This article first appeared in the February/March 2011 issue of the newsletter "States in Action."
The Massachusetts Health Connector was created as an independent state agency charged with implementing many elements of the state's 2006 health care reform. One of the models for the exchanges established in the Affordable Care Act, the Connector's core responsibility is to act as an "intermediary that assists individuals in acquiring health coverage."1 The Connector established both a subsidized health insurance program serving uninsured adults in families with incomes up to 300 percent of the federal poverty level (Commonwealth Care) and an unsubsidized market (Commonwealth Choice).
Commonwealth Choice began in May 2007 as a commercial health insurance exchange for individuals who lacked access to employer-subsidized insurance . It offers four different ways to find insurance: the Voluntary Plan, Contributory Plan (now closed to new enrollment), Business Express, and a Young Adult Plan. The Voluntary Plan, launched in 2007, allows employees whose employer registers through the Health Connector to use their pre-tax income to purchase insurance through the exchange. The Connector's small-business pilot, known as the Contributory Plan, was launched in 2009 for small employers to contribute to their employees' health insurance and offer more health plan options than are typically available to small groups. An evaluation of the Contributory Plan confirmed that it was effective in providing affordable choices to employers and employees, but needed enhancements required the Health Connector to temporarily close enrollment in March 2010 (though current members can still re-enroll). Now the primary option for small businesses and their employees is known as Business Express, which enables small employers to compare different health plans, select the plan that best meets their needs, and enroll their employees online. The Connector also offers a Young Adult Plan for adults ages 18 to 26.
As of December 2010, there are 150,998 members enrolled in Commonwealth Care and 40,075 enrolled in Commonwealth Choice (including 28,238 subscribers and 11,837 dependents). The latter includes a total of 3,942 subscribers who purchased coverage through their small employer (either through the Voluntary Plan, Business Express, or Contributory Plan).
All four programs of Commonwealth Choice are accessed via the Connector's Web site. Customers can find and compare their health insurance options in multiple ways, including by benefit tier (showing detailed comparisons of benefits), monthly costs, and annual deductibles. All participating carriers offer all benefit tiers, but not all of them are available in all zip codes. In addition, quality ratings based on the National Committee for Quality Assurance's (NCQA) health plan report card are displayed on the site to assist customers in comparing the quality of care delivered through various plans.
At the outset, individuals are asked for information on their household income; those who are potentially eligible for subsidized coverage are directed to the Medicaid application, which is used to determine eligibility for subsidized programs, including Medicaid and Commonwealth Care.
The Exchange's Purchasing Role
As part of the Health Connector's mandate, it must qualify health plans through a process known as the "Seal of Approval." The Connector uses an annual procurement process to validate plan designs and assess whether they are of sufficient quality and value to be included in the exchange. Plans must submit four tiers of health insurance benefits, based on the actuarial value of a standardized set of benefits. This model of standardization is similar to that required of insurers under the Affordable Care Act, although under national health reform certain required elements for health plans, including a minimum benefit level and standardized benefit tiers, will be designed initially through federal rulemaking.
As part of its assessment of value in the certification process, the Connector attempts to drive down premium costs. In fact, the Connector used its certification process to put pressure on the health plans to reduce their premium bids. As a result, in the first year of the exchange bids were decreased up to 5 percent. The Connector also has declined to give health plans it deemed to be of insufficient quality and value its Seal of Approval. In the initial bid, of the 10 carriers that submitted bids, six were granted the Seal of Approval. All major carriers in the state have been selected as part of the Seal of Approval process and have remained participants in the exchange since its inception.2
Massachusetts has had the benefit of having carriers that receive high marks for their quality of care. All six carriers participating in its exchange that have sufficient experience to be rated received four stars or an "excellent" accreditation status on NCQA's health plan 2010–11 report card.3 Five of the seven carriers participating in the exchange were identified by NCQA as being in the top 20 health plans in the nation in 2010.4
Massachusetts' recent experience in reviewing health insurance premiums provides lessons for other states. Its Division of Insurance (DOI), a partner agency to the Connector with authority to review premium increases, rejected premium rate proposals from most health plans in April 2010. This led to judicial and DOI appeals and a temporary suspension of availability of health plan products in the exchange. Although most health plans began to sell their products again on the exchange after negotiating a settlement, and subsequent premium increase requests were lower (under 10%), the dispute process was extremely disruptive to the insurance market. As state health exchanges develop their policies and procedures, a clear dispute resolution approach should be developed in order to ensure continued operation of the exchange during periods of dispute. In addition, states will need to thoughtfully plan how the premium review activities of the health exchange and state agencies with similar responsibilities will need to work together to fulfill the requirements of the Affordable Care Act.
Protecting Against Adverse Selection
The Massachusetts health reform law established a range of requirements to mitigate adverse selection, many of which are also components of the Affordable Care Act. These include a mandate requiring everyone to purchase insurance; establishment of the exchange as the exclusive market for subsidized insurance; requirement that health plans offer the same health insurance products inside and outside of the exchange, both in terms of benefit design and premium levels; and pooling of health plan risk for enrollees across the exchange and the outside market. (Massachusetts also merged its individual and small-group insurance markets.)
All of these requirements helped to ensure a mix of enrollees would be attracted to purchase insurance in the exchange, and no health plan would disproportionately attract sick patients. According to Connector staff, to date in Massachusetts no evidence of adverse selection within the Health Connector exchange has been substantiated.
It should be noted that the Massachusetts insurance market had already implemented some of the insurance reforms required in the federal reform (e.g., guaranteed issue and renewal) before its health reform efforts were implemented in 2006. It may be a challenge for states without such protections already in place to predict the combined impact in 2014 of new insurance reforms, new purchasing exchanges, and coverage expansions on the overall insurance marketplace.
For more information: Contact the Connector Public Information Unit at (617) 933-3145 or see the Massachusetts Connector Web site.
1 Massachusetts Health Connector, 2006–08 Annual Report.
The other four carriers were not major carriers in the state, and are not able to participate without the Seal of Approval.
See Blue Cross Blue Shield of Massachusetts, Fallon Community Health Plan, Harvard Pilgrim Health Care, Health New England, Neighborhood Health Plan, Tufts Health Plan at http://reportcard.ncqa.org/plan/external/plansearch.aspx.
4 See http://www.ncqa.org/tabid/1243/Default.aspx.