7 February 2012

Midwest Edition
Calendar
February 22
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Insurance Exchanges Moving Ahead

Illinois, Michigan, Kansas Each Take a Different Tack
In ts and starts, states across the Midwest are in various stages of creating the health insurance exchanges (HIX) mandated by the Affordable Care Act. To a large extent, the progress of each state is a function of the political party in power and its feelings about the reform law. Illinois, for instance, led by a progressive Democratic governor and two legislative houses with strong Democratic majorities, is moving quickly forward. Kansas, with an archconservative governor and Republican majorities in both houses, wont make a move until the Supreme Court rules on the legality of the individual mandate, most likely in June. And Michigans pragmatic Republican governor is ready to move forward with the exchange but is being held back by a tea party faction in the House of Representatives. In all cases, however, state ofcials are facing the timelines established in the law. Those who have embraced the HIX concept are going full-bore; those who have declared their opposition or who are awaiting the Supreme Courts decision will have a challenging catch-up marathon. By Jan. 1, 2013, the law requires states to notify the Department of Health and Human Services whether they intend to operate an exchange. The actual exchange must be up and operating by Jan. 1, 2014. Its a formidable IT task, not easily done, getting it into an Orbitz-like system, said Dave Waymire, spokesman for the Michigan Association of Health Plans. The timelines are tough. According to the most recent update by the Henry J. Kaiser Family Foundation, which monitors state-by-state progress on exchanges, 14 states have already created an HIX and four more have denitively declared they will establish one, including Illinois and Indiana. Another 23 states are still studying their options. In the Midwest that includes Michigan, Minnesota Missouri, Iowa, and Wisconsin. Eight states have made no signicant activity, including Kansas and Ohio. Two states Arkansas and Louisiana have decided not to have an exchange. Many states are waiting to see how the court rules, or how the November election turns out, said Rosemarie Day, president of Day Health Strategies in Massachusetts, who helped implement the HIX there in 2006. If the law is upheld and moves toward implementation, those states would have to step on the gas. But could they still meet the deadlines? From an IT perspective, not really, Day said. They could have a web site, but they
Continued on Next Page

April 27-28
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June 11-13
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Thursday, February 16, 2012

Noon CST

Charity Care/Community Benets: The New Paradigm

E-Mail info@payersandproviders.com with the details of your event, or call (877) 248-2360, ext. 3. It will be published in the Calendar section, space permitting.

Please join Michael Bilton, Executive Director, Association for Community Health Improvement, Jane Haderlein, Senior Vice President for External Affairs, Huntington Memorial Hospital and Ron Sorensen, Director, Community Partnerships, Providence Health & Services, to discuss recent pressures driving changes in charity care and community benefits.

http://www.healthwebsummit.com/pp021612.htm

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Insurance Exchanges
wouldnt be able to get that back-end stuff well done. Theyd have to rely on the feds for that part. The federal government would likely create a partnership option, where the state has a dedicated consumer-facing web page, but the mechanics of the site are developed and supported by HHS, she said. Its not optimal, but its a potentially doable scenario. If states are making progress, HHS might also relax the deadlines, as they have already started doing. Another scenario is you dont get it done by 2014, and you get it done in 2015, she said. But I think states will try to get it done, unless they are dead set against it. Here are updates from three Midwestern states at different places on the continuum: Illinois: We are aggressively moving on the rst phase of implementation, said Kate Rose, special deputy director for health planning at the Illinois Department of Insurance. The state has spent $6.125 million from two federal grants, and is preparing to apply for a second-level grant in March, to pay for technology and stafng for the next year. One drawback is the legislatures inability to pass the necessary enabling law. Bills have been introduced, but are stalled as lawmakers address the states nancial crisis and other urgent matters. Rose estimates that an HIX, once built, will cost about $57 million to $89 million a year to operate, or between $9 and $13.50 per member per month. What makes the exchange so expensive? Its a highly efcient cost, Rose said. The percent of total premium amounts to about 2% or 3%. Thats nothing, to operate an entire program that pulls through a shopping experience (on the internet), enrolling them in coverage and maintaining that? Compare it to broker fees. Thats signicantly less than the existing fees in place today. The projected fees for Illinois are comparable to the costs of the already existing Massachusetts exchange, the model used for the reform law. Michigan: The state began work on the HIX early in 2010 under the administration of Gov. Jennifer Granholm, a Democrat, and has continued under Gov. Rick Snyder, a Republican who took ofce in 2011. Gov. Snyder was very decisive, said Lisa Gigliotti, general counsel to the MIHealth Marketplace Health Exchange. He welcomed the technological innovations of market-based
(Continued from Page One)

