What's the Rx for New York's new health insurance exchange?

What’s the Rx for New York’s new health insurance exchange?

Posted April 19, 2012 By Michael Keller

Last week, Governor Cuomo issued an executive order creating a state health insurance exchange, after State Senate Republicans repeatedly blocked legislative efforts to create an exchange as mandated in the federal Affordable Care Ac. New York is now among 16 states that have created exchanges through executive order, according to the National Conference on State Legislatures’ latest count.

Thanks to the delays, other states are now farther along in getting their exchanges up and running. New York’s exchange must be operational by January 2014. So what happens now? What must New York State do now to launch its health insurance exchange?

If you have information or insights to share, write us, tweet @thenyworld or comment below.

What we found

New York has three main decisions it needs to make between now and January 1, 2014 when the exchange must go online: the organization of the exchange, rules of participation and financial sustainability.

Organization – What type of organization is it and who runs it?

Governor Cuomo’s executive order was thin on details but it did spell out that the exchange would be created within the current the state’s Department of Health.

In contrast to New York, other states have taken measures to protect their exchanges from politics. California’s exchange, for example, is designed as an independent state agency. Hawaii and Colorado have set up their exchanges as nonprofits, completely separate from government. Oregon’s exchange is an independent public corporation of the state, which, as opposed to an agency, can easily hire outside contractors.

New York also must decide who will serve as its board of directors and what rules they will ofllow. Most other states that have created exchanges through legislation have included provisions ensuring the board represents the diverse interests that have a stake in how healthcare is run, such as consumer groups, small businesses and labor. Importantly, most states have also implemented conflict-of-interest rules since board members will wield power over a lucrative industry.

Rules of participation – Who gets to sell plans, and what plans can they sell?

New York has yet to set these. States have three models to choose from in determining what can be sold on the exchange and who can sell it:

The “Free Market Facilitator” model, like its name suggests, sets basic standards but otherwise accepts all plans and all providers.

The “Active Purchaser” model is the most restrictive and grants the state power to dictate what plans carriers will provide and the exact rates carriers will charge.

The third model is an offshoot of the Active Purchaser model, called the Selective Contractor model. The state can dictate plans, if it chooses, but can’t negotiate rates.

Which model is best depends on demographics and how confident the state feels in predicting what people will want, according to Jon Hager, executive director of Nevada’s health insurance exchange. Nevada just decided in favor of the free market model, as a way to make sure the exchange can meet needs in both urban and rural areas. Said Hager, “you might have a carrier with good products in Las Vegas, but you want to make sure you allow for different products to match different regions. And that can become difficult to manage.” If a state’s terms become too onerous for companies, he noted, carriers may opt out of the exchange altogether.

Five states and the District of Columbia have granted active purchasing power, four are undecided and two have specifically forbidden it.

Sustainability – Who’s paying for it?

Once exchanges are up and running, the federal government requires that they be financially self-sufficient.

An exchange can decide to charge fees to only those carriers that take part in the exchange or to every provider that sells insurance in the state. Nevada is leaning towards charging only carriers in the exchange, much as California and Oregon plan to do.

The next steps for New York and other states will unfold over the next few years. They will have to decide on details like hiring IT vendors to create the online marketplace itself, negotiate rates if necessary, and market the exchanges.

But first, Governor Cuomo’s office will have to start providing more clues to its still very vague intentions.

