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With Just Months To Go, ���ϲ����� State’s Health Benefit Exchange Gears Up For Open Enrollment

�� Health Affairs June 2013

New York is a deep-blue state that Barack Obama won with 62��percent of the vote in both 2008 and 2012. Even so, the state’s Republican-controlled Senate balked twice at approving a central feature of President Obama’s signature health care reform law: a state health insurance exchange.

As a result, Democratic Gov. Andrew Cuomo had to issue an executive order in April��2012 to establish the ���ϲ����� Health Benefit Exchange. “Establishing the health exchange will bring true competition into the health care marketplace, driving down costs across the state,” Cuomo said in a written statement when he issued the order.

The Affordable Care Act requires an exchange in every state. ���ϲ�����, Rhode Island, and Kentucky are the only states that have established their new federally approved health insurance market by executive order. Thirteen others, plus the District of Columbia, have done so through legislation; Utah is awaiting federal approval of its legislatively created exchange. The remaining thirty-three states declined to set up an exchange on their own; as a result, in those states the federal government will run an exchange by itself or in partnership with the state.

Governor Cuomo’s executive order came nearly a year after the ���ϲ����� legislature’s failure to pass legislation. The delay has pushed the Empire State hard up against the deadlines for implementing the health insurance marketplace, which require starting enrollment on October��1, 2013, and coverage on January��1, 2014. Yet, unlike many other states that are struggling to meet the quickly approaching deadlines, ���ϲ����� has the support of nearly all stakeholders, including Republican Senate leaders, as it works to establish a state-run exchange. Since the executive order was issued, the state has by most accounts moved efficiently to get enrollment started on time.

“���ϲ����� is doing the best job one can expect given all the challenges,” says ���ϲ����� Senate Health Committee chair Kemp Hannon (R–Nassau County), who in 2011 backed the bipartisan bill to create an exchange that didn’t pass. “I haven’t heard anyone griping,” he adds. “But we’re building something entirely new, and even Amazon had growing pains at the beginning.”

The law’s proponents say it’s crucial for proreform states like ���ϲ�����, California, Maryland, and Oregon to have their exchanges up and running, enrolling people on October��1. Their success would demonstrate that the Affordable Care Act is working and would quiet critics like Sen. Max Baucus (D-MT), who recently warned of a “huge train wreck coming down” on exchange implementation.��President Obama acknowledged that launching the exchanges is “a big, complicated piece of business.”

Nationally, the state exchanges are expected to serve as a key mechanism in extending health coverage to an estimated twenty-seven million uninsured Americans by 2016 and in fostering competition that will curb health care cost growth. Nearly 1.6��million ���ϲ�����ers are projected to access coverage through the state’s exchange.

“There are a lot of eyes on ���ϲ�����,” says Donna Frescatore, a Cuomo health policy adviser and former state Medicaid director whom the governor appointed executive director of the exchange last July. “We’re a large state, and we have the opportunity to significantly reduce the number of uninsured. There are a lot of very interested folks rightfully asking us good questions.”

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Skepticism Persists

Whether they know it or not, ���ϲ�����’s 2.7��million uninsured residents-16��percent of the state’s nonelderly population-have a lot riding on the exchange’s success. One of them is Cynthia Morgan of Dunkirk, a town on Lake Erie south of Buffalo.

Morgan, a fifty-eight-year-old former hotel manager, has been out of work and uninsured for the past three years. The lack of insurance has been especially difficult because she has a heart condition, takes eight different prescription drugs, and-after a bad car accident-had to pay off $7,000 in medical bills out of pocket. She hasn’t been to the doctor, even at a free clinic, in a year because she can’t afford the preventive screening tests.

After learning that her family’s income is too high for her to qualify for Medicaid, Morgan looked into buying private coverage but found it would cost her at least $300 a month-an unaffordable chunk of her husband’s $1,700 monthly Social Security check. She’s a prime candidate for the ���ϲ����� exchange.

Morgan admits that she doesn’t know much about the Affordable Care Act or the exchange. And when she is told that people like her with a household income of less than 400��percent of the federal poverty level will qualify for either expanded Medicaid or federal subsidies to help them buy coverage, she is skeptical.

