Oregon's consumer health insurance exchange
By Mike Bonetto of Bend, Oregon. Mike is Governor Kitzhaber's health policy advisor and a member of the Oregon Health Policy Board. He is co-founder of HealthMatters of Central Oregon and a Deschutes County Public Health Advisory Board member.
Under the proposed health insurance exchange for Oregon - Senate Bill 99 - some 350,000 people will have access to affordable, quality health care through a central marketplace where carriers will have to compete on quality and value. For the first time, we will have apples-to-apples information about health insurance and will know exactly what we are buying. Oregon small businesses will be able to give their employees a set amount of money to buy coverage on the exchange, giving them more choices. And people who leave their jobs will have the option to keep their coverage.
Explicit in the law is that the exchange must be operated for the benefit of consumers:
- Administer a health insurance exchange in the public interest for the benefit of the people and businesses that obtain health insurance coverage for themselves, their families and their employees through the exchange.
- Be accountable to the public.
This is why Gov. Kitzhaber supports SB 99. It gives Oregon local control as the best way best way to ensure the standards set for the Exchange will provide true transparency, true value and quality, and true empowerment for the consumer.
Under the proposal, participating health insurance companies will be responsible to the governing board and to the public for service, quality and value. It also goes much further than the federal legislation in protecting consumers, helping small businesses and holding insurance companies accountable.
The proposal before the legislature meets the criteria of the citizen member Oregon Health Policy Board. During the public process, last year, all aspects of the Exchange were discussed, including who should be on the governing board and how to ensure the exchange will work best for Oregon.
For Oregon's exchange, the nine-member board will include a broad mix of stakeholders. The legislation is clear that there must be at least two consumer representatives but no more than two representatives from various health care sectors, including insurance. It also requires anyone on the board who has a conflict of interest on a particular issue to abstain from voting. Board members will be appointed by the Governor and confirmed by the Senate, providing the public an opportunity to evaluate the character and qualifications of prospective board members. Members must represent to the greatest extent practicable, the geographic, ethnic, gender, racial and economic diversity of our state.
Additionally, the legislation calls for insurance companies to compete on quality and value on the exchange. The governing board will establish participation standards for participating carriers and those that do not meet them will not be allowed to market their products on the Exchange. This will give individuals and small businesses who buy insurance free choice for the plan that works best for them.
Senate Bill 99 puts the power into the hands of the individuals and small businesses who will use the exchange. It offers an Oregon Exchange for choice, competition, value and transparency.
Without SB 99, Oregon would be would be left with the federal exchange, which will be designed to minimum national standards. We can do so much better than that. We can seize the opportunity before us and create a competitive, transparent, and accountable health insurance exchange that truly meets the needs of our state and opens the door for better health for more than 350,000 people. Read more about the Governor's position on HB 99. (PDF)
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April 22, 2011
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3:31 p.m.
Apr 22, '11
Thanks to Mike Bonetto for bringing this perspective on SB 99 to BlueOregon. As progressives consider the bill, there are a number of aspects and problems that this optimistic assessment does not address, at least with a view toward future further health care reform, as the proposed exchange is manifestly inadequate in a number of ways.
SB 99 represents the defeat of many if not most of the key progressive hopes for the exchange. The first great defeat came before the draft legislation was even written, when the Oregon Health Policy Board assigned the task of assessing the possibility of a public plan option within the Oregon exchange to a consultant with ties to private insurance industry who moved on to an industry job shortly after submitting a negative evaluation to the OHPB. While the limited scope of the exchange imposed by federal law already restricted the potential that some progressive thinkers claim for public plans within exchanges, the exclusion of any public plan from what became HB 99 removed the possibility of testing the claim that public plans can be used to set competitive standards within exchanges as well as critical concerns that such plans would fail due to adverse selection.
More recently, as has been commented upon on BO by Carla Axtman ("Oregon Senate Cmte makes lousy sausage"), advocacy by a wide grouping of pro-consumer progressive groups that the exchange should have power to negotiate premium rates with insurers and that insurer representatives should be excluded from the exchange's governing body were defeated in the Senate.
