How will people navigate the insurance exchanges?

by The Incidental Economist on January 15, 2013 · 3 comments

As we’ve previously noted, the last election has, to some extent, made the full implementation of the Affordable Care Act inevitable. It’s possible that opponents may still try to slow things down by restricting funding or putting up roadblocks, but at this point most of the major changes are going to happen.

The likely single biggest event in the coming year will be the creating of the insurance exchanges. About half of the thirty million or so uninsured Americans will be getting their insurance through these marketplaces. Most of the news coverage these days focuses on whether the exchanges will be at the state level, or run by the federal government, but that difference will not change how they function in general.

The exchanges will be one-stop-shopping for people who want insurance, but don’t get it through their employers. Traditionally, such people have really been at a disadvantage when it comes to getting coverage. Since they were individually rated, if they had any chronic conditions at all, it’s likely they were refused a policy. Even if they could get one, such policies were extremely expensive.

The exchanges will be different. Regulations require that insurance companies who want to participate employ what is known as “guaranteed issue”, meaning that they cannot refuse to cover anyone. Moreover, they cannot individually rate people. The only factors that can be used to change the cost of a policy are the number of people covered, the ages of the beneficiaries, tobacco use, and a factor for geographical cost differences.  In general, though, people across the country will be getting similarly priced policies regardless of their health. This is known as “community rating.”

Many expect that this will be the biggest change that will happen under the ACA. It will certainly result in a major alteration to the ways that insurance companies work, and many have already made adjustments to their operations in preparation. The exchanges are supposed to go live this October.

A fair amount of nervousness exists, however, as to how Americans will move through the exchanges to purchase insurance. Will they find it manageable? Will they face difficulties? Will they fail?

The best model we have for how things might go is likely Massachusetts. Under their model of reform, which looks very much like the ACA writ small (and ironically signed into law in 2006 by Governor Romney), uninsured citizens go to the “Health Connector,” which offers plans to individuals, families, and small businesses. In 2010, more than 40,000 people bought plans through the Health Connector.

A recent paper in Health Affairs* sought to describe how participants fared in this endeavor. “The Experience Of Massachusetts Shows That Consumers Will Need Help In Navigating Insurance Exchanges”:

In 2022 twenty-five million people are expected to purchase health insurance through exchanges to be established under the Affordable Care Act. Understanding how people seek information and make decisions about the insurance plans that are available to them may improve their ability to select a plan and their satisfaction with it. We conducted a survey in 2010 of enrollees in one plan offered through Massachusetts’s unsubsidized health insurance exchange to analyze how a sample of consumers selected their plans.

Their findings should reinforce the idea that there is much work still to do. Of those surveyed, more than 40 percent found it difficult to understand the information about the plans offered in the exchange. The good news is that some of them recognized this problem. About one-third of people sought and obtained help in choosing a plan, most often from family or friends.

About 20 percent, though, still reported that they could have used help in “narrowing plan choices.” This subset of respondents was significantly more likely to have had a negative experience and some disappointment with their final selection. Unfortunately, some of these participants may even have been eligible for a subsidized plan that they didn’t know about, but could have gotten.

There is certainly room for improvement in Massachusetts. Looking forward, we need to make sure that these mistakes aren’t repeated across the country or on a national scale. Setting up the exchanges is just the beginning. We can’t ignore the fact that insurance is incredibly complicated, and that providing people access to it is only a first step. We have to help them understand it as well.

*Full disclosure – one of the authors is a close friend of mine. I won’t embarrass the person by saying which one, but you should all know the conflict exists.

-@aaronecarroll

 

Editor’s Note: Additional reading on exchanges from AcademyHealth, HCFO and the RWJF State Network:

 

Dr. Aaron E. Carroll is an associate professor and vice chair of health policy and outcomes research in the department of pediatrics at the Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll

As part of our ongoing effort to raise awareness of health services research and increase its application in policy and practice, AcademyHealth has partnered with Austin Frakt, Ph.D., and Aaron Carroll, M.D., M.S., to contribute posts on the subjects of health care costs, delivery system transformation, and public and population health – areas AcademyHealth has identified as a priority in the current policy environment. As regular contributors, they’ll be discussing current events with an eye toward how new and existing research informs the issues

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