1. 3 Advocacy Group’s Tool
Shows Metal Plan Impact
On Costs
4 How Much Did Premiums
Grow for Benchmark
Plans? 0%, Study Finds
5 Congress, States Face
Hard Choices if Court
Strikes FFE Subsidies
5 Leavitt Examines Possible
King Contingency Plans
6 HEX’s 2014 Year in
Review
7 Plan Designs for 2016
Will Have More Complete
Rx Features
9 Federal Reg. Tracker
10 Table: Average Individual
Premium Rates for 2015
Exchange Plans
Decision-Support Tools Get Smart, Allow for
More Choice on Public, Private Exchanges
Given the broad range of choices available through public and private insurance
exchanges — combined with myriad factors that influence premiums, out-of-pocket
costs and provider access — choosing the best plan is virtually impossible without the
right technology and decision support tools. And unlike car dealerships, health insurers
generally don’t let potential enrollees test drive the policies.
An eye-popping 900,000 variables, or more, are involved in selecting a health insur-
ance policy, estimates Jay Silverstein, CEO of Picwell, Inc., a Philadelphia-based firm
that uses predictive analytics to help pair consumers with health plans. And what might
be the best plan this year might not be next year. A seemingly insignificant change,
such as switching a prescription brand, can have a substantial impact on out-of-pocket
costs, he says. The difference in premiums between Plan A and Plan B might be just $4 a
month. However, the out-of-pocket exposure under one plan might be $1,700 for a spe-
cific drug. Since October, Picwell has been available to Aon Hewitt’s private exchange
for retirees, and Silverstein says that relationship is expanding. The company also is
doing work with several state-run exchanges.
Even the best analytics can’t predict unexpected health expenses. But by combin-
ing expected medical cost data with information about demographics, provider prefer-
ences, lifestyle information and personality traits, sophisticated algorithms can align
Contents Will CoOportunity’s Woes Give CO-OPs
A Black Eye? Fledgling Plans Think Not
Since the beginning of 2015, CoOportunity Health has been in rehabilitation, under
the control of the Iowa Dept. of Insurance and facing possible liquidation. Insurance
regulators in Iowa and Nebraska are urging brokers to transfer their clients to other
insurance carriers. But Community Operated and Oriented Plan (CO-OP) operators in
other states tell HEX that they don’t face the same risk and contend their finances are
solid. And insurance regulators in those states say they are closely monitoring CO-OPs,
as they would any new carriers.
CoOportunity, one of 24 CO-OPs created by the Affordable Care Act (ACA), has
about 120,000 members spread between Iowa and Nebraska. The CO-OP’s membership
wound up being more costly than expected. Iowa opted not to expand its Medicaid
program as called for by the ACA. Instead, it enacted the Iowa Health and Wellness
Plan to extend health coverage to low-income adults, a two-part program that went
into effect last January. Part of that program expanded the state’s Medicaid eligibility
to 100% of the Federal Poverty Level ($11,490 for an individual). The second part, the
Iowa Marketplace Choice Plan, is aimed at adults with annual incomes between 101%
and 133% of the FPL ($11,491 to $15,282 for individuals), and allows them to buy subsi-
dized coverage through the state’s federally run exchange. CoOportunity Health and
Aetna Inc. subsidiary Coventry Health Care of Iowa were the two providers available
in that plan, says Amy Lorentzen McCoy, a spokesperson for the Iowa Dept. of Human
Services.
continued on p. 9
Timely News and Strategies for Doing Business on Federal, State and Private Exchanges
Volume 5, Number 1 • January 2015
Managing Editor
Steve Davis
sdavis@aishealth.com
Executive Editor
Jill Brown
Published by Atlantic Information Services, Inc., Washington, DC • 800-521-4323 • www.AISHealth.com
An independent publication not affiliated with insurers, vendors, manufacturers or associations
Change in HEX frequency:
This is your first monthly
issue. Subscribers now
receive a weekly E-Alert each
Wednesday with timely news
of the industry, in addition
to a 12-page monthly print
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3. January 2015 Inside Health Insurance Exchanges 3
narrow-network plan than someone who relies on a
variety of doctors and specialists. Consumers also can see
which plans “similar consumers” have purchased.
Questions Gauge Risk Tolerance
Like Liazon’s “recommendation engine,” Bloom
Health’s proprietary decision support survey asks po-
tential enrollees a series of questions about their lifestyle,
family and overall health. Employers that offer health in-
surance through Bloom Health’s private exchange must
select coverage via the search tool or over the telephone
through a licensed advisor. The process begins with an
online survey of 15 questions designed to provide the
user with knowledge, trust and confidence, explains
CEO Simeon Schindelman. For example, employees
are asked how they would deal with a $1,000 bill for a
medical service. While some people won’t view it as a
financial burden, or decide it can be paid off over several
months, others would opt not to seek a service if it means
having to pay a bill that size. Another asks how your best
friend would describe you in terms of risk taking.
“While two benefit plans might appear similar on
the surface, a high deductible with low office visit co-
pays has different implications than a plan with a lower
deductible and high copays,” Schindelman explains.
Bloom’s investors include Blues companies Health Care
Service Corp., Anthem, Inc. and Blue Cross Blue Shield
of Michigan.
Lang agrees that educating consumers about likely
out-of-pocket costs is essential. Along with monthly pre-
miums, Stride Health’s engine also tries to predict future
health expenses as well as the individual’s financial re-
sponsibility. “It’s important that consumers understand
upfront how much insurance will pay for care, if any-
thing, before the annual deductible is met,” he says.
And consumers digest information differently and
might want it in different formats. While some might get
more from a five-minute video, others will want to take a
deeper dive into the options, Schindelman adds.