Mr. Bonetto's post points out on the governance issue that among "stakeholder" groups, consumers must have at least two representatives, while the "health industry" can have at most two. However, this observation actually brings to light a feature of permitting private insurance companies to be represented on the board that progressive advocates had not made clear: not only will interests with inherent conflicts with the interests of consumers be allowed on the board, if insurer reps are appointed, they will crowd out reps from other parts of the "health industry," such as doctors, nurses, community clinics, hospitals or health worker unions.
Actually insurers are not health organizations but financing organizations, of course.
3:36 p.m.
Apr 22, '11
Further:
The exclusion of premium price "bargaining" power is less of a concern for me, almost a red herring. The worse problems with plans being offered in the exchange have to do with deductibles, co-pays and co-insurance.
Mr. Bonetto says that the exchange will offer those eligible to participate in it "quality, affordable access to health care." However, the methods used by private insurers to create "affordability" (relatively low premiums) involve degrading the quality of benefits offered.
I don't have space to go into the question of federal definitions (not yet set) of "essential benefits" and whether federal subsidies would actually apply to additional benefits if Oregon sought to require them, except to note it, in the context of the budget / deficit / debt debate circus consuming Washington DC and Republican ankle-biting at the federal health reform plan (PPACA).
More importantly, PPACA already sets standards for four levels of plans (Bronze, Silver, Gold and Platinum) according to premium affordability that must be applied in the Oregon exchange. "Bronze," the most "affordable," achieves its affordability with huge co-insurance -- plan members being responsible for 40% of costs -- and potentially extremely high deductibles.
To some extent for persons and families under 400% of poverty that problem may be mitigated by PPACA limits on out-of-pocket expenses as a percentage of gross income, from 0% for the very poorest rising to 9%. But to the extent that such limits prove to be real, it appears to eviscerate any real incentive insurers might have for quality competition on the cost side.
Meanwhile the calculation and division and billing of charges to plan-holders vs. the federal government according to income will add many addition chutes, conveyor belts, springs and tubes to the already hugely inefficient and expensive Rube Goldberg machine of private insurance-related bureaucracy.
These problems are perhaps largely DC problems just now, and Oregon is forced by law to participate in the charade. But we shouldn't pretend its not a charade, and we should prepare ourselves about what we are going to do if the wheels start coming off the PPACA bus, between the states' fiscal crisis cuts to Medicaid, and potential insurer abuse of subsidies, and the partisan sabotage being attempted by the Republicans.
3:51 p.m.
Apr 22, '11
Excellent observations. Who do I call to get Chris appointed a consumer representative on Health Policy Board.
9:35 p.m.
Apr 22, '11
I have the greatest respect for the Oregon Health Policy Board. I have attended their meetings and witnesses how hard they work attempting to create a fully functioning health care system for Oregon. And Oregon desperately needs a health insurance exchange, especially outside the urban centers where there are few health coverage choices. However, in addition to more choices, Oregonians need health insurance cost controls. For that reason, I don't believe Oregonians should accept SB99 as it is now written. Mike's defense of this bill falls apart before he can complete his opening sentence. The exchange as proposed by this bill will NOT provide access to affordable, quality health care precisely because there is nothing in this bill that requires the carriers to compete on quality or value. The Portland area is already awash with insurance carriers and plans, yet our premiums have doubled in 8 years. The only "innovation" offered by insurance companies, even where there are numerous choices, is higher deductibles and co-pays and/or less quality and lower coverage. Mike provides absolutely no evidence that insurance companies are suddenly going to "compete on quality and value". (People seem to forget that health insurance companies, like other insurance companies, are exempt from the anti-trust laws that might have engendered some level of competition. Insurance lobbyists fought long and hard to preserve their exclusive status in the battle to enact the Affordable Care Act. They were able to ensure they were not going to have to compete in an open market place.) As written, the exchange will simply provides more expensive and/or lower coverage policies to a larger portion of the state. If that is really the only option available to us, then I would like to hear that argument and discuss it openly. I think we have other possibilities. The only reason small businesses pay 18% more for the same coverage than larger companies is that small businesses (and individuals) don't have a sufficient size to negotiate with the insurance companies like the large employers do. If Oregon actually wants to begin to get control of sky-rocketing health insurance premiums they will have to empower a health insurance exchange with the authority to negotiate for the best deal possible, quality and value, for members of the exchange.
