Health insurance carriers won’t have to negotiate rates to sell their products in the state’s new virtual coverage “store.”
But those running the market — known as the health insurance exchange — will develop a plan for ways to drive down costs and promote affordability, which could include negotiation, members of the exchange’s board determined Thursday.
“This is a huge compromise,” said state Healthcare Advocate Victoria Veltri, who had wanted the exchange to have the ability to negotiate rates with insurance carriers from the start.
Exchange CEO Kevin Counihan, who had warned that negotiating rates could interfere with the new market’s viability, was more pleased. “I think we’re very comfortable with it,” he said.
The board’s vote Thursday followed an at-times contentious process to define the rules that will govern what plans are sold through the exchange’s market.
The exchange is essentially a virtual store for selling health insurance. Every state is required by federal health reform to have one, and Connecticut’s is expected to open next fall, selling insurance that will take effect Jan. 1, 2014. Most or all of the plans it sells are expected to be offered by private insurance carriers.
Veltri and other consumer advocates had wanted the exchange to be able to be selective about what plans it offers, with the power to negotiate rates with insurance carriers. They say it’s a critical tool for making sure the options are affordable.
But others, including the exchange staff, said that being too selective, or setting too many restrictions, could keep insurance carriers from offering their products through the exchange, leaving customers with fewer choices. They also warned that there are too many unknowns to effectively bargain before the exchange’s first year, including about who will be buying coverage through the exchange.
As part of a compromise, two advisory groups earlier this week recommended that the exchange sell any health plans that meet its standards in the first year. It came with one exception: If enough plans are available in the exchange to provide for sufficient consumer choice, the exchange could choose not to sell one or more on the basis of price.
The exchange board voted to adopt those provisions Thursday.
The advisory groups also recommended that the exchange move from a model of accepting “any willing carrier” toward a more active model for selecting which plans can be sold in future years.
But members of the exchange staff raised concerns with that recommendation Thursday. They said they disagreed with the characterization that the exchange is passively accepting any insurer, and said that while they could consider rate negotiations in the future, it shouldn’t be required.
An “active” exchange
Some board members said they liked the idea of having a more selective exchange, and revised the language to the more general suggestion of identifying mechanisms to drive down costs. That leaves open the option of not negotiating if rates in the exchange are satisfactory.
“I strongly believe in an active exchange that’s not just a price taker,” board member Grant Ritter, a health economist, said.
Benjamin Barnes, secretary of the Office of Policy and Management, said the reason people place importance on rate negotiations is that they don’t have confidence in the market to provide affordable insurance. But he said federal health reform and the exchange will bring significant changes, some of which he thinks will be dramatic improvements.
He said he was comfortable recommending that the exchange develop a plan for taking a more active approach, but said it should also include an analysis of how effective the changes in the market are, because that could change how necessary it is to have a more active exchange.
Veltri called rate negotiations “one of the biggest tools in the toolbox” to promote affordability,” and said she wanted to be sure that the compromise language wouldn’t take it off the table.
“I’m not taking anything off the table,” Lt. Gov. Nancy Wyman, the board chairwoman, said. She cited her 16 years as state comptroller, negotiating over state employee and retiree health insurance. “Negotiating is good,” she added.
Legal complication
Veltri said after the vote that she’s committed to making sure that negotiations happen after the exchange’s first year of operating, when people are buying plans for 2015. By then, she said, there won’t be uncertainty about who the exchange’s customers are, although she added that she thinks insurers already have a good idea of who will buy from the exchange.
One complicating factor, she said, is that the rates charged for any plan sold through the exchange must be approved by the Connecticut Insurance Department, potentially undermining the results of the negotiations. “I think it ties the hands of the exchange,” she said.
Veltri said policymakers should consider revising state law to eliminate the requirement. While the department’s rate review process is valuable in the outside market, she said, it might not be as helpful in the exchange, which is aimed in part at promoting innovation in the health care system.
Ellen Andrews, executive director of the Connecticut Health Policy Project, who had argued for negotiating rates, said she was “incensed” by the compromise. “It’s disappointing,” she said.
Andrews said the board had chosen to whittle down even what she called “heavily negotiated consumer protections that were inadequate to start with,” and said it doesn’t inspire confidence in the exchange.
Counihan said he was pleased the vote took place, allowing the process of developing the exchange to continue. “Our fundamental goal is to get up and running by October,” he said.
The discussion about negotiating rates took place as part of a larger process aimed at defining what standards plans must meet to be sold through the exchange; plans that meet the requirements will be certified as “qualified health plans.” People and small businesses that get federal subsidies to buy insurance will have to buy plans that are certified and sold through the exchange.
Many of the requirements are set by federal law, but states have the option of setting additional standards. Other requirements the board set Thursday included how many plan options each carrier that participates must offer and how many health care providers must be in an insurer’s network.
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