PUBLIC EXCHANGES Preparing for 2014 Launch

PUBLIC EXCHANGES Preparing for 2014 LaunchOctober 26, 2012

Russ AckermanPrincipal

Charles LassiterSenior Associate

© 2011 Mercer Health & Benefits LLC 2April 19, 2023

Agenda

Introduction – Mercer• Government Human Consulting Services - Who We Are

Our Understanding of Idaho’s Exchange Status

Areas of Expertise• A Case Study – Mercer’s Arizona Experience

Potential Financial Impact to Consumers

• An Illustration on Premiums

Questions and Answers


Introduction - Who We Are

MercerBroad array of resources with a strong local emphasis

Our Exchange Consulting Team

LeadershipRuss Ackerman - Mercer Government Consulting: National Practice Leader for

Public ExchangesShelli Stayner - Mercer Health and Benefits: Boise Office Business Leader

Project ManagementCharles Lassiter - Mercer Government Consulting: Currently consulting State of

Arizona’s Health Insurance Exchange

Actuarial LeaderSheree Swanson - Mercer Government Consulting: Exchange and Affordable Care

Act Actuarial Expert consulting several States, including California,

Oregon, Washington, New Hampshire, Connecticut and Arizona

Mercer also offers the expert services of our sibling companies, Oliver Wyman, Marsh, and Guy Carpenter


Mercer’s Understanding of Idaho’s Decision Points

How does November’s presidential election influence the decision?

How does State Government/Legislature influence your decision?• Authority• Exchange Entity – Structure and Governance• Funding

Type of Exchange• For 2014 and then subsequent years• Which level of Government is in control – short term vs. long term

Impact to:• Consumers• Insurance carriers• Providers• Agents• State agencies

• For commercial business / Department of Insurance• For Medicaid / Health and Welfare

Implementation• Who can help Idaho achieve the objectives?

© 2011 Mercer Health & Benefits LLC

MERCER’S GOVERNMENT HUMAN SERVICES CONSULTING PRACTICEOur Role and Experience With Public Exchanges

Mercer has partnered with several states in all areas of consulting services related to the ACA, Health Insurance Exchange strategy development, and preparation for implementation of Exchanges. Mercer has deep experience consulting more than 30 states in recent years for various programs, such as Medicaid. Some states and jurisdictions Mercer has also helped regarding the ACA and Exchanges include:

• Arizona• California• Connecticut• Hawaii• Kansas• Maine• Massachusetts• Missouri

• New Jersey• Nebraska• North Carolina• Oregon • Washington DC• Puerto Rico• US Virgin Islands


MERCER’S GOVERNMENT HUMAN SERVICES CONSULTING PRACTICEOur Capabilities

How Mercer has Helped these States’ Public Exchanges:

• Market Research• Medicaid Expansion Impact on State Budgets• Medicaid Expansion and Integration with Exchanges• Basic Health Plan Analysis• Exchange Planning and Design• Exchange IT System Strategy• Exchange Sustainability• Insurance Market Reform Strategy• Eligibility Process Evaluation and Simplification

• Call Center Strategies • Financial Reporting and Dashboard Development• Procurement Assistance• Peer Review Guidance• Essential Health Benefits Plan• Benchmark Plan Evaluation• Population Data Assessment• Exchange Utilization Analysis•“3 Rs” Analysis (Risk Adjustment, Reinsurance, and Risk Corridors)


MERCER’S GOVERNMENT HUMAN SERVICES CONSULTING PRACTICEOur Areas of Expertise

From beginning to end, Exchange development and implementation is a complex undertaking.

Although Mercer and our sister companies have very broad core capabilities, Mercer recognizes both the need and benefit of partnering with other industry experts to arrive at an optimal solution.


A Case Study - Mercer’s Arizona Experience

The value in stakeholdering

• Carriers, producers and their associations are participating in Exchange development around the Country; Idaho is in a great position to capitalize on their lessons learned, innovations and novel solutions.

• Deferring to the Federal Exchange will minimize the ability of the insurer and provider community to affect a marketplace that is currently and historically market-driven.

• Effective stakeholdering and consensus building will ensure that the Idaho Exchange solution is implemented with minimal advocate, legislative or executive resistance.