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<h1>What’s the Rx for New York’s new health insurance exchange?</h1><a onclick="javascript:pageTracker._trackPageview('/outgoing/www.thenewyorkworld.com/wp-content/uploads/2012/01/dailyQ2-01.jpg');" href="http://www.thenewyorkworld.com/wp-content/uploads/2012/01/dailyQ2-01.jpg"><img class="alignleft size-full wp-image-2600" title="dailyQ2-01" src="http://www.thenewyorkworld.com/wp-content/uploads/2012/01/dailyQ2-01.jpg" alt="" width="105" height="105" /></a>Last week, Governor Cuomo issued an executive order creating a state health insurance exchange, after State Senate Republicans repeatedly blocked legislative efforts to create an exchange as mandated in the federal Affordable Care Ac. New York is now among 16 states that have created exchanges through executive order, according to the National Conference on State Legislatures’ <a onclick="javascript:pageTracker._trackPageview('/outgoing/ www.ncsl.org/issues-research/health/state-actions-to-implement-the-health- benefit-exch.aspx');" title="NCSL" href="http:// www.ncsl.org/issues-research/health/state-actions-to-implement-the-health- benefit-exch.aspx" target="_blank">latest count</a>.
Thanks to the delays, other states are now farther along in getting their exchanges up and running. New York’s exchange must be operational by January 2014. So what happens now? What must New York State do now to launch its health insurance exchange? 
If you have information or insights to share, <a onclick="javascript:pageTracker._trackPageview('/mailto/nyworld@thenewyorkworld.com');" href="mailto:nyworld@thenewyorkworld.com">write us</a>, tweet @thenyworld or comment below.
<h3>What we found</h3>
New York has three main decisions it needs to make between now and January 1, 2014 when the exchange must go online: the organization of the exchange, rules of participation and financial sustainability.
Organization – What type of organization is it and who runs it?
Governor Cuomo’s executive order was thin on details but it did spell out that the exchange would be created within the current the state’s Department of Health.
In contrast to New York, other states have taken measures to protect their exchanges from politics. California’s exchange, for example, is designed as an independent state agency. Hawaii and Colorado have set up their exchanges as nonprofits, completely separate from government. Oregon’s exchange is an independent public corporation of the state, which, as opposed to an agency, can easily hire outside contractors. 
New York also must decide who will serve as its board of directors and what rules they will ofllow. <a onclick="javascript:pageTracker._trackPageview('/outgoing/www.nashp.org/sites/default/files/Building_a_Consumer_Oriented_Exchange_final.pdf');" href="http://www.nashp.org/sites/default/files/Building_a_Consumer_Oriented_Exchange_final.pdf">Most other states</a> that have created exchanges through legislation have included provisions ensuring the board represents the diverse interests that have a stake in how healthcare is run, such as consumer groups, small businesses and labor. Importantly, most states have also implemented conflict-of-interest rules since board members will wield power over a lucrative industry.
 
Rules of participation – Who gets to sell plans, and what plans can they sell?
New York has yet to set these. States have three models to choose from in determining what can be sold on the exchange and who can sell it:
The “Free Market Facilitator” model, like its name suggests, sets basic standards but otherwise accepts all plans and all providers.
The “Active Purchaser” model is the most restrictive and grants the state power to dictate what plans carriers will provide and the exact rates carriers will charge.
The third model is an offshoot of the Active Purchaser model, called the Selective Contractor model. The state can dictate plans, if it chooses, but can’t negotiate rates.
Which model is best depends on demographics and how confident the state feels in predicting what people will want, according to Jon Hager, executive director of Nevada’s health insurance exchange. Nevada just decided in favor of the free market model, as a way to make sure the exchange can meet needs in both urban and rural areas. Said Hager, “you might have a carrier with good products in Las Vegas, but you want to make sure you allow for different products to match different regions. And that can become difficult to manage.” If a state’s terms become too onerous for companies, he noted, carriers may opt out of the exchange altogether.
<a onclick="javascript:pageTracker._trackPageview('/outgoing/www.statereforum.org/blog/Six-States-Give-Green-Light-to-Active-Purchasing-in-the-Exchange');" href="http://www.statereforum.org/blog/Six-States-Give-Green-Light-to-Active-Purchasing-in-the-Exchange">Five states</a> and the District of Columbia have granted active purchasing power, four are undecided and two have specifically forbidden it.
 
Sustainability – Who’s paying for it?
Once exchanges are up and running, the federal government requires that they be financially self-sufficient.
An exchange can decide to charge fees to only those carriers that take part in the exchange or to every provider that sells insurance in the state. Nevada is leaning towards charging only carriers in the exchange, much as California and Oregon plan to do.
The next steps for New York and other states will unfold over the next few years. They will have to decide on details like hiring IT vendors to create the online marketplace itself, negotiate rates if necessary, and market the exchanges.
But first, Governor Cuomo’s office will have to start providing more clues to its still very vague intentions.

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