By Lois M. Collins
SALT LAKE CITY, Utah Sharon Opfermann wanted to provide health insurance for the handful of full-time staff members at the doggy day care and boarding business she operates in South Salt Lake, but it wasnt very easy to pull off. The one-size-fits-all plan she first picked didnt serve each employee equally well. And it was expensive.
When she got a chance to enroll her business, Camp Bow Wow, in the Utah Health Exchange a couple of months ago, she jumped at it. Shes paying the same amount toward employee health benefits, but each member of her staff is free to pick the plan that meets his or her needs. And it all happens online, where its convenient and transparent, she says.
Two states Utah and Massachusetts are attracting attention from other states scrambling to establish their own health exchanges, which are mandated by the Affordable Care Act. They are the two states ahead of the curve, each one operating its own version of a health exchange.
The approaches are very different by design, according to Norm Thurston, health reform implementation coordinator in the Utah Department of Health.
Massachusetts was the first state to tackle the challenge and Utah watched its efforts with great interest back in 2005 when Utah decided to form an exchange. But it didnt take long for Utahs reform planners to decide that the Beehive state would do better with a different approach.
Massachusetts exchange has a more regulatory approach than Utahs, taking greater state ownership of the coverage issue than Utah wanted, Thurston said.
But although Utah chose to go about things differently, it learned these basics from Massachusetts, he said: Identify your problem, identify your solution and implement it.
Utahs unique approach
Utah didnt have to reinvent the wheel. For several years, the states health department already had been studying who was uninsured. That made targeting the biggest need fairly simple, state experts said. The question was not which populations could best benefit from a health exchange, but rather how to create a program that would succeed.
Every state has to do it its own way, said Thurston. In Utah, we count on competition and market forces to make it work.
Still, it took some practice runs to turn theory into action. Utah had been looking at health care reform and what to do about those who were uninsured or underinsured for many years, but with the exception of creating a high-risk insurance pool operated by the state for those who simply could not get coverage because of a serious pre-existing medical condition, it didnt tackle the uninsured. That risk pool is too expensive for those who dont have whats been described as horrific risk.
Three governors involved in planning
When Mike Leavitt was Utahs governor from 1993 to 2003, his Health Policy Commission considered many aspects of health coverage from who had coverage and who didnt to how to contain health care costs. And policymakers experimented with public programs to create ways to help low-income adults who didnt qualify for anything else. The administration also emphasized the benefits of having a healthier population overall. But it failed to arrive at a concrete action plan for uninsured employees of small businesses, which in Utah is a very large number.
There were no major dramatic efforts by his successor, Gov. Olene Walker. But when Jon Huntsman Jr. became Utahs governor in 2005, he focused health-reform efforts very narrowly, Thurston said. The task he assigned was simply to learn who the uninsured were and then do something about it.
We found common denominators, said Thurston. But the big one was small business employment. Most had no insurance options.
Utah small business owners, in fact, were less likely to provide health insurance benefits to employees than the average small business nationally. Only about one-third provided any access to health insurance at all and those that did typically offered whatever plan best served the boss and his or her family. From the fertile field of small businesses that didnt offer health insurance, the Utah Health Exchange was created.
The Utah Health Exchange formed and fine-tuned by Huntsmans team and now running under Gov. Gary Herbert could be considered a natural, albeit major, follow-up to the seeds planted way back then under earlier administrations, Thurston said.
The Small Business Administration has said that 97 percent of Utahs work force labors for small business, which under federal guidelines is defined as having fewer than 500 employees. Fully half of the states workers are self-employed or labor in companies with fewer than 50.
Focus on smallest businesses
The Utah Health Exchange focuses on the smallest of the small businesses those with two to 50 employees on a defined-contribution basis. That means the employer decides how much to contribute to the cost of insurance for employees or whether to contribute at all. Employees, in turn, can go online to the exchange and pick the plan that best works for their family and situation. The Utah Health Exchange offers all the tax and other benefits that health insurance provided by larger employers offers. The employer withholds the employees contribution on a pre-tax basis.
Its also possible for an employee to take the boss defined contribution and combine it with the contribution from the spouses employer and purchase insurance through the exchange.
Four of Utahs five largest health insurance providers Humana, Regence, SelectHealth and UnitedHealthcare offer policies on the exchange. And through them, participating employees have a choice from among 146 different plan designs.
During the early pilot testing that began in 2009, 11 small businesses participated, offering coverage to a total of about 150 employees.
When the exchange first began operation as a very limited beta test, reports circulated that health insurance costs initially spiked within the exchange. They didnt. Initially, prices put forth by the insurers were all over the place, Thurston said. Those who saw premiums go up complained to the media. Those who saw premiums go down didnt. The result was an inaccurate impression that was soon outmoded anyway as insurers and health reformers worked together to level off the differences.
When the exchange formally opened Jan. 1, 2011 to all small business employers, all 11 of those who participated in the pilot stayed with it, a fact Patty Conner, director of the Utah Office of Consumer Health Services, which maigovntains the exchange in the Utah Governors Office of Economic Development, points to with pride.
