESSFUL?
In a sense, the very existence of the Connector—a pioneering state effort to offer truly competitive—and easy—health plan selection—represents a success. However, this success is due in part to the factor that undermines the Connector’s effectiveness: the very low enrollment numbers. Establishing the Connector would almost certainly have been much more difficult and faced far stronger opposition if Massachusetts had had more pre-reform uninsured, especially those above the 300 percent FPL level, as will be the case in most other states who must establish PPACA insurance exchanges.
The real value of the Massachusetts experience is likely to prove not to be to the Commonwealth itself, but to other states. Whether they can achieve greater success, and the lessons they can learn from Massachusetts, will be the subjects of a subsequent article.
The Connector, which offers Commonwealth Care subsidized coverage for those with incomes below 300 percent of FPL but not eligible for Medicaid, and Commonwealth Choice private plans for other families and individuals and small employer groups, has been touted as a major success by current and former Commonwealth officials and many national reform advocates.
But, after four years of operation, just how successful has the Connector really been? Has the Connector simplified health plan choice and enrollment, increased the number of insured, reduced marketing costs, created competition, or driven down premiums? It turns out that the answers are far less positive than the Connector’s boosters have admitted.
HAS THE CONNECTOR SIMPLIFIED PLAN SELECTION AND ENROLLMENT?
For some, at least.
For the 33,000-enrollee unsubsidized Commonwealth Choice program the answer is yes. Health plan selection and enrollment for CommChoice’s seven plans (with six levels of benefits each) is directly available via the Connector website, with simple well-designed screens and navigation, and easy comparison of alternatives. However, in spite of the ease of use, only half of Massachusetts’ post-reform non-subsidized insured have chosen coverage via CommChoice.
For the 155,000-enrollee subsidized Commonwealth Care program, enrollees face enough complications that a 13-page booklet is necessary to guide them through the process. Plan selection and enrollment for CommCare’s five Medicaid managed care plans (with multiple benefit levels depending on income) require applicants to first complete a benefit request form with income and other details; only after eligibility is determined by the state Medicaid agency is plan selection possible, either on-line or, for those without convenient web access, through submission of a paper form. Not only can this be a time-consuming process, but it’s one that is explained on the Connector website in language that may require a higher level of education than many potential applicants possess.
HAS THE CONNECTOR INCREASED THE NUMBER OF INSURED?
Only marginally, at best.
A few CommChoice enrollees may have purchased coverage as a result of the easy-to-use Connector enrollment procedures, but—given the pressures of the individual mandate and its associated penalties—most would otherwise have bought insurance through brokers or directly from carriers.
CommCare enrollees are even less likely to have acquired coverage because of the Connector’s capabilities. Most CommCare enrollees pay no premiums and presumably would have submitted applications for coverage regardless of the Connector.
Overall, although the Connector provides a useful source of information, most of Massachusetts’ post-reform insured were probably influenced more by media coverage of the individual mandate and other reform details than by the Connector. In fact, neither the media nor the Connector has persuaded all eligibles to become covered. The latest Census Bureau figures show Massachusetts—while having the lowest uninsured rate in the US—still with five percent uninsured, while a 2010 Robert Wood Johnson Foundation study estimates that almost half of these uninsured are eligible for either CommCare or Medicaid.
HAS THE CONNECTOR REDUCED MARKETING AND ENROLLMENT COSTS?
Probably not.
For CommChoice, the Connector’s costs (funded by a 4.5 percent levy on premiums, roughly equivalent to broker commissions) are additive to health plans’ own administrative costs. Although the plans presumably incur somewhat less enrollment effort as a result of the Connector, the volume of enrollees gained (less than 5 percent of total enrollment) isn’t large enough to influence plan costs significantly.
For CommCare, the Connector’s costs (funded by a 4 percent levy on premiums) also are additive to plans’ administrative costs. However, because the Medicaid managed care plans contracted by CommCare have cost structures that assume enrollment is a state function, plan costs are not affected by use of the Connector.
Connector administration costs to date are actually significantly higher than the premium levy amounts indicate, since initial implementation efforts were funded by a one-time $25 million appropriation.
HAS THE CONNECTOR CREATED A COMPETITIVE MARKET FOR COVERAGE CHOICES?
Only to a limited extent.
The Connector website allows applicants to compare costs of plans with similar benefits—essential for a competitive market. Initially, the Connector allowed choices between “actuarially equivalent” plans, but more recently has switched to offering plans whose benefits are almost identical in order to facilitate price comparison.
For CommChoice, price seems to have played a significant role in plan and benefit choice: most enrollees have chosen the lower Bronze or Silver benefit levels, with less costly plans being most popular. However, with CommChoice enrollees representing fewer than five percent of the individual and small group market, the Connector’s price-comparison capability is unlikely to have influenced overall market competition.
For CommCare, most enrollees pay no premiums so that price comparisons are meaningless. For the remaining CommCare enrollees, premium differences between plans are small and seem not to have been a major influence on plan selection.
HAS THE CONNECTOR RESULTED IN LOWER PREMIUMS?
Possibly, for the subsidized CommCare plans, but not for CommChoice.
Connector administrators have taken activist roles in attempting to control premium increases, especially for CommCare, rejecting plan proposals until lower rates have been offered. For CommChoice (whose plans are available in the general market), Connector administrators supported the state insurance regulators’ rejection of rate hikes that led to a brief “insurance strike” in the spring of 2010 and ultimately to reduced increases. What is not known for either program is the extent—if any—to which state pressures on individual market premiums may have resulted in cost shifting elsewhere.
Although Connector officials have claimed in Congressional testimony that CommChoice’s creation led to a dramatic drop in non-group premiums, the reality is that this was primarily due to the state’s combining of the small group and individual markets, something that also resulted in premium increases for small groups. The very small CommChoice enrollment is simply too little to influence the overall Massachusetts market (which has the highest health insurance premiums in the nation): the tail does not wag the dog.
SO, DOES THIS MEAN PPACA INSURANCE EXCHANGES WILL BE EQUALLY UNSUCCESSFUL?
In a sense, the very existence of the Connector—a pioneering state effort to offer truly competitive—and easy—health plan selection—represents a success. However, this success is due in part to the factor that undermines the Connector’s effectiveness: the very low enrollment numbers. Establishing the Connector would almost certainly have been much more difficult and faced far stronger opposition if Massachusetts had had more pre-reform uninsured, especially those above the 300 percent FPL level, as will be the case in most other states who must establish PPACA insurance exchanges.
The real value of the Massachusetts experience is likely to prove not to be to the Commonwealth itself, but to other states. Whether they can achieve greater success, and the lessons they can learn from Massachusetts, will be the subjects of a subsequent article.
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