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In Brief
Illinois Governor Appoints New Insurance Director
Illinois Gov. Pat Quinn appointed Andrew Boron, a lawyer, to be director of the Department of Insurance. I am condent his strong leadership will enhance the essential regulatory and consumer protections the Department of Insurance provides, Quinn said in announcing the appointment. The insurance department is the major state agency charged with implementing the various provisions of the Affordable Care Act, including the creation of the health insurance exchange. Boron started his career at CNA Financial, the Chicago-based insurance group, as counsel and later director of state government relations. He worked at the Illinois Toll Highway Authority in 2009 and 2010, and then was vice president and counsel at ACE Group, where he was liaison to insurance departments in nine states. Borons appointment comes almost a year after the previous Illinois insurance director, Michael T. McRaith, was appointed as the rst head of the newly created Federal Insurance Ofce (Payers & Providers, March 22, 2011). Interim directors had been running the department in the meantime.

Aetna Fourth-Quarter Net Income Surges on Low Utilization

Aetna Inc., the countrys third-largest health insurance company, reported strong earnings last week, primarily because of low utilization of medical services by members. Net income in the fourth quarter was $372.6 million, compared with

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elements. He doesnt care if the Affordable Care Act is upheld. Lets do the health insurance exchange anyway, he likes the concept. A bill enabling the exchange was introduced in September 2011, with the goal of passing it by the end of the year. It passed the Senate in November, but is stalled in the House. The leadership in the House said it has no interest in moving the bill until the Supreme Court rules, said Waymire. The bill as written now allows the exchange to go away if the Supreme Court rules against it. So its pure politics. A handful of tea party adherents have made it clear they dont want to see any movement on the bill. The governor supports passing the legislation, and mentioned it in his state of the state address in January. He cautioned that the alternative is a federally mandated program designed by people who dont live or work in Michigan. The states health plans are reasonably comfortable with the general outline of the exchange so far, Waymire said. Kansas: The Sunower State, under the leadership of its Republican insurance director, Sandy Praeger, had hoped to be an early innovator, and won large federal grants to gallop ahead and develop systems that could be borrowed by other states. We had a good response from stakeholders in the state, who were very engaged in the process, said Linda Sheppard, director of the accident and health division for the Kansas Insurance Department. They were interested in having an opportunity to inuence what an exchange would look like. But Gov. Sam Brownback, also a Republican, nixed that effort and declared a policy of total non-compliance with the reform law. Since then, working groups have continued to meet and make recommendations for what to do if Kansas does eventually develop a state-based exchange. If not, they will deliver their stakeholder input to federal ofcials who are devising the backup plan for states that dont build their own HIX. The feds are in the same position the states are: nobody has ever built one of these before, Sheppard said. Weve gotten this opportunity to work with them on molding how this is going to look. They didnt have a plan either.

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Fitch Expects Spending to Stay Low

Rating Agency Says Health Costs Trending Down
The rate of increase in healthcare spending is likely to reset to the lower level seen in the last two years, said Fitch Ratings, a credit rating service, in a recent report. In 2009, U.S. national healthcare expenditures rose 3.8%, and in 2010, 3.9%, according to actuaries and economists at the Centers for Medicare and Medicaid Services. (Payers & Providers, Jan. 17) This was the lowest rate of increase in 51 years and for the rst time in memory didnt exceed the growth in gross domestic product. The decline in employer-paid health insurance is partly responsible, as well as the general economic decline, which has led many Americans to delay or do without elective treatments or pharmaceutical prescriptions. However, Fitch sees other long-term trends that will continue to push the growth line downward. That includes slower growth in healthcare premiums. Reimbursement rates to providers are also expected to hold steady as Medicares budget is likely to be trimmed in 2013, Fitch noted. Further, states are testing ideas to rein in Medicaid expenses, such as devising systems to coordinate care, reduce eligibility, lower benets, and impose greater cost sharing on patients. These conditions will likely persist after the end of the current market downturn and

In Brief
$215.6 million a year earlier. Revenue remained almost constant, at $8.57 billion. Aetnas medical loss ratio was 80.7% in the quarter, while a year ago it was 83%. Under the health reform law, insurers are obligated to spend no less than 85% of their premium revenue on medical costs for large groups, and 80% for small groups and individuals. Analysts said the weak economy probably played a role in the prot increase, as Americans refrained from seeing the doctor, lling prescriptions, or scheduling elective surgery because they dont have the disposable income to pay the extra costs involved.