Early success in attracting participants
Just four months after it opened to any qualified small business, more than 100 small employer groups are participating, providing coverage to more than 3,000 people, including 1,300 employees and 1,700 of their dependents. For 20 of the 100 small businesses, health insurance is being offered for the very first time. And those who run the exchange expect to have 1,000 employers and a total of at least 25,000 employees and dependents enrolled by next January, Thurston said.
Putting the exchange in the economic development office has allowed Utah to connect with businesses while keeping our distance from politics and bureaucracy, Conner said. Instead, her three-person exchange staff focuses on bringing insurers and those who need coverage together, creating rules and protections to make it work and coordinating with technology providers so that its easy to do everything needed online.
We dont own data or sell products, she noted.
The exchange meets the need employers and employees have to look at insurance in a way that makes sense for their situation, Conner said. Key to that are technology tools to filter and sort, based on what matters to the person seeking the policy. The plans can be sorted by cost, by deductible, by whats covered. If a particular doctor or hospital is important, you can sort it that way. There are tools for side-by-side comparison based on what you want, she said.
The defined contribution is up to the employer and it can be zero or a significant amount. Rates are typically based on age bands and family structure. Theres a lot of flexibility. For instance, coverage for workers, 60 and up, is typically about twice the cost of coverage for someone who is 21 years old. Some companies then choose to contribute a bit more to the insurance of the older workers, to help defray that difference.
Utah law requires that every Utah Health Exchange plan meet federal guidelines for employer-sponsored coverage. While that leaves room for great variation among plans, the competition is expected to drive quality up and keep prices down, Thurston and Conner said.
System continues to evolve
While Utahs ahead of most states in developing an exchange, its a work in progress, according to Conner. We continue to fine-tune it and we have some opportunities for improvements.
Although the federal government may require some tweaks by 2014 under the Affordable Care Act, the architects of Utahs exchange dont expect to be asked for major changes. Weve been assured were on the right track, Thurston said.
Making it work involves three technology companies, the four insurance companies (SelectHealth and Regence are local, while Humana and UnitedHealthcare are national insurers) and several hundred licensed health insurance brokers who have already been trained in the intricacies of the exchange, with more learning it every month.
The small businesses that use the exchange dont have to go through a broker. But their special training is helpful and makes things easier on the small businesses, Conner said. Those who go it alone are more likely to come back to the state and ask to make changes to their selections.
Guaranteed insurance critical
Don Garlitz sees the exchanges value from a couple of perspectives. Hes a vice president and benefits consultant for First West Benefit Solutions, a small business that obtains employee health insurance through the exchange. Hes also a certified broker for the exchange.
The exchange, he said, gives small businesses a crucial advantage they couldnt get with individual insurance: group insurance, guaranteed issue. Thats a very important thing for an employer, he said. And theres a lot of insurer choice, network choice and more. Theres also excellent spread in products that are offered. You can go from a low deductible, say $500, with a pharmacy card and traditional benefits that have become common over the years in an employer marketplace, all the way to a high deductible, say $5,000, where you can use a Health Savings Account.
Its important to note, he added, that some people believe the consumer cant handle that much choice. But the exchange has filtering tools that help break down the options.
Its not as daunting a task as it might appear from the outside, Garlitz said.
And heres an interesting fact: All of the plans have been selected by somebody.
The public is not stupid, said Garlitz. The consumers can sort through and find what best meets their needs.
When an employer joins the exchange, he or she designates a default plan for employees, as well. If an employee doesnt pick a plan by the enrollment date and doesnt waive coverage, enrollment in that default plan is automatic.
Although in most cases the default plan is similar to whatever coverage might have been offered before, if any was offered, only about one-third of exchange applicants enroll in the default plan. Most are making an active choice based on their individual circumstances and needs.
Among FirstWests employees, for instance, nine different plans have been selected, Garlitz said.
Community rating to come
Starting in 2014, community rating will come into play. Right now, companies are rated individually and theres a cap on how much prices can go up. Proponents argue that individual company rating provides better incentive for the healthiest groups to join the marketplace. That matters. They get lower rates, but their participation provides some protection to sicker groups. It does, however, have potential to create a problem for an employer who unknowingly hires someone with a sick dependent.
When the community rating comes in, sicker groups might see lower premiums, while healthier groups might see their premiums go up a bit, Garlitz said.
Utahs exchange so far does not help mom-and-pop operations or sole proprietor shops. A plumber working alone or perhaps with a spouse doing the books can apply for insurance as an individual or family in that marketplace, but not as a small business, because one would be a dependent on the others policy. And the exchange plans are not available at this time for individual policies, although the portal can be used to help identify insurance options the individual might have.
We facilitate for them, but only in the form of links, Conner said.
You can get insurance, but there are no guarantees around the cost, said Thurston of those individuals. Youre rated on health status.
Eventually, the exchange is expected to expand to help larger employers and individuals both. It started, Thurston noted, with the small, small businesses. Its next expansion will likely be those with 51 to 100 employees and so forth.
The exchange also solves a long-lamented issue about usage of medical services. Costs are high in part, experts say, because the consumer doesnt really know what the services they use cost. In the exchange, employees learn quickly how much more they pay for a high-deductible plan or what they might have to give up to keep premiums affordable for them. Its much more transparent.