National polls show that most Americans in her position also lack knowledge about the health care law’s benefits. A recent Enroll America survey found that 78��percent of uninsured people did not know they will have access to “a quality health insurance plan” that they can afford.��In addition, 42��percent of Americans were unaware that the Affordable Care Act was still in effect, according to a recent Kaiser Family Foundation survey.

Morgan can envision what it would mean for her if the law’s promise is fulfilled. “Oh, God, that would be great-if there’s going to be a plan that’s affordable,” she says. “But come on now, it’s really hard to believe.”

The fate of the ���ϲ����� exchange will depend heavily on the state’s effectiveness in getting the word out and enrolling uninsured people like Morgan. It also will hinge on signing up small businesses-those with fewer than fifty-one full-time employees-to buy coverage for their employees in the state’s separate Small Business Health Options Program, known as the SHOP exchange. Many small businesses currently don’t insure their workers, saying they can’t afford to do so.

Enrollment in ���ϲ�����’s individual exchange is projected to reach 615,000 and another 450,000 in the SHOP exchange.��Nearly 60��percent of those expected to sign up in the individual exchange were previously uninsured.��It’s estimated that another 510,000 uninsured people will be eligible through the exchange for Medicaid or the state’s Child Health Plus public coverage, including 75,000 who will be newly eligible under the expanded Medicaid program and 435,000 who are currently eligible but not enrolled.

But many observers are nervous. As of early May, the ���ϲ����� Department of Health had not announced a plan for public education, outreach, and enrollment. It has received applications from organizations seeking to provide “navigator” services to help individuals and small businesses interested in buying coverage through the exchange. The department is not expected even to announce what navigators it has chosen to work with until July.

“We’re concerned about the timing,” says Elisabeth Benjamin, vice president of health initiatives for the Community Service Society of ���ϲ�����, which runs a consumer assistance program that helps people with questions about health insurance. The organization has applied to set up a statewide navigator network. “To get people trained as navigators by the time of open enrollment seems unlikely.”

Early Stumbles

Despite ongoing concerns, stakeholder groups are relieved that ���ϲ�����’s state-run exchange was established in the first place. That almost didn’t happen because of a combination of timing, a busy legislative agenda, and conservative opposition to President Obama’s health reform law.

In June��2011 Governor Cuomo reached an agreement with the leaders of both houses of the state legislature-the Assembly is controlled by Democrats, the Senate by Republicans-on a bill to establish a state exchange run by an independent public authority, governed by a board of representative stakeholders. Initially, Cuomo had envisioned an exchange that would engage in aggressive selective contracting with health plans, while Senate Republicans and the health insurance industry preferred an open-market model that would allow any plan meeting exchange criteria to participate. The legislation that moved forward was a compromise.

The Assembly passed the bill, which then went to the Senate-where it was expected to pass. The Senate Republican Conference took the bill up on June��23, 2011, the next-to-last night of the legislative session, which had been consumed with controversial bills on same-sex marriage and capping property tax growth. Senate Health Committee chair Hannon says GOP leaders simply decided they didn’t have time to consider the complicated exchange bill. Its failure stunned everyone.

Governor Cuomo reintroduced the bill early in the 2012 legislative session as part of his proposed budget. But by then the presidential election campaign was in full roar, and fiery opposition to “Obamacare” had become a litmus test within the national Republican Party. The longtime Assembly Health Committee chair, Richard Gottfried (D–���ϲ����� City), says state Senate Republican leaders refused to take up the exchange bill, arguing that the issue would be moot if the US Supreme Court struck down the Affordable Care Act or Obama was not reelected.

Soon after, Governor Cuomo announced that he had analyzed state law and concluded it allowed him to order the Department of Health to set up the exchange as a bureau within the department, although he couldn’t unilaterally establish an independent public authority to run the exchange. He issued his executive order April��12, 2012.

“We were lucky here that we have a strong governor who said it was ridiculous to wait until it would be too late to set up our own exchange,” says the Community Service Society’s Benjamin. “From a consumer perspective, that was the right call.”

After the governor issued the order, Gottfried says, “there was not a peep of controversy. That’s because while Senate Republicans may not have wanted their fingerprints on it, all the stakeholders, including the insurers, very much wanted an exchange and they didn’t want Washington running ���ϲ�����’s insurance market.”