Tools Allow for Greater Choice
Roughly 80% of employers offer no more than two
health benefit plans, says Schindelman. And typically
those choices are either nearly identical or completely dif-
ferent, which made selecting one much easier, he adds.
Employers increasingly are looking to give employ-
ees greater choice and control when choosing their health
insurance. A typical employer on Bloom’s exchange
platform offers between six and 10 options. Dozens of-
fer as many as 20. A recent survey of Bloom participants
found that just 10% of users thought they were offered
too many choices.
“At the end of the day,” Lang says, “the consumer
only wants to know which plan is the right one….Some-
times people just want to be told what to choose.”
Editor’s note: Last fall, Liazon released a white paper
on decision-support systems for benefits. Download it at
http://tinyurl.com/pxs6mlw.
Contact Silverstein at jay.silverstein@picwell.com,
Lang at noah.lang@stridehealth.com, Cohen at alan.
cohen@liazon.com and Denise Lecher for Schindelman at
dlecher@bloomhealth.com. G
Advocacy Group’s Tool Shows
Metal Plan Impact on Costs
When shopping for health coverage on public insur-
ance exchanges, consumers typically have just two key
data points on which to base their decision: the premium
and the deductible. Those who haven’t previously pur-
chased coverage on their own tend to choose the lowest-
priced option. And that can be a costly mistake.
Out-of-pocket costs for medical services and pre-
scription drugs can vary up to 600% depending on the
metal level of a chosen plan (i.e., bronze, silver, gold or
platinum), according to the National Health Council
(NHC), a non-profit patient advocacy group. The organi-
zation says its decision-support tool can help consumers
save money by making better informed decisions about
their coverage. NHC is an umbrella organization that
provides a united voice for people with chronic illnesses
and disabilities and their member advocacy organiza-
tions, including the American Heart Association, the
American Diabetes Association and the American Cancer
Society.
The analytics behind the group’s PuttingPatients-
First.net calculator were developed by Avalere Health,
a health care consulting firm in Washington, D.C. The
calculator is based on 2015 exchange plan designs and
includes tax credits and cost-sharing reduction informa-
tion. Through the website, consumers enter data about
their expected medical and drug usage, and the data are
then applied to 15 plans across each metal tier available
through the public exchange.
Prescription drug costs, depending on where they
fall on a health plan’s formulary, might require very high
copayments or coinsurance, or none at all, explains Marc
Boutin, NHC’s executive vice president and chief operat-
ing officer. In many plan designs, the consumer is on the
hook for a large share of prescription drug costs. That
also can be the case for specialist visits, some hospital
services and primary care, he says.
To account for costs before the deductible is met —
and to translate coinsurance to actual dollars — patients
Web addresses cited in this issue are live links in the PDF version, which is accessible at HEX’s
subscriber-only page at http://aishealth.com/newsletters/insidehealthinsuranceexchanges.
5. January 2015 Inside Health Insurance Exchanges 5
Jack Rovner, a principal for The Health Law Con-
sultancy in Chicago, says taking away subsidies would
make health coverage unaffordable in FFE states. People
in those states would be excused from the individual
mandate tax penalty, and healthy individuals would
likely drop coverage, which would negatively impact
the risk pool and further drive up costs. “That is apt to
increase the ranks of the states’ uninsured, which would
decrease receipt of health care for the states’ residents,
threaten provider revenues and undermine the financial
as well as physical health of the states’ residents,” he as-
serts. Meanwhile, state-based exchanges would continue
to evolve and their individual insurance markets would
avoid destabilization. The residents of these states who
receive federal premium subsidies will get financial assis-
tance from taxpayers in those states lacking state-based
exchanges, he adds.
But Rovner expects that most FFE states would
quickly move to a partnership model. “All it would
Gabel says he was surprised by the findings and
says he thought premiums and deductibles would both
have increased about 5%.
See the NORC study at www.comonwealthfund.org.
To read McKinsey’s issue brief, visit http://tinyurl.com/
qflkyzy. G
2015 Outlook
Congress, States Face Hard Choices
If Court Strikes FFE Subsidies
For public insurance exchanges, 2014 began with
pandemonium, resignations and a dribble of enrollment.
This year started with a more positive tone. No signifi-
cant glitches have been reported for either HealthCare.
gov or state-run exchanges, and as of Jan. 2, nearly 6.6
million people had either signed up for coverage via
HealthCare.gov or were re-enrolled. But chaos will
most certainly return this summer if the Supreme Court
decides federal premium subsidies are available only
through state-run exchanges (see box, this page).
In its July 22 ruling, a Democrat-majority panel of the
U.S. Court of Appeals for the 4th Circuit in Richmond,
Va., determined in King v. Burwell that premium subsi-
dies awarded to 4.7 million enrollees via HealthCare.
gov were legal. Earlier that same day, in Halbig v. Burwell,
a Republican-majority panel of the U.S. Court of Ap-
peals for the D.C. Circuit ruled 2-1 that the wording of
the Affordable Care Act (ACA) provision indicates that
only exchanges set up by states can issue subsidies (HEX
7/31/14, p. 1). The Supreme Court has taken up the King
case and is expected to issue a decision in June. If the
court rules against HHS, the 35 federally facilitated ex-
change (FFE) states will have a strong financial incentive
to transition to a “supported state-based marketplace”
(SSBM) model (HEX 9/4/14, p. 1) or regional marketplace
partnerships. But CMS would need to determine wheth-
er those models meet the definition of a state-based ex-
change. And lawmakers who have opposed Obamacare
will face millions of constituents in danger of losing their
health coverage.