9:53 p.m.
Apr 22, '11
Point #2: I have heard no one explain why the legislature or the Governor needs to carve out reserved seats on the exchange board for insurance executives and lobbyists. What is with that? I just can't see the need to have Wellpoint or Cigna representatives "tying up the lines" complaining that we really don't understand that insurance companies have no control over health care costs and really don't make that much money, despite what we may have heard. I'm sure insurance company lobbyists will have no problem getting their position heard before the board. Can someone please give me a rationale for the exalted privilege of seats on the board for the industry that helped get us into this mess?
12:28 a.m.
Apr 23, '11
I'm still sorting through all the details, but regarding the question of insurance industry representation:
It seems rational to me that the board should have someone who understands health insurance from inside the industry. (If I were making the appointment, I'd probably select a retired person, rather than someone actively employed, but I digress.)
If we accept my assumption that industry experience may be useful (and I know that many won't accept that assumption) then it seems worthwhile to carve out a spot AND then limit it.
Certainly, I'd hate to see it left wide open, only to have a future GOP governor stack the board entirely with industry reps.
If it is true, as Chris suggests, that the two insurance reps necessarily mean no doctors, nurses, or other medical professionals, that would seem problematic.
Can Mike B. or someone else clarify that?
10:18 a.m.
Apr 23, '11
Absolutely, the exchange board needs to utilize the expertise of the industry, as well as many other perspectives. That expertise should be formalized into an advisory capacity, instead of a decision-making one. This way, you get both the expertise without a situation where the insurance industry is negotiating with itself (and undermining public trust in the exchange to boot).
10:41 a.m.
Apr 23, '11
Makes sense to me.
9:06 a.m.
Apr 24, '11
I believe industry professionals should serve in an advisory capacity, not as voting members.
7:25 p.m.
Apr 27, '11
Well put! There is no point in having the exchange board entirely dismiss the advice from folks with expertise in the insurance industry but people with a vested interest in how the negotiations play out certainly shouldn't be holding votes on a 9 person board.
5:16 p.m.
Apr 23, '11
For those wondering why care providers and the insurance industry are bundled with respect to board representation, it's because both have conflicts of interest with consumers. From a recent OSPIRG Policy Brief:
"While the exchange will serve many functions, in large measure the most important is its role as a purchaser of insurance. For it to be effective at this task, it must be a zealous advocate for the interests of consumers, which means that it must be free of influence from the insurance industry, brokers, and providers. Consumers need the exchange to deliver high quality, affordable coverage – when it comes to negotiating for a better deal, their interests are at odds with those of the insurers. Because brokers are usually paid by insurers on commission for the policies they sell, and pressure on insurers to lower costs might translate to cost pressure on providers, they also should not serve on the exchange board." (emphasis mine)
5:27 p.m.
Apr 23, '11
Kari, I like David Rosenfeld's suggestion regarding expertise, which extends beyond insurance expertise.
Mike Bonetto explains representation on the board not in terms of expertise but in terms of "stakeholding." In other words, if insurance companies have a rep, they are there to represent the stake or interest of the industry. Which is in conflict with the stated purpose of the exchange to serve the interests of consumers.
Mike writes: there are two seats for "the various health care sectors, including insurance." From the context in contrast to "at least two seats" for consumers, two is a maximum for "health care sectors, including insurance."
Insurance is not a health care sector, it is a financial sector.
