Kansas Works To Design Health Insurance Exchanges

Tue, July 12, 2011

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KMUW / Fletcher Powell

One of the key parts of last year’s federal health care reform bill asks states to set up new public marketplaces that will help lower health insurance costs and provide information about insurance options. As part of our Sound Mind and Body Series, KMUW’s Fletcher Powell looks at how Kansas is working to address this part of the new law.

Matt Headley is working alone in his tattoo shop on a Friday afternoon, so he’s dealing with questions from walk-ins at the same time he’s working on a customer’s arm.

Even though Headley is in his early 30s, he’s owned the shop, Red Sea Tattoo, for quite a while.

Headley: Yeah, I’ve been open for, uh, nine years, and a month, and a few days…

Headley’s current customer has a pained look on his face, though it’s not clear whether it’s because of the tattoo needle in his left arm or the topic of conversation.

Headley: …as a tattooer you’re listed as a private contractor, typically…

Headley is talking about how, as a self-employed small business owner, he’s had to buy his health insurance through the private market. Unlike the vast majority of insured Americans, he doesn’t have an employer to offer him policies at lower rates. Instead, if he wants insurance, he has to do all the research on his own and find a plan that will cover what he and his wife need, and then accept the rate a company offers.

Headley: And that’s about 300 some for the both of us, but the reason I got that as opposed to other ones is the fact that, yeah, it was a little bit more, but it did have maternity—if my wife would get pregnant.

Luckily, Headley and his wife are pretty health-conscious—he says he rides his bike or skateboard to work every day, and has only been to the doctor a handful of times over the last nine years. So they’re only paying around $330 a month, a fraction of what many others pay. Still, if he worked for Wichita State University, for example, he’d be paying a third of what he’s paying now.

And he’s not alone. Around 9% of Americans buy their insurance individually, and another 15 to 16% don’t have any insurance at all. This won’t be a surprise to hear, but it’s usually just a lot more expensive to buy insurance on your own than it is if you have an employer offering it to you.

This is one of the things that the Affordable Care Act hoped to address when Congress passed it in March of 2010. Because the legislation mandates that all Americans have health insurance, Congress needed to come up with a way to make the insurance a lot less expensive, too. Carolyn Smith is Director of Public Policy and Legislative Advocacy for Via Christi.

Smith: ACA is requiring that all states, by January 2014, which is when the individual mandate goes into effect, January 1 of that year, to have a marketplace, if you will, for consumers who don’t have insurance, either they have private insurance or they work at a company that does not offer insurance.

Smith is talking about one of the ways the Affordable Care Act—or “ACA,” as she calls it—is trying to tackle the cost of insurance.

Smith: So this exchange would be a marketplace for those consumers to go and not only learn about private insurance, but also learn about the ACA and what impact it would have—or will have—on them, but to look and shop for various health insurance plans, and to go that next step beyond and actually purchase an insurance plan.

Smith has been deeply involved in helping to design what’s called a “health insurance exchange” in Kansas. In theory, the exchange will make it easier for those who don’t get insurance through their employers to find insurance and negotiate lower rates more easily.

When a large employer offers insurance, it can often get low rates because it gives an insurance company a large number of customers all at once. The risk to the insurer is much lower because there are so many people paying in to the system, and no insurance company wants to lose out on hundreds of new customers by pricing themselves out of the market.

The health insurance exchange wants to do this same thing. Hundreds of thousands of Kansans don’t get their insurance through an employer. Since everyone will eventually be required to have health insurance, if the state can pull all of those people together, they can negotiate lower rates on their behalf. Just like an employer, the state will be able to offer a much larger risk pool to insurers.

Smith: …so that’s a pretty big market and the hope is that insurers or carriers will say, hey, we want our plans listed and we want to participate, and that competition among carriers, theoretically, will help drive the cost down.

At least, that’s the idea.

But, whether it ends up working or not, this is something that Kansas, and every other state, has to do.

And if we don’t?

Smith: Well, then, the federal government will come in—HHS will say, you know, you didn’t set up an exchange that meets the requirements of the ACA, so we’re going to set one up and run it for you.

With that in mind, Carolyn Smith says, Kansas has decided to get moving. The state applied for, and received a $32 million “Early Innovator Grant” from HHS to help set up the infrastructure necessary to implement an exchange.

It’s hard for Smith to offer specifics about how the exchange will look once it’s fully designed, since Kansas and the rest of the country only just this week got more detailed regulations from the federal government, but this idea of joining together to negotiate rates is nothing new. In fact, the Wichita Independent Business Association offers something kind of like this to its members, small business owners a lot like Matt Headley. But this presents another issue.

Headley: I didn’t even know Wichita had an independent business association, so no, I’ve never looked at that.

Like a lot of things, if you don’t know to look for something, you probably won’t know it’s there. And Carolyn Smith says this information vacuum is another major hurdle the Kansas health insurance exchange will need to address.

Smith: So there’s also going to be this huge consumer education or outreach campaign or initiative, where those who know something about the exchange and the ACA will go out to the people and try and raise awareness and to educate.

Smith talks about a program of “navigators,” volunteers who will go into the community and help people understand how the insurance exchange works, and what decisions will be best for each individual.

Smith: Whether it’s sitting down with the consumer, say, at the local library or some other location and helping that individual purchase health insurance… And I think that program or that approach will allow this information to really get down into the grassroots, or at the grassroots level—that’s where the navigators are going to be the most helpful.

More than that, Smith says, she envisions a website that people can visit that will provide them with information and allow them to use tools that will supply them with the best insurance fit for their needs.

Smith: In other words, there will be filters where if you want to only see providers within, say, Sedgwick County, then there might be a filter for you to do that. Or if you want to make sure you have coverage for, let’s say, dental care, then there’s a filter for that. And you can apply all those filters, much like you do if you’re trying to find, say, a hotel online.

Once the workgroups designing the exchange have sifted through the new federal regulations, Smith says, the state will still need its legislators to act to put these things into place. And Smith acknowledges that some of these legislators are expressing reluctance.

Smith: …there still are a number of legislators, not only in Kansas, but throughout the country, who are holding out hope that the US Supreme Court will rule the ACA unconstitutional. And that means that it’s all, then, at that point in time, off the table.

But Smith points out that if Kansas doesn’t act and the ACA isn’t overturned, the state will end up having to scramble to meet the federal requirements by the deadline.

Smith: It’s a whole lot easier to turn something off than to get it started.

Smith is not shy about saying she knows how complicated this whole thing is, and that this is brand-new for Kansas and most of the rest of the country. She’s hoping that it’ll clear up a little now that the new regulation proposals have been presented by the federal government. Whatever happens, she says, she thinks a health insurance exchange is a good idea. The next step is making one that works for Kansas.

Funding for KMUW’s Sound Mind & Body series is made possible, in part, by Via Christi Health.