“Obamacare has the potential to go in two dramati-
cally different directions at the end of June. Things will
either continue along on the current path, or the…law
will be devastated if the court strikes down the subsidies
in 35 states,” says industry consultant Robert Laszewski,
president of Health Policy and Strategy Associates, LLC.
“The loss of subsidies to enrollees in FFE states could
take down the exchanges in those states by starving them
of enrollment,” adds Deborah Chollet, Ph.D., senior fel-
low at Mathematica Policy Research. She says such a rul-
ing by the high court would likely motivate some states
to move to a state-partnership model.
Subscribers who have not yet signed up for Web access — with searchable newsletter archives, Hot Topics, Recent Stories and more —
should click the blue “Login” button at www.AISHealth.com, then follow the “Forgot your password?” link to receive further instructions.
Leavitt Examines Possible King
Contingency Plans
In less than two months, the Supreme Court is
slated to hear oral arguments in the King vs. Burwell
case, which will decide whether federal premium
subsidies are restricted to people who buy health
insurance through a state-based exchange (SBE) (see
story, p. 5). On Jan. 12, consulting firm Leavitt Part-
ners released a white paper examining how law-
makers in 34 FFE states and members of Congress
might respond to a decision in favor of the plaintiff.
If the Supreme Court upholds the King decision,
and Congress chooses not to take corrective action in
response, “contingency plans for maintaining ac-
cess to insurance subsidies will ostensibly fall to the
states,” co-author Dan Schuyler, who leads Leavitt’s
insurance exchange practice, tells HEX.
The paper examines possible contingency plans
from a variety of angles and includes a state-by-state
look at which states are likely to migrate to an SBE
model and which ones are likely to “dig in their
heels” and seek concessions from the Obama ad-
ministration. In Leavitt’s opinion, states that would
willingly move to a state-based exchange include
Delaware, Illinois, Iowa, New Hampshire, Penn-
sylvania, Virginia and West Virginia. The strongest
opposition would likely be from 13 states including
Alabama, Florida, Louisiana and Texas.
To download the report, “The Stage is Set: State
and Federal Planning Ahead of King v. Burwell,”
visit http://leavittpartners.com/news.
6. 6Inside Health Insurance Exchanges January 2015
Call 800-521-4323 to receive free copies of other AIS newsletters, including
Health Plan Week, ACO Business News and Medicare Advantage News.
appear to require is state legislation to establish a state
exchange entity that would then contract with HHS for
all the back-office support.”
Industry consultant Fred Karutz says states should
get ahead of the court and adopt a “states’ rights agenda
for health care” that would let them apply for federal
waivers similar to what Arkansas did for its exchange.
“It sounds like an expensive proposition, but as ven-
dors have refined their solutions, I anticipate new cost-
effective [IT systems] will give states the opportunity
to take ownership and customize their exchanges at a
significantly reduced cost from previous arrangements,”
he predicts.
A majority of health sector stock investors are op-
timistic that the Supreme Court ruling won’t derail the
ACA and that exchange enrollment will meet or exceed
HHS’s expectations, according to a survey of 114 inves-
tors conducted by Credit Suisse. More than 60% of re-
spondents expect the ruling to uphold the ACA. When
asked if a ruling blocked subsidies from flowing through
federally run states, a majority of respondents were opti-
mistic that FFE states would find alternative solutions to
ensure enrollees retain their subsidies.
Eight Exchange Trends to Watch
Here’s a look at eight trends industry observers pre-
dict for private and public exchanges in the year ahead:
(1) Greater interest in private insurance exchanges:
Despite slower-than-expected adoption, private ex-
changes continue “to be a top topic of conversation for
many employers as they evaluate their future options,”
says Julie Huppert, vice president of health care reform at
Express Scripts Holding Co., a pharmacy benefits man-
ager (PBM). As the market continues to evaluate private
exchanges, she says the PBM is “focused on creating
opportunities with our clients to incorporate employee
choice and manage costs through direct PBM arrange-
ments.” Employers with 50 or fewer employees will see
private exchanges as an attractive alternative to more
traditional employee benefit strategies, adds Joe Donlan,
president of ConnectedHealth, a Chicago-based, web-
broker entity that provides full-service private exchanges
to various types of organizations, including employers
and health insurers.
(2) Rapid growth: Now that last year’s IT glitches
seem to have been resolved, industry observers predict
both public and private insurance exchanges will see
For public insurance exchanges, 2014 began with
a sputtering HealthCare.gov website and several
non-functioning state-run websites. However, most of
the major technical problems were resolved and the
enrollment period, which was twice extended, wound
up with about 8 million signed up. But the IT prob-
lems led to lawsuits in several states. Oracle Corp., for
example, sued Oregon for a breach of contract, and
the state countered by suing the vendor. Maryland
scrapped its IT system for one used by Connecticut.
Problems prompted executive directors in many states
to resign. Despite that, major carriers that sat on the
sidelines last year jumped in with both feet for the
second enrollment period.
On the private exchange side, more health insur-
ers launched their own proprietary exchange, as did
insurance agencies, associations and chambers of com-
merce. But while more employers are offering cover-
age through a private exchange, the buzz remains
louder than action.
Here’s a review of some of the important stories
we examined in 2014:
u Spooked by Troubled Exchange Rollouts, Partner-
ship States in No Rush to Take Over (HEX 1/9/14, p. 1)
u State Exchange Leaders Were Warned of Possible
Problems (HEX 1/23/14, p. 5)
u As Fifth Exchange Director Resigns, New Vendors
Are Sought to Pick up Pieces (HEX 3/6/14, p. 1)
u Enrollment Through Private Exchanges Hits 3 Mil-
lion as Employers Target Benefit Costs (HEX 6/19/14,
p. 1)
u Restricting Subsidies to State Exchanges Is Unlikely,
but Would Seriously Alter ACA (HEX 7/31/14, p. 1)
u Oracle Comes Out Swinging in $26 Million Breach-
of-Contract Suit (HEX 8/14/14, p. 4)
u Exchanges Seen as Enrollment Opportunity; States
Collectively Add 50+ Carriers for ’15 (HEX 9/18/14, p.