BJ Cefola's argument below that insurance is included with providers because both have conflicts of interest with consumers is interesting, but in that case the seats should be defined as the conflict of interest seats, not the "health sectors" seats. Personally, insofar as providers may have conflicts of interest with "consumers" I don't think they are as complete or of the same quality as the conflicts with insurers.
In private insurance, if you get a treatment you need, to the insurer that's a "medical loss."
9:02 a.m.
Apr 23, '11
Kari, I agree the exchange board needs input from all health care stakeholders: representatives of the insurance industry, medical equipment suppliers, medical professionals (traditional and non-traditional), medical schools, pharmaceutical, social work, etc, etc. It's completely unclear to me why the insurance industry alone requires 2 board positions. It's hard for me to believe, sans board representation, the insurance industry would not be able to have its voice heard before the board. I think it's clear why health exchange patients need direct, voting influence on the board overseeing their care. What does the exchange miss by not having 2 insurers arguing and voting their special interests?
5:17 p.m.
Apr 23, '11
Mike Bonetto says there are two seats for "the various health care sectors, including insurance." So this could mean zero from insurance, one doctor, one hospital administrator. Or one nurse and one health organization consultant (maybe). Or two from insurance.
The problem (apart from conflict of interest) is that any from insurance crowd out that number from a real health care sector. Insurance is part of the financial sector.
11:15 a.m.
Apr 23, '11
Perhaps someone can answer this, that happened to the momentum to create a public option that would be represented on the exchange?
11:33 a.m.
Apr 23, '11
I went to Salem Monday and talked to Rep. Thompson about what the House can now do to get a better bill than the current SB 99. I am really concerned that the governor's office wants us to just take the Senate bill without trying to make it better. Unless I am mistaken the House could still influence changes on the bill.
I have two problems with the current bill. It is going to be very hard for the small business community to buy into a bill that forbids the Exchange to participate in negotiations that influence the cost of health care premiums. Why do we need to start right out gate setting up an Exchange with no negotiating power? It was better left unsaid than making a point to forbid it.
I also strongly disagree with putting insurance executives on the board. For more than a year I served on the Fund Board Finance Committee that was loaded with insurance executives and I eventually became one of three authors of the minority opinion because the recommendations for the Exchange ignored our voices. Massachusetts and California stood with business owners and consumers and didn't allow that. Whom is Oregon trying to satisfy?
I testified at the Senate Committee and feel it was a waste of my time to travel from Bend. In the end they listened to the insurance companies that testified right before me.
Can someone explain to me why we are throwing in the towel before the House committee even gets started? I am in no way suggesting we just take what the feds hand down, but we doing everything we can to make something better.
5:50 p.m.
Apr 23, '11
Well said Aelea
7:33 p.m.
Apr 27, '11
Aelea, I read your column piece on oregonlive today--thank you so much for all the effort and commitment you are putting into communicating with our representatives as well as letting those of us who are not small business owners know how this version of the exchange falls short in helping you get coverage for your employees.
In solidarity.
9:15 a.m.
Apr 24, '11
As proposed in the current senate bill, the exchange gives small business owners and our employees less choices than we currently have. If the bill does not allow the Exchange to negotiate price, then we will be at the mercy of the insurance companies - they can give us as little as they like - which they do now. Every time there is a rate increase, we have to suck up the cost, often change insurance carriers - which often means changing doctors, and get less for more money. I would prefer single payer and never, never, never having to negotiate for or shop for health insurance again. If we cannot have that, then we need real protection from predatory insurance companies who routinely deny coverage so they can make a higher profit on sick people. Patients are not consumers and should not be treated as consumers.
I testified in March before the Senate committee and even got a thumbs up from one of the senators. But it appears the interests of the insurance companies are far more important than the interests of small businesses and our employees.
I will be in Salem tomorrow. I do not want an Exchange that makes no difference to the people.
7:09 a.m.
Apr 25, '11
Great op-ed, BTW. http://www.oregoncitynewsonline.com/opinion/story.php?story_id=130313933725902800