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Sebelius Says Federal Exchange Pressuring Plans for Affordable Rates

By John Reichard, CQ HealthBeat Editor

June 24, 2013 -- Health and Human Services (HHS) Secretary Kathleen Sebelius said last week that federal officials are negotiating with insurers over the rates they'll charge on the federal exchange this fall despite previous statements by her department that it won't be what in the insurance world is known as an "active purchaser."

The insurance industry has strongly objected to the active purchaser model for the new health care law (PL 111-148, PL 111-152) marketplaces. Only a small number of states plan to use it for their exchanges.

"I think that what consumers should be confident about is that we intend to do rate negotiation and make sure that the plans offer consumers the best possible choices," Sebelius told a reporter roundtable.

Sebelius also said the administration is in discussions with the National Football League both to run paid advertising about the insurance exchanges and to spread the word in some sort of partnership arrangement. "We're hopeful that 7 million is a realistic target" for enrolling people in coverage in exchanges in 2014, Sebelius added.

The secretary spoke during an extended session with the press that was meant to call attention to intensified administration outreach efforts under the overhaul. Such activities include a relaunch of the website to promote health coverage options and a new 24-hour call center.

The remarks by Sebelius come at a time when critics of the health care law are saying premiums will be too high among plans sold on exchanges. Insurers also are warning that rates may be unaffordable in a number of cases. Democrats have also expressed some concern about what the premiums will be in the new marketplaces.

"It isn't an active purchaser in the way that I think some states would regard it," Sebelius said. But exchange officials are reviewing with insurers what they plan to charge, what coverage they will offer and whether they will have "an active network that's able to satisfy the consumers," she said.

California employs an active purchaser model. Recently, it announced rates that eased worries among health care law supporters that predictions of rate shock would come true.

During a background briefing after Sebelius' remarks, administration officials elaborated on the way that the federal exchange is negotiating with plans. Unlike in California, the federal marketplace won't exclude a plan if it charges rates that it considers too high. But it's putting considerable pressure on plans nonetheless.

Rates will likely make or break the success of the health care law in expanding coverage. Much of the nation will be served by the federal exchange, which will offer plans in 26 states and will assist seven "partnership" states in offering coverage. Seventeen states plan to open their own marketplaces.

Sebelius said the federal exchange won't be making its rates public until September, while the states control when to release the rates in their exchanges.

She contrasted the procedure that the federal exchange is following with what she called a "file and use" approach used by some states. Under that approach, "a company comes in with plan rates and you take what you get."

An administration official said that in the federal exchange, plans will be told whether their rates are high relative to what other insurers plan to charge, though specific competitor rates won't be divulged as part of that process.

"We're doing, in essence, what's kind of like an outlier analysis,'' the official said. "So when we see things that are ... high or low ... out of kind of what the norm is, we go back to the company. We want to make sure that it's right."

If a state served by the federal exchange has the power to reject rates under its insurance regulations, it appears that the feds will rely on that process. "We very much work with the states," the official said. "Even states that don't have prior approval authority ... often engage in conversations and discussions with issuers."

Mix of Enrollment Matters

When it comes to enrollment targets, Sebelius said the right mix of enrollees also is important, along with total enrollment.
"It's both about numbers and hopefully getting a balanced risk pool," she said. "So a lot of our efforts will be using creative ways to outreach to sort of the young healthy population who is eligible but who may not get up every morning thinking about health insurance."

Sports leagues offer a demographic critical to the success of enrollment efforts: young males.

"It's clear that we're having active discussions right now with a variety of sports affiliates both in terms of what will end up being paid advertising, but hopefully some partnership efforts," Sebelius said. "The NFL, for instance, in the conversations that I've had, has been very actively and enthusiastically engaged because they see health promotion as one of the things that they think is good for them and good for the country."

Sebelius was asked whether she's worried about the Medicaid expansion under the law because many states aren't cooperating. "What we know right now is we've got 24 states who will be expanding come January 1st of 2014, probably another four or five currently debating. And then the remainder of the states, at least as of right now, won't be expanding Medicaid on January 1st. There is no timetable. The door is open.

"We're confident looking at the history of CHIP expansion that states will eventually come in," she said.

"We are very concerned that in some states there will be people who are [below] 100 percent of poverty so they will not, absent Medicaid expansion, qualify for any financial assistance for health insurance. That message is going to be complicated ... There will be a huge gap between what they can afford and what is available. Officials said that in those instances, website visitors and callers will be told about nearby community health centers.

Officials also addressed the issue of how large the menu of plans will be on exchanges. Big insurers like United HealthGroup, Cigna, and Aetna will only offer coverage on a relatively small number of exchanges, in contrast to Blue Cross Blue Shield plans which are likely to be offered on all the marketplaces at least in the individual market. United, Cigna, and Aetna aren't big players to begin with in the individual insurance market, one official said, downplaying their decision not to take part widely.

Sebelius said "early reports indicate that the markets are going to be far more competitive than people are seeing in today's static marketplaces. For example, while in 29 states today more than half of enrollees in the individual market are covered by a single insurer, starting in October insurers plan to offer more than 15 qualified health plans per state on average."

Under its relaunch the site is changing considerably. It's been getting one million visitors a month to obtain information such as what health plans are now available to consumers locally. That information is being moved to a links section at the bottom of the site. Other information has been moved in recent weeks to the website for the Center for Consumer Information and Insurance Oversight.

Officials also said that some 9,000 people will staff the call center, compared to 2,000 now for the toll free Medicare information line. They didn't specify a goal for maximum wait times callers would face. In contrast to recent concerns expressed by the Government Accountability Office about exchanges being delayed, officials said exchanges would open on time. With respect to the federal data hub that is supposed to feed information on incomes, citizenship status, eligibility and tax credits to the exchanges, an official said it would be like other large data projects. While there likely would be "hiccups" here and there they would be straightened out as they arose, he predicted.

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