1)
u Private Exchanges Poised to Grow Quickly; Cadil-
lac Tax Could Prompt More Movement (HEX 10/2/14,
p. 1)
u If Republicans Gain Control of Senate, Are Risk
Corridors in Danger? Maybe (HEX 10/16/14, p. 1)
u Last Year’s Low-Cost Leaders Have Been Bumped
Out in 19 Federally Run Exchanges (HEX 12/12/14, p.
4)
HEX’s 2014 Year in Review
7. January 2015 Inside Health Insurance Exchanges 7
more rapid adoption. “2015 will be the year that both
concepts stabilize and begin a rapid mainstream growth
phase that will last the next several years,” says Todd
Berkley, president of HSA Consulting Services.
(3) Tax-season surprises for some enrollees: People
who received an advance premium tax credit (APTC) last
year might be in for a surprise during the upcoming tax
season if their annual income increased in 2014, predicts
Mark Waterstraat, chief strategy officer and co-founder of
Benaissance, a SaaS technology and premium payment
processing company that works with exchanges. There
will be “a flood of human interest stories about families
impacted by this. I expect we’ll then see many Americans
wanting their 2015 APTC to be recalculated and exchang-
es and carriers are going to need to be prepared for this,”
he warns.
(4) Emergence of public-private hybrid exchanges:
New forms of exchanges will emerge, blurring the line
between public and private, predicts Brian Poger, CEO of
Benefitter Insurance Solutions, a California-based tech-
nology company that helps brokers and employers find
individual health coverage. “To date, private exchanges
only provide access to a more diverse set of the same old
(and often unaffordable) group insurance products. New
models will provide a compliant model for employees to
access the highly-subsidized individual market,” he tells
HEX. “The pace of change will be inversely related to
the economy. As our bull market begins to soften, more
groups will seek truly transformative change to their
benefits structure.”
(5) Small employers shifting to public exchanges:
Smaller employers will continue to look for alternative
ways to offer employees coverage. That will include
dropping group coverage and encouraging employees
to find insurance on the individual marketplace. But that
doesn’t mean employers won’t be involved in health
benefits. “We are finding that if you can reduce some of
the administrative hassles for an employer, and deliver
turn-key benefit solutions, including individual cover-
age, that are simple to set up and manage, this approach
will resonate with employers,” says Donlan. “Rather
than just telling employees to go to the public exchange,
they will retain some control over that experience and
how it’s rolled out to employees.”
(6) Extended enrollment period: Some industry
observers predict that HHS will extend the enrollment
period beyond Feb. 15 for federally run exchanges.
Berkley calls it “highly likely.” While HHS extended the
enrollment deadline twice last year, this year’s open-
enrollment period has been running smoothly. Bailey
suggests that a few insurance companies might decide
to make off-exchange products available for up to two
weeks beyond the Feb. 15 deadline to boost sales. While
Laszewski says he doesn’t anticipate a major deadline ex-
tension, a short extension, which has allowed exchanges
to enroll people who are stuck in the queue past deadline
to complete the process, “seems to be a regular part of
Obamacare,” he quips.
(7) Growth in health savings accounts: Berkley pre-
dicts HSAs will go “mainstream” as private exchange
operators and carriers understand the “natural link be-
tween HSAs and exchanges and the ability for HSA ac-
counts to add a sticky, on-going relationship component
to the experience,” he says.
(8) No big news: During the first half of 2014, enroll-
ment problems and legal battles between states and IT
vendors were a regular feature in daily newspapers. The
big news for 2015 will be no big news, says Georgia-
based insurance broker Rick Bailey, president of Rick
Bailey & Company, Inc. The electronic enrollment sys-
tems are doing much better. The insurance companies
are better prepared this year with one year’s experience,
and HHS Sec. Sylvia Burwell “seems to be more business
minded than politically minded,” he says. In Bailey’s
home state, pricing on the exchanges has prompted
people to move from platinum-level plans to gold and
HSA-qualified plans. This has lowered the average pre-
mium per policy by about 10% — from $605 per month
on average in 2014 to $544 for 2015.
Contact Berkley at todd@hsaconsultingservices.
com, Rovner at jrovner@hlconsultancy.com, Chollet at
dchollet@mathematica-mpr.com, Jonathan Pearlstein for
Poger at jonathan@benefitter.com, Donlan at jdonlan@
connectedhealth.com, Bailey at rick@rickbaileycompany.
com, Laszweski at robert.laszewski@healthpol.com and
Waterstraat at mark.waterstraat@benaissance.com. G
2015 Outlook
Plan Designs for 2016 Will Have
More Complete Rx Features
During the recently concluded plan year, pharmacy
benefits manager (PBM) Express Scripts Holding Co.
says it didn’t see clients substantially modify their phar-
macy benefit designs for products on public exchanges
because carriers were required to submit 2015 benefit of-
ferings in the spring of 2014, and they had limited data to
support shifts in business strategy. But that could change
this spring as carriers develop products for the 2016 plan
year, now that they have “sufficient actionable data to
drive smart plan decisions,” says Julie Huppert, vice
president, health care reform.
