Variations in insurance markets from state to state mean there is no single formula for how to set up the new health insurance exchanges, as required under healthcare reform, a panel of experts said at the America's Health Insurance Plans Fall Forum on Tuesday in Chicago.
"As we contemplate our vision for an exchange in Illinois we need to embrace the reality of our marketplace right now: we are not Massachusetts, we are not California, we are not Wisconsin. We have to find a way that works for us," said Michael McRaith, director of the Illinois Department of Insurance. "Every state is so different, the regulation in each state is so different."
McRaith said the National Association of Insurance Commissioners is working on a model law that includes the essential provisions of the Affordable Care Act as a starting place for state legislatures to consider as they begin work on creating exchanges in 2011.
"What we do not attempt to do with the model law is reconcile the conflicting public policy decisions that individual states will have to make," McRaith said. "We want to assure maximum state flexibility."
Using a flexible framework proved important in Massachusetts and Utah, the first two states in the country to create working HIEs.
In Massachusetts, the structure of the Commonwealth Health Insurance Connector Authority was important to its success in establishing the exchange, said Rosemarie Day, its former deputy director and COO and now president of Day Health Strategies.
"One of the secrets of our success in Massachusetts is we did not stay with government format. We were created as a quasi-governmental authority," Day said.
This independence gave the authority latitude in a number of areas, including marketing and the creation of a website. It also allowed Day to recruit talented people from within the industry to foster the creation of the exchanges, as she was not constrained by government pay scales.
"In Massachusetts we were grateful for the fact that we were set up independently and were therefore able to be more entrepreneurial as a result," said Day. "We created a different sort of culture and – having worked within state government, I can speak to this – it was very freeing."
In Utah, while there was also consideration to create an exchange via a quasi-governmental entity, the decision was ultimately made to run it from within the state's executive branch, said Cheryl Smith, director of Leavitt partners and former director of the Utah Health Exchange Office.
"There was some contention whether this would be put within our department of health or department of insurance," said Smith. "What we realized was our uninsured population was coming out of the small business sector and that is where we were losing a lot of insureds, as small businesses were dropping coverage. So we decided to put this in the Governor's Office of Economic Development."
According to Smith, while Massachussets seeks to contract with the insurers in the exchange, Utah's model is as a market organizer.
"In Utah they didn't have a political desire or the political appetite to implement a market-maker model. They just wanted to see the exchange like a farmer's market – a place where carriers can display their wares and employees can compare plans and purchase the plan that works for them," Smith said.
While Massachusetts' quasi-governmental structure provider flexibility, Smith noted that for Utah, statutory flexibility was equally important. In Utah, the law was simple and broad, calling for the creation of a sate exchange by a certain date with very little else in the details.
Both Smith and Day noted the importance of deliberately not providing too many mandates early in the development of their state exchanges as reasons for their success and something they would recommend to other states facing this task.
"You'd be hard-pressed to find two states such as Utah and Massachusetts that are more different politically and culturally," said Smith. "So if these two states can find a way to implement an exchange and make it work, the other 48 can, too."