The extended legislative impasse delayed exchange implementation to some degree. In the interim, however, the ���ϲ����� State Health Foundation supported a number of studies, including reports about consumer protections, customer assistance, key business functions of the exchange, and the role of brokers. The results of these studies helped the state get off to a fast start once it finally established an exchange.

Since Governor Cuomo’s executive order, ���ϲ����� has received nearly $370��million in federal implementation grants. Under the Affordable Care Act, every state exchange must be financially self-sufficient by 2015. ���ϲ����� has not yet announced how it plans to finance the exchange’s day-to-day operations after 2014, although it’s expected to impose user fees, as most states probably will. The budgeted 2014 operating cost of $120��million will be fully funded by the federal government; over the two years that follow, the budget drops to $97��million, then $75��million.

In most states with an exchange, the legislature created an independent public authority to oversee the development and operation of the new marketplace. The long-term impact of ���ϲ�����’s less common approach remains to be seen.

The Cuomo-ordered exchange is housed within ���ϲ�����’s Department of Health, an executive branch agency that oversees Medicaid, other public insurance programs, and some health maintenance organizations. But it is the state’s Department of Financial Services that oversees other types of commercial health plans. “It’s one of those ironic things that it’s probably working out better than the original concept,” Hannon says. “You have people sticking with their areas of competency, and you avoid duplicate functions.”

But others, including some who generally praise the Department of Health’s work on the exchange, say that having the exchange within the executive branch rather than under an independent public authority has led to less transparency and public engagement. Austin Bordelon, an analyst with Leavitt Partners, which tracks exchange efforts nationally, says that compared with Oregon-a pacesetter in transparency-���ϲ����� has provided little visibility into its exchange development process.

The Community Service Society’s Benjamin agrees in part. “Press outreach and external affairs are very tightly controlled,” she says. “It’s not that we don’t trust them, but people are feeling nervous that we haven’t had a public stakeholder meeting since last November. The state feels a little bunkered in.”

Building On A Strong Foundation

Compared with other states’ exchanges, ���ϲ�����’s exchange started off with some major advantages—as well as some distinct disadvantages.

The most obvious advantage is that the state has a strong tradition of regulating health care markets that’s widely accepted by stakeholder groups and both Republicans and Democrats. As a result, when the ���ϲ����� exchange announces plan premiums later this summer, consumers are unlikely to experience the so-called rate shock that purchasers in most other states may experience.

Across the country, health plans have warned that they’ll have to jack up premiums because of the Affordable Care Act’s requirements: Starting January��1, 2014, all health plans must accept applicants without regard to preexisting medical conditions and must limit the differences in the premiums they charge that are based on age, sex, and medical condition, so that no one group pays more than three times what another group pays. Younger, healthier people will pay more, and older, sicker people will pay somewhat less.

The difference in ���ϲ����� is that the state already requires insurers to accept all applicants in the individual and small-group markets. Regulators also have established a system in which insurers have to charge everyone in the same market the same premium, regardless of age or health status.

When implemented in the 1990s, these rules led to a sharp increase in premiums, particularly in the individual market, and a dramatic reduction in the number of ���ϲ�����ers purchasing coverage in the individual market. Only about 17,000 people now have such insurance, and they each pay as much as $1,300 a month. Today, the same rules are expected to ease ���ϲ�����’s transition into next year’s reformed insurance market.

A recent Society of Actuaries report projected that premiums in ���ϲ�����’s individual market would decrease 13.9��percent in 2014. That would be the largest drop in the country. In states with little or no previous insurance market reforms, rates are projected to increase as much as 81��percent.

“The bad news is we’ve been paying high rates all along,” says David Sandman, senior vice president of the New York State Health Foundation. “The good news is they won’t get worse and will probably get better.”

Another advantage is that unlike some states that are dominated by a small number of insurers and provider systems, ���ϲ����� has relatively robust competition in both the insurance and hospital markets in many of its regions. There are nearly forty insurers doing business in the state, including about a dozen with significant market share.

As a result, most observers predict that ���ϲ�����’s exchange will offer an adequate number of health plans in each regional market-a major worry for exchanges in other states. Participating plans may include national insurers like Oxford and Aetna; nonprofit health maintenance organizations (HMOs) such as the Capital District Physicians’ Health Plan; Blue Cross Blue Shield plans, including Empire and Excellus; the state’s nonprofit CO-OP (Consumer Oriented and Operated Plan), the Freelancers Insurance Company; and plans sponsored by hospital systems. The exchange also may include Medicaid managed care plans, such as Fidelis, that obtain commercial licenses to serve exchange customers.