And with CMS implementing a quality ratings sys-
tem (QRS) for exchange plans beginning in 2016, Hup-
pert says one key area of focus for public exchanges in
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8. 8Inside Health Insurance Exchanges January 2015
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delivery to multiple readers, and customized feeds of selective news and data…daily, weekly or whenever you need it.
2015 will be driving medication adherence among their
members to yield improved health outcomes.
The Affordable Care Act (ACA) envisioned a QRS
for the exchanges to identify high-performing qualified
health plans (QHPs). That system will closely mirror the
stars program, which CMS has used to rate Medicare Ad-
vantage (MA) plans for the past six years. Like the MA
program, Healthcare Effectiveness Data and Information
Set (HEDIS) and Consumer Assessment of Healthcare
Providers and Systems (CAHPS) measures will be col-
lected and used to rate plans sold on state-run and
federally facilitated exchanges. CMS intends to beta-test
its data collection system on exchanges this year (HEX
10/30/14, p. 1).
“Managing costs and remaining competitive on pre-
mium price are also top priorities, and we believe plans
will look to the use of preferred pharmacy networks,
home delivery pharmacy alternatives, and formulary/
co-pay strategies for expensive specialty medications to
help achieve those goals,” Huppert adds.
Prescription drug coverage is one of 10 essential
health benefits (EHBs) that must be offered by plan spon-
sors of individual and small-group plans sold on health
insurance exchanges. For the 2014 and 2015 plan years,
EHB plans have had to cover the greater of one drug per
U.S. Pharmacopeia category and class or the same num-
ber of drugs in each USP category and class as the state-
selected EHB benchmark plan.
In a proposed rule on benefit and payment param-
eters released in December, HHS acknowledged that
issuers have had difficulty developing formularies that
conform to the USP system, which was developed for the
Medicare population, and recognizes that “some drugs
that are likely to be prescribed for the larger EHB popula-
tion were not reflected.”
The trade association Pharmaceutical Research and
Manufacturers of America (PhRMA) tells HEX that it
welcomes the proposed changes. “This includes im-
proved formulary transparency, clarification that cost
sharing for medicines approved through an exceptions
process will count toward the out-of-pocket maximum,
and policies that will better promote inclusion of new
and innovative products on formularies,” says spokes-
person Allyson Funk.
Drug Benefit News, HEX’s sister publication, recently
asked insurance carriers and PBMs about the phar-
macy trends they expected to see in private and public
exchanges in the year ahead. Pharmacy benefit consul-
tancy The Burchfield Group predicts that the two things
to have the biggest impact on PBMs will be: (1) combined
out-of-pocket accumulators for all medical and pharma-
cy costs, which will create “an extensive and expensive
process with no added revenue to any party,” and (2) sig-
nificant growth in either the public or private exchanges
as it represents a risk to the traditional PBM model, says
Founder and CEO Brian Bullock.
“Moving forward, the public exchanges are likely to
include more member friendly features, including ex-
panded formulary options,” he adds. “Drug coverage in
public exchanges will be as good as or better than what
exists in 2014.”
Wall Street’s Forecast for Health Insurers:
Picking 2015’s Winning and Losing Trends and Companies
¾¾ Which trends are most likely to boost health plan profitability in 2015?
¾¾ Will private exchanges, pay-for-value contracting and narrow network strategies win more
favor in the new year? How will these factors affect earnings and stock valuations?
¾¾ Will medical loss ratios be a positive or negative factor for major plans in 2015?
¾¾ How concerned is Wall Street about the threat to the ACA from a Republican Congress and
Supreme Court ruling on the legality of federal exchange subsidies?
¾¾ Should we expect more or less M&A activity in 2015 than we saw in 2014?
¾¾ Which health carriers are positioned to profit the most from today’s turbulent market?
¾¾ Is there a health insurance sector stock bubble that is about to burst?
Join Carl McDonald of Citi Investment Research and Analysis and
Neal Freedman of Standard & Poor’s Ratings Services for a Jan. 20 Webinar.
Visit www.AISHealth.com/webinars or call 800-521-4323
9. January 2015 Inside Health Insurance Exchanges 9
Web addresses cited in this issue are live links in the PDF version, which is accessible at HEX’s
subscriber-only page at http://aishealth.com/newsletters/insidehealthinsuranceexchanges.
habilitation, CoOportunity had just $17.2 million in cash
and assets, or about $143 per member. The three-year
risk-corridors program was designed to shield carriers
that wind up with a disproportionate share of high-cost
enrollees.
In an alert to insurance brokers and agents, state
regulators in Iowa and Nebraska encouraged them to
move all CoOportunity business, new and renewal, to
other carriers “as soon as possible.” Along with issuing
Federal Reg. Tracker: Dec. 1, 2014 –
Jan. 12, 2015
Proposed Regulations
u Summary of Benefits and Coverage and Uniform
Glossary (Dec. 30)
These proposed regulations concern the sum-
mary of benefits and coverage (SBC) and the uni-
form glossary for group health plans and health
insurance coverage in the group and individual
markets under the Affordable Care Act (ACA).
Visit www.gpo.gov/fdsys/pkg/FR-2014-12-
30/pdf/2014-30243.pdf.
u Amendments to Excepted Benefits (Dec. 23)
These proposed rules would amend the regula-
tions regarding excepted benefits under the Em-
ployee Retirement Income Security Act of 1974, the
Internal Revenue Code, and the Public Health Ser-
vice Act related to limited wraparound coverage.
Visit www.gpo.gov/fdsys/pkg/FR-2014-12-
23/pdf/2014-30010.pdf.