Public Sees Ideology in Decisions

Believes Supreme Court Will Follow Their Own Views
The general public believes the justices of the U.S. Supreme Court will decide the health reform law case based on their own personal political views instead of a rational interpretation of the law, according to a recent poll by the Henry J. Kaiser Family Foundation. Six in 10 Americans said they believe the justices will follow their own ideological principles when deciding the legality of the socalled individual mandate, considered the cornerstone concept in the Affordable Care Act. About 28% think the court will make its decision based only on legal analysis and interpretation. The court is expected to hear oral arguments in late March, and to rule in June. Support for the healthcare reform law is weak among the public at large, and the level of opposition and support has remained mostly constant over the two years since its passage in March 2009. In particular, the laws insistence that everyone obtain medical insurance, or pay a penalty, is unpopular, with 67% having an unfavorable view and only 30% a favorable one. Slightly over half the polls respondents (54%) thought the court should nd the mandate unconstitutional, and 17% believe it should be held constitutional. The public believes 55% to 29% that the justices will nd the mandate unconstitutional. A majority of the public (55%) thinks that, even if the court strikes down the mandate, parts of the law will be implemented, while 30% think the entire law will be invalidated if the mandate is lost. The Kaiser Foundation tracks sentiment around the reform law on a monthly basis. The poll of 1,206 adults was conducted in midJanuary and published at the end of the month.

Wisconsin Medical Society Names New Chief Executive

William Rick Abrams has been chosen to lead the Wisconsin Medical Society. He will become CEO and executive vice president in April. He has a long history working in New Jersey and New York. He worked for New Jersey Gov. Thomas Kean as assistant counsel, deputy attorney general and director of government relations in the state Department of Health. He was 10 years with the New Jersey Association of Health Care Facilities, and then chief operating ofcer of the American Health Care Association, an organization for longterm care providers. Abrams was most recently the executive director of the Medical Society of the State of New York. Susan L. Turney, M.D., the previous leader of the Wisconsin association, departed to become CEO of the Medical Group Management Association late last year. The Wisconsin Medical Society has 12,000 members.

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OPINION

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Navigating Reforms Challenges

Providers and Payers Must Plan a Joint Future
WellPoint Inc., the Indianapolis-based parent primary-care physicians in particular to take on company of Blue Cross and Blue Shield plans additional care-management tasks and re-design in 14 states, recently announced that it will be their practices to leverage physician extenders investing $1 billion to boost primary-care and care coordinators to better manage high-risk physician fees by approximately 10% to reduce and chronic-disease patients. overall medical costs and encourage better (3) Provision of care management, risk patient management. (Payers & Providers, Jan. management, and claims payment consulting, 31, 2012) outsourced operations and infrastructure Payers This groundbreaking announcement is just have developed or spun off separate organizations another in a string of moves over the past year to provide consulting and/or turnkey management by payers to partner with providers in new services to assist providers in taking on more risk. ways that acknowledge the health-reformThese relationships can also take the form of a fueled transition from a fee-for-service to a fee- turnkey, private-label health plan owned by a for-value world. provider organization but managed by a payer There hasnt been this much news and partner. discussion of the payer and provider spaces (4) Acquisition/merger of provider coming together since the 1980s, when a organizations into payer organizations Several number of hospitals and health systems regional and national payers have acquired large decided to start their own health plans and physician groups, and in some cases, have compete as integrated delivery systems. combined this strategy with some of those above From our discussions with clients and in order to exercise more control over primarycolleagues, we believe there is much more to care management of the patient in key markets. come; its only a matter of time before Payers and providers of all scopes and sizes integrated payer/provider organizations like need to keep the following in mind: Kaiser Permanente are more common across (1) Study the market, understand what the the country. most innovative organizations across the country This article is the rst in a series that will are doing, and develop pilot projects to see how highlight the innovative ways that payers and certain models might play within your providers are partnering to organization in your market(s). improve healthcare for the There is no need to re-invent By Teresa Koenig, populations they serve. The the wheel, but the market is M.D. series will feature different moving so fast that you may types of next-generation not have time to wait and see and Jay Warden relationships, provide specic how the efforts of other examples from the Midwest organizations turn out before and other parts of the country, and highlight the you make a move yourself. lessons learned and market dynamics to watch (2) Develop a business plan that requires your as both sectors navigate their way through organization to think beyond the current year. health reform and the regulatory challenges Deploy scenario planning to identify the best-case and opportunities that it brings. and worst-case scenarios relative to payer and Some examples of the payer and provider provider strategic activities and partnerships in relationships we intend to talk about: your market(s). Develop the discipline to plan in (1) Tiered/Exclusive Networks Payers are advance how you would respond to these designing new products and benet plans scenarios. around more value-oriented provider networks. (3) Start talking to everyone. There is no These may be tiered, where members who use substitute for rst-hand market intelligence, and the preferred provider or tier 1 network will you never know when a payer or provider that has pay lower co-pays and deductibles, or even co-existed in your market might become an exclusive networks where certain benets are unlikely partner (or competitor) based on these treated as out-of-network if the preferred rapidly changing market dynamics. provider network is not utilized. (2) Patient-centered medical home and Teresa Koenig, M.D., is vice president, and Jay other care re-design approaches and incentives Warden is senior vice president at The Camden Payers are consulting to and incentivizing Group.

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