The Patient Protection and Affordable Care Act (ACA), which the Supreme Court found constitutional last month, requires all states to roll out health insurance exchanges where consumers can compare in one place plans based on price, deductibles and benefits.
Two central elements of the ACA affect states: they have to set up the health insurance exchanges (HIXs) and take part in a Medicaid expansion.
Massachusetts was the first state, and it is still only one of a handful, to have already implemented a HIX. The commonwealth created its HIX -- called HealthCare Connector -- six years ago, so it has had plenty of time to refine it.
And yet, Scott Devonshire, CIO at HealthConnector, knows federal guidelines for HIXs will require a significant IT upgrade, even for a mature system such as his.
"There are a lot of nuances involved in the ACA-compliant exchange," he said. "We're really working closely with the federal government to get guidance on policies. We've had a functioning exchange over the past years, but as many similarities as there are [to the federally compliant HIX] there are just as many differences."
For example, Massachusetts has three insurance plan tiers - gold, silver and bronze - just as an ACA-compliant exchange requires. But the state also has sub-levels, such as Bronze-low, medium and high. The ACA model has no such sub-categories.
According to The Centers for Medicare & Medicaid Services (CMS), the federal agency overseeing HIX deployments, state and federal exchanges are major IT implementations that combine portal technologies, content management, full e-commerce, CRM, online user experience and other information systems to produce a fully functional online marketplace.
"There are potentially 14 million new people walking through the electronic front door in light of ACA," said Garland Kemper, health and human services program director at services provider Unisys. "There are [state-based computer] systems that in some cases are 25 years old. They're legacy apps that, to modify the rules to reflect the new federal ones, will be very difficult. It varies state to state.
"This is going to be a huge impact to state government," he added.
The Congressional Budget Office estimates that 12 million consumers will buy health insurance in the HIX market in 2014, with that figure rising to nearly 28 million people by 2019. The overwhelming majority of those using the HIXs will be low-income people, contractors who don't have an employer-sponsored plan or those already insured through employer plans, but whose family members aren't covered.
"About 17 million of those newly insured (those below 133% of the Federal Poverty Level) will receive coverage through an expanded Medicaid program," PricewaterhouseCoopers International (PwC) stated in a report they released in June.
By 2021, the individual and small business exchange market is projected to grow to about $190 billion in premiums and $96 billion in premium credits, according to PwC.
Every state must operate an HIX with multiple points of contact, including paper-based systems, phone lines and online channels where any qualified individual can shop for and buy health insurance. People will also be able to use the exchanges to submit questions to insurers and find out whether they're eligible for tax credits for private insurance programs or qualify for public programs, such as the Children's Health Insurance Program (CHIP).
Unisys operates the Medicaid eligibility system for Los Angeles County, which has the highest volume of applicants compared to any other county in the U.S. Several million residents of the county receive public assistance, and will in turn be using California's HIX once it's operational, placing a tremendous strain on its Web-portal infrastructure.
States will also be required to electronically interact with the federal government's data hub, which will have information such as a citizen's residency and legal status, tribal status, incarceration records, and eligibility for financial assistance. Currently, states are islands unto themselves when it comes to resident information, and it can take weeks for an applicant to be approved. By connecting to the federal government's data hub, the approval process will be reduced to minutes, Devonshire said.
"As we move toward an ACA-compliant implementation, our infrastructure will grow. We'll need to build out hardware and software," Devonshire said. "Right now, we have a fairly light infrastructure in the data center that houses all our web servers."
More than half of the states have "made progress" on electronic exchanges, according to CMS. Forty-nine states and the District of Columbia have already received exchange-planning grants, and seven states, such as Massachusetts and Utah, have received early innovator grants.
No states, however, are currently ACA-compliant.
Texas is the only state refusing federal funds to expand Medicaid and build a state HIX, although several states have said they won't expand their Medicaid programs. That doesn't mean Texas won't have an HIX. States that refuse to build their own exchange will have one built for them by the federal government.
So far, 14 states and the District of Columbia have made significant progress toward reform, while another 19 have seen moderate progress. The remaining 17 states have done less to implement the healthcare reform law, according to PwC's Health Research Institute
The progress of states in compliance with healthcare reform, including deploying HIXs (source: PwC)
In an acerbic letter to President Obama earlier this month, Texas Gov. Rick Perry referred to the ACA as an Orwellian-named power grab. Perry said the ACA and HIXs represents "brazen intrusions into the sovereignty or our state," making it no more than an appendage of the federal government.
"In short, it essentially treats the states like subcontractors through which the federal government can control the insurance markets and pursue federal priorities rather than those of the individual states," Perry wrote.
The ACA grants the US Department of Health and Human Services (HHS) the authority to review health insurance premium increases, and insurers must justify rate hikes of over 10%.
States have the option of building their own HIXs, partnering with other states in building exchanges or simply allowing the CMS to take over the effort. The problem with allowing the federal government control over an HIX is that each state has its own insurance industry regulations and relationships with its regional carriers, Devonshire said.
"It's hard to say the federal government, in building an exchange, will be able to meet the needs of individual states. We've learned many lessons on how we deal with small insurance groups, and how [we] deal with individual carriers," Devonshire said. "There are market differences from state to state that will make the difference in how you set up your exchange."
The CMS last year issued rules for HIXs that required states to begin offering health insurance via exchanges by 2014.
To get ahead of the public exchanges, private insurers are looking to set up their own private ones -- in the form of in-store kiosks and online sites where consumers and businesses can compare plans based on price and coverage.
According to a survey published by PwC last year, 52% of health insurance executives said their companies plan to compete in individual or small group health insurance exchanges.
According to PwC's survey, insurers on average expect it will take about 15 months to get their businesses ready for exchange certification by the federal government. Forty percent expect it to take 18 months, and 20% believe it will take up to two and a half years to be ready.
"They're not insurers, they're just providing a vehicle to represent insurance products," Chris Hoffmann, chief marketing officer at TripleTree, an independent investment bank and strategic advisory. "United, Aetna, Cigna, WellPoint, and Humana are all going to have insurance products on the public exchanges. Those same products will be offered on Walgreen's exchange, for example."
Lucas Mearian covers storage, disaster recovery and business continuity, financial services infrastructure and health care IT for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed. His e-mail address is email@example.com.
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