This summer the Virginia Health Reform Initiative (VHRI) is busy making decisions that could affect Virginians’ access to affordable health insurance for decades. The VHRI is a body appointed by Governor McDonnell and is working on implementation of the new health care law, including setting up the state’s health benefit exchange. The exchange would allow residents without employer provided insurance to pool their money together and bargain for better rates and coverage.
At an upcoming meeting on July 15 in Richmond, this body will be considering what kind of health benefits exchange we will have and who will be on its board, insurance executives or people looking out for us.
The following are recommendations for the exchanged developed by Virginia Organizing and other groups:
Avoiding Conflict of Interest with the Health Benefits Exchange
Insurers should not have seats on the governing board of the Exchange.
· The Exchanges will have to
o certify that health plans meet rigorous quality standards
o review insurance premium costs and increases
o decide if offering certain insurance products serve the interests of consumers and employers
o plan how to fund Exchange operations, perhaps by charging fees against insurers
· In each of these areas, someone working for an insurance company will not be unbiased. They would have a conflict of interest.
o Insurers on the exchange board will likely already sell insurance in Virginia and will work to protect their own business interests.
§ Insurance representatives may pressure the Exchange to provide price and quality ratings that would favor their own companies.
§ It will be in the interest of those existing insurers to maintain their market share and to exclude new competition.
§ Even “any willing insurer” exchanges will need to establish basic market conduct and certification rules that could favor existing market participants.
§ Many new approaches for health insurance authorized by the Affordable Care Act (e.g. new insurance consumer cooperatives, multi-state insurance plans, interstate compacts) will not be favored by companies already in the market.
Insurance brokers and agents who market insurance should not have seats on the governing board of the Exchange.
· Insurance agents and brokers are effectively the marketing arm of insurance companies, and they are usually paid directly by insurers for selling insurance.
· Agents/brokers would also have conflicts of interest as Exchange board members.
o Agents/brokers have a clear financial stake in the sale of insurance through the Exchange
o Agents/brokers will want to preserve high premiums to preserve lucrative commissions for their work – in direct conflict with a goal of the Exchange to reduce insurance costs.
Because virtually every action taken by the Exchange will affect insurers (and many decisions will affect brokers/agents), insurers, brokers and agents could not vote on or participate in most key issues.
· If insurers/brokers/agents are allow to serve on the Exchange governing board, board operations, deliberations and actions will be inefficient and cumbersome.
o Insurance representatives could not be present when the board reviewed the confidential business or financial information of their competitors.
o Questions would constantly arise about which discussions and decisions insurers, brokers and agents could participate in.
o Even if all legal procedures were followed, the appearance of a conflict could remain, undermining public confidence and credibility of the Exchange.
There is ample expertise in academic institutions, the business community and among consumer representatives to provide highly qualified governing board members who will not have a conflict serving on the board and who can fully participate in deliberations and decision making.
· Insurers, broker and agent representatives can still be actively engaged as members of stakeholder advisory boards that will provide valuable advice and expertise to board members.
Insurers, brokers and agents face irreconcilable conflicts of interest if they were to serve as members of the Exchange board. They must not be allowed to essentially regulate themselves by serving as voting members of the Exchange governing board.
Active Purchaser to Control Costs
We believe the health benefit exchange should retain authority to be an active purchaser. In other words, the exchange should not be required to accept all plans if they do not meet a reasonable standard of quality and value. While we are still awaiting federal guidance to determine what the minimum standard for a Qualified Health Plan will be, the state should not give up its authority to set the standard above the minimum standards set by the federal government or to deny a plan that does not meet the needs of the consumer.
In addition, the exchange should provide full transparency and require comprehensive and user-friendly information for consumers to compare health insurance options and make choices that best fit the needs of themselves and their families. As mentioned in the VHRI memo, the Exchange will be required to publish price and quality information, likely on the web portal. It is important that such information be clearly presented in a way that the consumer can understand and utilize it – making “apples to apples” comparisons. It should include medical-loss ratio information as well, so consumers can know how much of their premium dollar is being spent on health care and not administrative costs.
Additionally, the state should consider restricting the number of plans offered at each level of coverage. Having too many plans could confuse the consumer, as insurance plan details can be extremely complicated even for those with insurance knowledge and expertise. Such confusion has been common in Medicare Part D, where dozens of plans are available, making the purchasing decision more difficult.