Letter
u DRAFT 2016 Letter to Issuers in the Federally-
facilitated Marketplaces (Dec. 19)
This 60-page letter provides issuers seeking
to offer qualified health plans (QHPs), including
stand-alone dental plans (SADPs), in the Federally-
facilitated Marketplaces (FFMs) or the Federally-
facilitated Small Business Health Options Programs
(SHOPs) with operational and technical guidance
to help them successfully participate in those
exchanges in 2016. Unless otherwise specified,
references to the FFMs include the SHOPs. CMS
identifies the areas in which states performing plan
management functions in the FFMs have flexibility
to follow an approach different from that articu-
lated in the guidance.
Visit http://tinyurl.com/pfrmrd5
SOURCE: AIS Health, December 2014.
Several PBMs indicate a strong interest in participat-
ing in private exchanges, in which large employers move
all or a portion of covered employees to a platform that
offers access to several health plan options. Prime Thera-
peutics LLC, for example, says it expects a significant
number of its accounts to consider private exchanges,
and is “playing an active role in building private-
exchange based benefits/programs that will support a
number of plan models and position our organization
to be ready for future growth,” says Tom Hoffman, vice
president and general manager of individual markets.
Catamaran Corp., which recently lost Walgreen
Co. member lives to a private exchange, says it expects
minimal impact to its PBM business from the growth
of private exchanges. “As employers ‘shuffle’ how they
purchase health insurance in the new marketplace, we
will follow their needs and respond accordingly. Which-
ever way employers come into the system, we are well
positioned to serve them,” says Ellen Nelson, senior
vice president of government relations. “Currently we
see employers carefully weighing their options with
most taking a wait-and-see attitude to see if private ex-
changes are a short-term fix or a longer-term value add.”
Contact Funk at afunk@phrma.org and Jennifer
Luddy for Huppert at jennifer_luddy@express-scripts.
com. G
High Risk Sinks Iowa CO-OP
continued from p. 1
Moreover, Blues plan operator Wellmark, Inc., which
dominates Iowa’s insurance market, opted not to partici-
pate in the public exchange. “I think they figured out that
while they would lose some market share by not partici-
pating in the exchange, they would benefit competitively
with most of the high risk/high cost Medicaid eligibles
going to CoOportunity, which in turn would potentially
destabilize CoOportunity’s financial reserves. I can un-
derstand that as a business tactic, but not by a not for
profit entity that has community based responsibilities,”
says Martin Hickey, M.D., CEO of New Mexico-based
Health Connections and board chairman of the National
Alliance of Health Care CO-OPs.
To offset the higher-than-expected claims, CoOpor-
tunity was counting on a $125.6 million infusion from
CMS through the Affordable Care Act’s risk-corridors
program. But a provision included in the $1.1 trillion
spending bill signed by President Obama in mid-De-
cember requires that program to be budget neutral (HEX
12/17/14, p. 1). The CO-OP’s reimbursement could be
slashed in half as a result. Moreover, payments from the
risk-corridors program won’t be distributed until Au-
gust. When Iowa regulators forced the insurer into re-
10. 10Inside Health Insurance Exchanges January 2015
Call Bailey Sterrett at 202-775-9008, ext. 3034 for rates on bulk subscriptions or site licenses, electronic
delivery to multiple readers, and customized feeds of selective news and data…daily, weekly or whenever you need it.
a $500,000 per-member limit on medical and pharmacy
claims, state regulators have warned that federal pre-
mium subsidies might no longer be available to CoOpor-
tunity members.
CO-OP Execs Remain Confident
Last month, HEX reported that CO-OPs, including
CoOportunity, had “come out swinging” by offering
more competitive rates than they did a year ago (HEX
12/18/14, p. 1). Now that one of them is up against the
regulatory ropes, do the others share a black eye?
CO-OP executives don’t think so, and contend that
CoOportunity’s problems aren’t representative of the
whole group. “CoOportunity is an unfortunate occur-
rence,” says Peter Beilenson, M.D., CEO of Maryland
CO-OP Evergreen Health. “It’s very clear from working
with the other CO-OPs that each one is in such a different
situation. Our markets are all completely different.”