“I think there probably will be six or seven plans participating in the small-group exchange in most of the twenty-four counties we cover,” predicts Robert Hinckley, chief strategy officer for the Capital District Physicians’ Health Plan, whose Albany-based HMO serves 400,000 commercial, Medicare, and Medicaid members. “We’re planning on being active in the individual exchange as well. I’m optimistic there will be participation. I think most of the plans are looking at this as a defensive play to keep the groups they have.”

In addition to the ���ϲ����� exchange’s built-in advantages, some clear challenges remain. With a highly diverse population of nearly twenty million people and multiple complex and fragmented regional markets, ���ϲ����� will not be the easiest state in which to conduct outreach and enrollment.

It’s estimated that 37��percent of the potential enrollees in ���ϲ�����’s individual exchange speak a primary language other than English-and 19��percent have a primary language that is neither English nor Spanish.��That’s why stakeholders are eager to hear exchange officials’ plans for public outreach and enrollment, and why they put so much importance on the navigator program, which will provide help to consumers in their own languages.

Exchange officials know that effective outreach is crucial. They encouraged a wide range of organizations, including chambers of commerce and trade organizations, to apply to serve as navigators, and they decided to allow insurance brokers to sell exchange products to both individuals and small businesses. The state plans to spend nearly $30��million a year on navigator assistance for consumers. Plans for the public outreach campaign were scheduled to be discussed at regional public advisory committee meetings in late May.

“We need an ‘all hands on deck’ approach,” says Frescatore, the exchange’s executive director. “Our outreach efforts will focus on those populations that are the most difficult to reach. We know our ability to reduce the number of uninsured is highly dependent on our outreach strategies and partnerships.”

Tough Decisions Ahead

Even with those reassurances, stakeholder groups are fretting because there is so little time before October��1 to work through the enormous challenges and myriad policy decisions involved in setting up a working exchange.

Health plans had to scramble to file applications to offer products on the exchange, including listing their proposed rates, by the end of April��2013; the invitation to plans only went out February��1. Meanwhile, plans continue to negotiate with hospitals and other providers to line up their networks. The Department of Health says it won’t announce what plans will be offered on the exchange, their premiums, and their networks until later this summer.

Health plans are concerned about whether enough young and healthy people will sign up for exchange coverage to lower the overall premiums. They also are wary about whether the Department of Financial Services, which has premium approval authority, will approve rates that will be adequate to cover the costs of the exchange risk pool. Given how small the individual market has been until now, ���ϲ����� insurers have less experience than those in other states when it comes to setting rates for individual purchasers.

“Our concern is plans will come in at one rate level, the Department of Financial Services will come back with a rate that’s substantially less, and then there’s the question of whether plans will participate in the exchange or not,” says Paul Macielak, president of the ���ϲ����� Health Plan Association. “We’re concerned about allowing enough time for a dialogue.”

Hospital systems and physicians face tough decisions about whether to join health plans’ networks. Those plans are negotiating aggressively on reimbursement rates. Yet, because no one knows how sick the exchange population will be, hospitals are struggling to predict the costs of serving this group. Frescatore says that she has reassured hospitals that exchange health plans would not base their reimbursement rates on low Medicaid inpatient rates.

“Hospitals are anxious to support the idea of exchanges to increase affordable and accessible care,” says Jeffrey Gold, vice president for insurance at the Healthcare Association of ���ϲ����� State. “But the rate structures may or may not be good deals for hospitals. So they’re having to make tough choices in a compressed time frame, without a lot of information.”

Hospitals also fear that many consumers will choose plans with lower premiums and higher cost sharing, forcing providers to spend more time collecting copayments and coinsurance from patients-a task they loathe. “If there’s a migration to bronze and silver plans with higher copays, as there was in Massachusetts, we will have increased headaches,” Gold says. “Chasing individual patient responsibility is one of the hardest things for hospitals to do, and we’d love not to do it.”

Small-business owners express uncertainty about whether premiums for plans offered through the exchange will be affordable. Additional costs from mandated essential health benefits, a health insurance tax required by the Affordable Care Act, and the surcharge that the exchange is likely to impose to cover its own administrative costs all could drive up premiums.

