Featured Health Business Daily Story, Aug. 24, 2012

D.C., Vermont May Require Small Employers to Use Only Exchanges

To ensure that their exchanges have enough enrollees to be viable, the District of Columbia and Vermont might require small employers to participate in their insurance exchanges. Revenue needed to operate state exchanges likely will come from an assessment or tax on participating health plans, which will be based on the number of enrollees.

While states are receiving hundreds of millions in federal funding to get the entities up and running, the exchanges have to be self-sustaining in 2015. It’s estimated that Vermont’s exchange could require carriers to pay an assessment of between 5% and 6% of premiums depending on how many people enroll.

Washington and Vermont have similar profiles. The District of Columbia has a population of about 600,000 and about 42,000 uninsured. Vermont has 620,000 residents and 47,000 uninsured. About 80,000 people in the District have coverage through a small employer, according to Mercer estimates.

Under a proposal being considered by the District of Columbia Health Benefit Exchange Authority, all Washington, D.C.-based small businesses (fewer than 100 employees) seeking insurance would be required to purchase coverage though the District’s insurance exchange, says Wayne Turnage, director of D.C.’s Health Care Finance Dept. and ex-officio member of the group guiding the development of the exchange.

The idea was proposed by a subcommittee of Mayor Vincent Gray’s (D) Health Reform Implementation Committee. Turnage says that enrolling enough lives to make the exchange viable will be a challenge given the area’s small population. The board, he adds, “will need to make a decision sometime this summer as to what the market structure will be for the exchange,” he tells HEX.

The mayor recently appointed the members of the exchange’s governing board, which met for the first time on July 23 after being confirmed by the city council. Board members contacted by HEX say the group has yet to make any substantive decisions. But within the next month or two, Turnage says the new board will need to determine the market structure of the exchange. Carriers now operating in the District include Aetna Inc. (and AARP-branded Aetna plans), CareFirst BlueCross BlueShield, Celtic Insurance Co., Kaiser Mid-Atlantic and UnitedHealth Group.

In January, the mayor enacted legislation that allows for an exchange to be established. The District received $8.2 million in a Level 1 establishment grant, and intends to apply for a Level 2 grant by Aug. 15.

Vermont Carriers Can’t Pay Brokers

Vermont doesn’t anticipate including more than two carriers in its exchange, and views the exchange as a stepping stone toward a single-payer system. Blue Cross and Blue Shield of Vermont has more than 70% of the commercial market. The other carrier in the small-group and individual market is Schenectady, N.Y.-based MVP Health Care, Inc.

The single-payer system, dubbed Green Mountain Care, will use a common mechanism to administer all commercial, government and state employee health plans (HEX 10/11, p. 10).

Because of Vermont’s small population, individual and small-group coverage will be available only through the state’s insurance exchange beginning in 2014. Moreover, health plans that participate in the exchange will not be allowed to compensate brokers. As a result, brokers likely will bill clients directly. Some are considering becoming Navigators, although it remains unclear how Navigators will be funded.

Vermont also is encouraging small employers to drop coverage and allow their employees to purchase coverage directly through the exchange. But that could have the unintentional consequence of boosting uninsured among the middle class that previously had coverage through an employer, according to a local industry observer who asked not to be named.

© 2012 by Atlantic Information Services, Inc. All Rights Reserved.