Ten of the other 23 CO-OPs responded to HEX’s
request for comment. Several executives say they aren’t
relying on risk-corridor payments. Others say they have
countered high-risk individual enrollees by promoting
coverage to the off-exchange group markets, which tend
to be younger and have lower risk than the individual
market. State regulators generally offered little insight
about the financial shape of their CO-OPs, but told HEX
the carriers appear to be financially sound. Here’s a look
at where several CO-OPs stand:
u Arches Health Plan: Shaun Greene, founder and chief
operating officer at the Salt Lake City-based CO-OP, says
executives there expected the risk-corridor program to
wind up being budget neutral. “We did accrue some
money for it that we need to change, but we don’t see it
changing our cash position,” he says. “We have taken a
conservative position for the 3Rs, and we will try to get
the best risk we can.” To do that, Greene says Arches
directs its messaging to people under age 30, and has
launched a gamification smartphone app aimed at col-
lege students. The average age of new members for 2015
is 29 — down from an average of 34 last year. The CO-OP
Average Individual Premium Rates for 2015 Exchange Plans, by State, by Tier
State Catastrophic Bronze Silver Gold Platinum
Alabama $201.00 $225.54 $282.87 $328.03 $383.20
Alaska $364.00 $471.09 $578.48 $682.78 NA
Arizona $183.18 $255.77 $312.83 $346.39 $354.41
Arkansas $189.07 $243.93 $313.39 $360.42 NA
California $238.87 $263.08 $334.44 $403.08 $456.37
Colorado $231.17 $270.20 $334.30 $378.73 $426.27
Connecticut $197.36 $273.40 $347.40 $383.24 $472.22
Delaware $218.67 $252.24 $324.33 $369.57 $438.51
District of Columbia $155.24 $211.93 $272.88 $328.63 $418.10
Florida $241.11 $295.05 $356.30 $404.96 $453.50
Georgia $216.72 $263.67 $322.35 $376.75 $466.87
Hawaii $155.03 $170.74 $205.54 $244.76 $303.75
Idaho $227.98 $248.00 $301.30 $325.83 NA
Illinois $219.46 $242.41 $298.32 $358.94 $453.91
Indiana $224.65 $291.55 $356.96 $431.53 $673.03
Iowa $251.33 $257.68 $323.41 $376.44 $513.07
Kansas $161.29 $210.08 $249.53 $292.25 $348.84
Kentucky $167.61 $219.53 $275.17 $322.68 $342.36
Louisiana $217.00 $278.34 $359.57 $411.83 $456.53
Maine $222.78 $298.81 $370.28 $464.47 NA
Maryland $173.04 $206.16 $269.05 $315.65 $381.52
Massachusetts NA $287.94 $333.97 $428.00 $515.49
Michigan $205.96 $259.88 $316.77 $387.05 $455.17
Minnesota $147.76 $201.48 $243.87 $295.86 $315.79
Mississippi $242.92 $254.98 $332.16 $373.96 $389.02
Missouri $244.08 $266.51 $330.04 $385.25 $362.26
Montana $186.37 $228.38 $276.08 $333.75 $388.98
Nebraska $201.74 $265.15 $322.97 $375.63 $529.68
Nevada $255.31 $284.43 $333.33 $373.07 $410.25
11. January 2015 Inside Health Insurance Exchanges 11
Subscribers who have not yet signed up for Web access — with searchable newsletter archives, Hot Topics, Recent Stories and more —
should click the blue “Login” button at www.AISHealth.com, then follow the “Forgot your password?” link to receive further instructions.
also targets the generally stable large-group market. As
of Jan. 1, Arches has about 36,000 members — about two-
thirds have individual policies, and about 80% of the rest
are large group. Greene says his company could wind up
with another 13,000 members by Feb. 15.
u Colorado HealthOP: A spokesperson for Colorado’s
Division of Insurance says HealthOp’s finances meet the
minimum capital and surplus requirements of the divi-
sion and state law. “The situation in Iowa is concerning,
but the division is not doing any additional monitoring
of the Colorado HealthOP,” says spokesperson Vincent
Plymell. “That being said, we do financial monitoring of
all our carriers on at least a quarterly basis, which is espe-
cially important in the new world of the ACA.”
u Evergreen Health: Beilenson admits that Evergreen got
off to a slow start last year, which he contends was due
largely to being undercut by CareFirst, Inc., the state’s
Blues plan operator. For 2014, the CO-OP sold just 450
individual policies, but it added 12,000 people through
small-group policies. With the majority of member-
ship on the small-group side, and a median age of 35,
Beilenson says his firm isn’t expecting much from the
risk-corridors program, which is aimed only at individ-
ual qualified health plans (QHPs). For 2015, Evergreen’s
individual exchange enrollment hit 2,000 six weeks after
the open-enrollment period began. Another 500 indi-
viduals signed up outside of the exchange. He expects
individual enrollment will double by Feb. 15, and small-
group enrollment to double by the end of the year.
u Health Republic Insurance of New York: With “de-
cades of experience” in the health insurance industry,
Health Republic’s executive leadership says it has been
working consistently with state and federal regulators to
“prudently serve its members while maintaining sound
financial footing, including adequate solvency reserves,”
says Debra Friedman, president and CEO of the New
York CO-OP. For the 2014 plan year, the insurer had more
than 150,000 members across all product lines.
u Health Republic Insurance of New Jersey: The CO-OP
tells HEX that it is on “a sound financial footing.” The is-
sues affecting CoOportunity were specific to those states,
lines of business, and claims experience and have no
Average Individual Premium Rates for 2015 Exchange Plans, by State, by Tier
(continued)
State Catastrophic Bronze Silver Gold Platinum
New Hampshire $194.18 $253.65 $328.89 $400.33 $664.82
New Jersey $271.75 $327.03 $359.83 $453.76 $554.38
New Mexico $184.13 $203.15 $254.17 $303.40 $384.20
New York $196.47 $361.29 $435.13 $513.56 $611.82
North Carolina $214.73 $281.43 $356.54 $416.61 $468.10
North Dakota $188.60 $263.84 $318.70 $364.38 NA
Ohio $194.63 $264.96 $328.56 $378.74 $532.63
Oklahoma $172.62 $216.59 $281.31 $353.23 $501.77
Oregon $203.46 $213.23 $266.23 $314.15 $376.12
Pennsylvania $165.99 $228.62 $285.33 $324.81 $431.17
Rhode Island $199.33 $227.74 $283.91 $340.01 NA
South Carolina $221.33 $277.10 $317.13 $375.43 $678.14
South Dakota $205.51 $244.74 $292.13 $369.27 $429.45
Tennessee $168.99 $209.01 $267.64 $352.35 $446.52
Texas $225.85 $242.35 $300.73 $364.05 $467.68
Utah $203.35 $212.14 $261.93 $307.41 $271.96
Vermont $218.45 $383.42 $455.20 $546.12 $635.48
Virginia $197.72 $247.36 $302.14 $372.62 $516.74
Washington $224.57 $237.87 $299.91 $357.27 $407.65
West Virginia $223.88 $248.89 $298.40 $361.51 $511.07
Wisconsin $222.19 $300.51 $358.23 $427.03 $563.39
Wyoming $329.06 $386.92 $447.63 $526.72 $563.39
NOTE: Average premiums are based on a non-smoking 40-year-old individual. New York and Vermont do not differentiate premium rates by age.