The equation is somewhat different for businesses with twenty-five or fewer employees and average wages of less than $50,000. Those businesses will be eligible for a sliding-scale tax credit if they buy coverage through the SHOP exchange and pay at least half of the premiums for their workers. Yet many small business owners remain skeptical that the exchange will be a financially attractive proposition.

They also wonder whether their employees will have a choice of plans through the SHOP exchange, or whether it will be the business owner’s responsibility to pick a single plan for all employees. According to a survey conducted by ���ϲ����� exchange officials, Frescatore reports, 76��percent of small-business owners said that they would like their employees to have a choice of plans in the SHOP exchange. The Obama administration had intended to require state SHOP exchanges to offer small-group employees that choice, but it has delayed implementing the rule because it’s technically difficult for the exchange to let each employee enroll in a separate plan. ���ϲ�����’s SHOP exchange nevertheless intends to go ahead and offer each worker at participating small businesses a choice of plans.

Under that model, employers will contribute a fixed amount every month to cover their employees through the SHOP exchange. Each employee will apply those funds to a plan that he or she chooses, paying the difference if the premium is higher than the employer’s contribution.

Complicating matters is the fact that the SHOP exchange will not be the only place where small businesses can buy group coverage. A growing number of employee benefit firms are launching private exchanges—such as HealthPass in ���ϲ�����-which offer employers administrative support and a choice of health plans for their workers.��In addition, most small employers in ���ϲ����� buy health insurance through brokers, and the broker community remains skeptical about the SHOP exchange.

“What you may see is plans outside the exchange that are more creative in their benefit packages that may fit better with particular consumers,” says Dick Poppa, CEO of the Independent Insurance Agents and Brokers of ���ϲ�����, a trade association. “There certainly is conversation about, ‘What if we have an exchange and no one comes?’”

Meanwhile, consumers are waiting to see whether federal subsidies will make premiums and cost sharing in the individual exchange affordable enough for the most vulnerable consumers. Much depends on how many people sign up, and who they are. If enrollment is both heavy and balanced between healthier and sicker people, premiums may stop climbing or even drop. But if mostly sicker people sign up, rates could rise even higher.

Everyone is wary of predicting how successful enrollment will be at the start, especially given the relatively small federal tax penalty that individuals will have to pay if they do not obtain insurance. “Whatever the rate is, for someone who doesn’t have insurance today, it’s going to be more than they want to spend and more than the penalties, and that will dampen the take-up,” says the health plan association’s Macielak.

The Final Push

For their part, Frescatore and her fellow exchange officials face numerous challenges, including the urgent need to get a smoothly functioning web portal up and running to enroll people by October��1. ���ϲ����� has hired Virginia-based Computer Sciences Corporation, which also runs its Medicaid billing system, to design the exchange web portal.

Exchange officials envision one-stop shopping online, where individuals and families can sign up for subsidized or unsubsidized private plan coverage, Medicaid coverage, or the state’s Child Health Plus coverage. Their goal is to have the system automatically funnel applicants into the program for which they qualify and then present them with that program’s coverage options. The exchange also will offer telephone assistance, and navigators and brokers will be available to give consumers help in person.

Exchange officials also are counting on the federal government’s data hub to be operational by the time enrollment begins. The hub, now in testing, aims to provide a real-time link to information from the Internal Revenue Service, Department of Homeland Security, and other federal agencies. That connection will enable the exchanges in New York and other states to instantly determine applicants’ eligibility to participate and receive federal subsidies to buy coverage.

On top of all this, exchange officials still have a major decision to make: Will they choose which plans will be offered? Or will any plan that qualifies be allowed to participate? Governor Cuomo prefers the former—a selective approach that Massachusetts took as part of its earlier reform efforts and that California officials intend to implement as well. Although ���ϲ����� exchange officials haven’t announced any explicit policy on this, they have signaled that they want to take a middle road between aggressively limiting plan participation and letting everyone play. But first they want to see what products insurers have proposed in response to the plan invitation.

The ���ϲ����� State Health Foundation’s Sandman suspects that exchange officials at first will not be very aggressive about selective contracting. “The thinking is, let’s create an attractive marketplace that health plans want to participate in,” he says. “If we have a working model, we can raise standards and use more purchasing power later. But let’s not sink this ship before it even starts to sail.”

