Insurance exchanges: public market for private plans
Even more controversial than the Medicaid expansion is the ACA's provision requiring patients buy insurance or pay a tax penalty,
commonly known as the "individual mandate." Most insurance today is purchased as group plans through employers. However, individual
insurance plans will gain in importance with the ACA mandate as a greater number of individuals and small employers now look
to get coverage. To facilitate this shift, the ACA will establish insurance markets through state insurance exchanges. In
the words of HHS, the goal is to provide "consumers a consistent way to compare and enroll in health coverage in the individual
and small group markets, while giving states and insurers more flexibility and freedom to implement the ACA." It is expected
that these exchanges will provide coverage for as many as 24 million patients by 2016.
Figure 1 shows the current state of the insurance exchanges as of April 2013. Insurance plans offered on these exchanges must
meet minimum requirements for essential healthcare benefits and patient cost sharing. Requirements will vary across state
lines, and are currently in the process of being established—so far, only California has released details on their proposed
benefit design. A key open question for these plans will be to what extent each state allows highly restrictive MCO formularies.
What we do know is that the general structure of the offerings will be stratified into four metal-themed categories: bronze,
silver, gold, and platinum. The Bronze plans will offer the lowest monthly premiums, but have high patient copays and deductibles.
Platinum plans might offer even richer benefits and lower patient copays than typical employer insurance offerings—but this
comes at the cost of higher monthly premiums. Given the demographics of patients expected to enter these exchanges, we predict
that the lower premium plans (bronze and silver) will end up seeing the most enrollment.
Figure 1: Current status of insurance exchanges, by state.
However, insurance exchange requirements set by the state are merely the "rules of the game" within which MCOs will be competing
for members. The MCOs themselves will ultimately decide what kinds of products to offer within the guidelines, and how best
to differentiate their offerings from competitors. The Massachusetts State Health Connector, a model used for the development
of the insurance exchange concept, has numerous companies offering plans. For example, there are 10 plans currently offered
at the "silver low" tier with premiums ranging from $330 to $485 per month. Variations between the offerings include differences
in regard to physician networks, copay for ophthalmology visits, coinsurance levels for lab imaging, and more. Fallon Community
Health Plan even has an offering leveraging their relationship with Steward Health Care (an ACO) where patients pay $100 less
each month if they agree to receive care exclusively within the "Steward Community Care" network. The Massachusetts example
shows that even within the benefit constraints of a given tier, there can be clearly differentiated plan options and competition.
There is no question that federal and state governments have been the catalysts for the creation and operation of these exchanges.
On the other hand, what is also clear is that the private sector will be the group actually managing these new patients and
competing for their business.