NA=The state does not offer plans in the applicable metal tier.
SOURCE/METHODOLOGY: Calculated by AIS from premium rates released by HealthCare.gov and state-sponsored exchanges. Full lists of premium
rates that have been released from federal and state public exchanges are available in AIS’s Health Insurance Exchange Database: 2015 Plans and
Premiums, now shipping. For more information or to order, call (800) 521-4323 or visit http://aishealth.com/marketplace/health-insurance-exchange-
database.
12. 12Inside Health Insurance Exchanges January 2015
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delivery to multiple readers, and customized feeds of selective news and data…daily, weekly or whenever you need it.
impact on New Jersey, says Chief Financial Officer Joel
Vandevusse. “HRINJ is currently on target to meet its
financial projections and already has achieved its enroll-
ment goals for 2015.”
u HealthyCT: Connecticut’s CO-OP expanded its prod-
uct portfolio significantly and predicts steady enroll-
ment growth for 2015. “With more choice, competitive
pricing and growing brand recognition, we’re earning
approximately 20% of the new on-exchange enrollments,
versus just 3% last year,” says CEO Ken Lalime, adding
that the CO-OP holds a “strong cash position” going into
2015. The insurer also has expanded into the large-group
market, which it says has led to significant off-exchange
membership. Like any new health insurer, HealthyCT re-
ceives heightened scrutiny to make sure it is growing “in
a manner which is financially sound and permits them
to meet their policyholder obligations,” adds Connecti-
cut Insurance Dept. spokesperson Donna Tommelleo.
Lalime says it’s too early to know how HealthyCT will
be affected by the budget neutrality of the risk-corridors
program. He notes that many smaller carriers, not just
CO-OPs, are vulnerable because they don’t have the
capacity to absorb adverse risk the way large insurers do.
u InHealth Mutual: The Ohio-based CO-OP says it has
“zero assets” tied to the risk-corridors program. InHealth
wasn’t licensed in the state until September 2013 — too
Recent E-News Alerts
These items were included in E-News Alerts that were
transmitted since the last print issue of HEX was
published on Dec. 18:
January 7, 2015
• Iowa Insurance Dept. Takes Over CO-OP
• Vast Majority of Exchange Enrollees Qualify for
Subsidies
• HHS Proposes Rules to Simplify Insurance
Shopping
• Study: Subsidized Coverage Cuts Spending by Two-
Thirds
January 14, 2015
• Cover Oregon to Lay Off 61 Staffers
• Financial Woes May Drive Some State Exchanges
to Fed Site
• Colo. Exchange Boosts Enrollment Spending by
$322K
• Covered California Enrolls 1 Million So Far
To retrieve copies of these E-News Alerts, visit HEX’s
subscriber-only Web page at AISHealth.com. If you
need a password or other assistance, please contact
AIS’s customer service department at 800-521-4323
or custserv@aishealth.com.
late to be allowed to sell coverage through the state’s
federally run exchange last year. Off of the exchange,
however, the company enrolled about 6,000 people. In-
Health received more than $63 million in capital, which
was significantly larger than the state’s initial solvency
requirement of $2.5 million, says CEO Jesse Thomas. The
company has a loan commitment for $50 million in ad-
ditional solvency funds. The company’s business model
has “deliberate low overhead and a slow and measured
growth strategy,” he says, adding that InHealth uses a
per-member per-month pricing model versus a fixed-cost
model. That lets InHealth “incur costs only as we in-
crease our revenues.” Thomas says InHealth’s 2015 rates
are an average of 14% higher than premiums in 2014. He
adds that his firm has recorded reinsurance recoverables
of only about $500,000. “As a prudent and conservative
business measure, we reduced the amount to be recov-
ered by an estimate of 25% because there is no certainty
as to whether the fees charged will be enough to cover
the recoverables sought in the industry,” he explains.
“Relative to our $50 million in surplus, InHealth is finan-
cially strong enough to survive even in the very unlikely
situation that we collected none of the $500,000,” he
concludes. A spokesperson for Ohio’s Dept. of Insurance
declined to comment on the CO-OP’s finances.
u Kentucky Health Cooperative: Kentucky Insurance
Commissioner Sharon Clark says her office has been
monitoring the Kentucky Health Cooperative (KHC)
closely since its inception, “just as we would any new
company.” In its first year, the CO-OP wound up with
nearly double the enrollment it had anticipated…and the
vast majority of those members had previously been in
Kentucky Access, the state’s high-risk pool, she says. Due
to the unexpectedly large number of enrollees — and
resulting claims — KHC recently received an additional
$65 million in solvency loan dollars from CMS, Clark
says. “In addition, the cooperative decided to delay its
entry into the West Virginia market and raised its rates
for the 2015 plan year. All these steps were taken with the
approval of the Dept. of Insurance,” she says.
u Maine Community Health Option: Maine’s Bureau of
Insurance (MBI) says the state’s CO-OP reported higher-
than-expected enrollment in 2014. “The bureau views the
company’s initial experience as being good, to date, with
sufficient access to capital. More will be known, however,
as 2015 unfolds,” says MBI spokesperson Doug Dunbar.
Contact Amy Wells for Thomas at awells@
inhealthohio.org, Michael O’Leary for Vandevusse
at moleary@newjersey.healthrepublic.us, Greene
at sgreene@archeshealth.org, Beilenson at plb@
evergreenmd.org, Audrey Honig Geragosian for Lalime
at audreyct@sbcglobal.net and Hickey at martin.hickey@
mynmhc.org. G
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