Under the Affordable Care Act, insurance products offered through the exchanges must fit within bronze, silver, gold, and platinum tiers that range from covering 60��percent to 90��percent of a policyholder’s total health care costs. The act also allows a catastrophic, high-deductible tier for people younger than thirty. All products offered both inside and outside the exchange must cover at least an essential benefit package that is actuarially equivalent to the state’s chosen benchmark plan-which in ���ϲ����� is Oxford’s exclusive provider organization, a popular plan currently available to small groups in the state.

Some experts fear that within each tier, insurers will offer many different and potentially confusing plan variations. “We heard that too much choice is overwhelming and consumers need to have manageable choice,” Frescatore says. “But we also wanted to preserve plan innovation. We wanted to come up with an approach so consumers could have an apples-to-apples comparison of exchange offerings in terms of premium, cost, provider network, and quality ratings.”

The insurance industry seems comfortable with ���ϲ�����’s approach so far. “Unlike other states, ���ϲ����� hasn’t said anything about moving to selective contracting,” says Macielak. “You can go to regions of the state where there are maybe three plans, and we don’t know if all three intend to participate in the exchange. I don’t know how selective you want to be.”

Looking at the multitude of challenges and the tight time frame for implementing the exchange in ���ϲ����� and other states, politicians and pundits already are predicting a difficult road. Even President Obama recently said, “Even if we do everything perfectly, there’ll still be… glitches and bumps.”

Across the country, Republican elected officials have blocked state-run exchanges in most states, adding to federal officials’ burden and increasing the chances of problems. Congressional Republicans have also refused to approve President Obama’s budget request for $1.5��billion next year to help implement the exchanges and conduct a broad public education campaign about enrollment.

Political observers say that Republicans hope to exploit exchange snafus to argue that “Obamacare” is a failure and to make gains in the 2014 congressional elections,��with an eye to rolling back or repealing the landmark health care law.

“If it crashes and burns on October��1,” Sen. Johnny Isakson (R-GA) recently warned the federal official in charge of exchange implementation, “you’ve got a huge problem.”

The stakes for leading reform states like ���ϲ����� are high, and ���ϲ����� officials are acutely aware of that. “If we can’t do it well here, that will undermine people’s confidence overall,” says Assembly Health Committee chair Gottfried. “It’s important that we not screw it up.”

NOTES

• Governor’s Press Office��[Internet].��Albany (NY):��Governor’s Press Office. Press release,��Governor Cuomo issues executive order establishing statewide health exchange,��2012��Apr��12��[cited��2013 May 13]. Available from:����

• Morgan��D Senator gives administration “F” on public education for health-care law.��Washington Post.��2013��Apr��17.

• Kaiser Health News.��Transcript of President Obama’s remarks on April 30, 2013��[Internet].��Menlo Park (CA):��Kaiser Family Foundation;��2013��Apr��30[cited��2013 May 17]. Available from:

• Enroll America.��Informing Enroll America’s campaign: findings from a national study��[Internet].��Washington (DC):Enroll America;��2013��Feb��[cited2013 May 13]. Available from:

• Kaiser Family Foundation.��Kaiser health tracking poll: April 2013[Internet].��Menlo Park (CA):��KFF;��2013��Apr��30��[cited��2013 May 13]. Available from:��

• Rothstein��S ���ϲ����� Health Benefit Exchange: health care for all ���ϲ�������[Internet].��Albany (NY):��The Exchange;��2013��Mar��28��[cited��2013 May 13]. Available from:

7.�������� ���ϲ����� Health Benefit Exchange.��Characteristics of ���ϲ�����’s Health Benefit Exchange enrollees: individual and SHOP exchange��[Internet].��Albany (NY):��The Exchange; [cited��2013 May 14]. Available from:

��Society of Actuaries.��Cost of the future newly insured under the Affordable Care Act (ACA)��[Internet].��Schaumburg (IL):��SOA;��2013��Mar��[cited2013 May 13]. Available from:��

• Banham��R ��The pros and cons of private health insurance exchanges.Business Insurance��[serial on the Internet].��2013��May��13��[cited��2013 May 13]. Available from:

• Calmes��J.��New worries for Democrats on health law.�����ϲ����� Times.2013��May��6.��