Why Health Insurance Exchanges Unnerve CFOs

Karen Minich-Pourshadi, for HealthLeaders Media , October 1, 2012

Last spring, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act but made participation in the expanded Medicaid program optional. The new flexibility with Medicaid expansion led many states announce that they'd opt out of the program—a decision with the potential to leave an estimated three million people uninsured, according to the Congressional Budget Office.

But PPACA also requires that states make insurance plans available for purchases through HIX by January 1, 2014.States must also demonstrate to the Department of Health and Human Services by January 1, 2013, that an exchange will be operational by 2014. If a state cannot meet that 2013 deadline, then the federal government has the authority to establish and operate an exchange for that state.

To encourage states to create their own HIX, the federal government has allotted about $1 billion to go toward research, planning, and technology for exchanges. Just last week, HHS Secretary Kathleen Sebelius announced that Arkansas, Colorado, Kentucky, Massachusetts, Minnesota, and the District of Columbia would receive one of the Affordable Insurance Exchange Establishment grants.

These six are among the 49 states, plus the District of Columbia and four territories, that have now received federal grant money to plan HIX; 34 of those states plus the District of Columbia have received grants to build an exchange. The ultimate goal is to allow consumers in every state to be able to buy insurance from qualified health plans directly through these marketplaces and to be eligible for tax credits to help pay for their health insurance. 

Establishing a state exchange is a highly complex process, however—another reason several financial leaders at the HealthLeaders Media CFO Exchange expressed concern about how they might ultimately impact healthcare organization finances.

For instance, states must grapple with establishing governance and certification procedures, determining competitive standards among plans, and creating IT structures. Additionally these exchanges must develop small-business health plan options as well as plans that can take on a disproportionate share of high-risk, high-cost individuals that don't impose higher premiums on those individuals.

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3 comments on "Why Health Insurance Exchanges Unnerve CFOs"

joe davis (10/2/2012 at 7:46 PM)
Sorry, I misquoted a number in an earlier post that has not yet been posted. CBO did assume that 6 million people would enroll in the HIX by 2019 who previously had insurance. This is 6 million out of 24 million expected enrollees. 3,5 of the 6 would be the result of employer "dumping." 1.5 would have employer insurance but would meet the income limits to make them eligible. And, another 1 million would drop their non- group coverage. In any event, while some few analysts are throwing out very high estimates of likely employer dumping into the HIX or just termination of coverage, (which has been a slow but steady trend) there is no good evidence or a clear logic to the alarm. Did not happen in Massachusetts. Pretty hypothetical fear.

Joe Davis (10/2/2012 at 2:46 PM)
With all respect to the CFOs and experts quoted, one of whom is a friend, where is the evidence? Massachusetts did not experience a high rate of employer dumping. The CBO original estimates were higher and assumed that half of all currently insured people would come from employers who dropped coverage. But, that is about six of twelve million people. 30% of ALL CURRENTLY insured employers. I don't think so. And the industry is absolutely scared about being paid less in the future. From everyone. There may be a few states that create an environment for restricted price negotiation...but they will be the BIG exception. It's all about negotiation. That is why the idea of narrow networks and tiered networks are resurfacing. And homegrown ACOs will feed into this, Fewer credible observers expect HIX to lead to Medicare or medicaid rates unless the provider is in that range already with commercial insurers. When you run the numbers, many systems are clearly better off in relation to HIX. And, there will be some interesting opportunities. But, the fog of uncertainty about the future has to create fear.

Drew Joyce (10/2/2012 at 10:15 AM)
Have I missed a development? Why would CFO's believe that individual insurance sold through the exchange will be contracted at Medicaid or Medicare rates? I think everyone expects difficult reimbursement discussions but wouldn't such a major step require more legislative action? There will be more care reimbursed at Medicaid rates in States that opt in, but there should also be a great increase in commercial reimbursement due to expanded enrollment in subsidized individual coverage.




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