The complexities of Plan Management

• Knowing the rules – Mercer utilizes both its D.C. policy group as well as local consultants to provide real time analysis and consultation on all Exchange related rules.

• Key documents include: Design Review Evidence, Blueprints, and QHP applications.



Why Essential Health Benefits still matter

• The EHB, chosen or not, remains the basement benefit for all plans sold in the State. The interpretation of benefits in the EHB remains a crucial issue to carriers offering plans in the State. Being able to select or guide the interpretation of EHB will ensure stability in the market and ensure that the State values remain in tact.

• CCIIO has indicated that the selection is only intended to cover the first two years of the Exchange.



Ensuring sustainable solutions

• All Exchanges must be self-sustaining by 2015. A State-based exchange will not be approved and initially funded by CCIIO without an approved sustainability plan meeting all of the technical requirements.

• This effort required considerable information gathering, actuarial projections, and analysis of current and prospective market conditions.

• Idaho is not disadvantaged for having waited. The State will still be able to apply for Level Two Exchange Establishment funds through October 15, 2014. It is likely that these funds can be used to offset some first year Exchange costs allowing the State to rapidly build reserves.



Seamless integration of eligibility systems

• The Exchange will not operate in a vacuum; its users will transition to and from the Expansion and Medicaid benefits.

• Multi-discipline team resources dedicated to Exchange activity include Medicaid consultants, commercial health and benefits consultants, actuaries, policy experts and data analysts.



Ensuring the State gets the best vendors possible

• Procurement drafting, evaluation support and performance based contracting are areas that Mercer provides consultation to states all over the country.

• Mercer provided pricing and out-year cost projections on all of the IT vendor bids that came in. This 5 month selection process included several rounds of interpreting bid structures and translation into a digestible apples-to-apples comparison of estimated bidder costs.



The value in full partnership

• Mercer has provided both original works and peers on State created works. Both offer legitimacy to final products and Exchange decisions.

• Because Mercer has been on board since the planning stages of the Arizona Health Insurance Exchange, our continued consultation has with it all the background and political knowledge necessary to effectively assist the State in realizing its original intentions.

• Of the State clients we work with, Arizona appears to have great alignment with Idaho’s ultimate long-term goal toward a State-based exchange, particularly in the long-term strategy, philosophy and health care market arenas.


ILLUSTRATIVE EXAMPLE - POTENTIAL FINANCIAL IMPACT TO CONSUMERS

Non-Group / Individual Market

• Premium assumptions based on the CBO’s work

• Average premiums in the non-group market of $5,800, and $15,200 for single and family coverage, respectively in 2016

• Premiums in non-group market 10% to 13% higher under the ACA reflecting a combination of richer benefits, administrative cost savings, changes in risk pool (we used 10% for this analysis)

• Models show large variation between impact on rates for younger individuals (18-29) versus those closer to retirement age due to 3:1 ratios, subsidies for lower income individuals (see appendix), mandated benefits and impact of limited catastrophic plan availability

• Actual results may vary – each state has different, complex market drivers that need to be studied



Premium Rate Changes in the Small Group Market – A Carrier ExampleAbout 40% of covered members from this company’s small group market will see premium increases in excess of 10% due to changes to market rules

Percentage of covered members and premium increases due to the elimination of underwriting loads, 3:1 for age, and the elimination of gender rating

Per

cen

t o

f C

ov

ere

d M

em

be

rs

Decile based on premium

Prem

ium

Increase

Source: Oliver Wyman



The Middle and Larger Group Market

• Reactions are mixed

• Assuming no major changes, early premium impact may be relatively small

• Real answers depend on how both employers and insurance companies choose to react to Exchange implementation

• A few potential influences:

• Insurance company offerings, including limited networks

• Further employer gravitation toward self-insurance

• Employer decisions regarding employee status

Mercer study shows 2/3 of employers may reduce some employees’ status to be lower than the 30 hour per week threshold

• Employer decisions steering employees to various products

• Greater movement to true defined contributions for coverage

• Private exchange availability


THANK YOU

Questions?


Mercer is not engaged in the practice of law and this report, which may include commenting on legal issues or regulations, does not constitute and is not a substitute for legal advice. Accordingly, Mercer recommends the advice of competent legal counsel with respect to any legal matters related to this report or otherwise.

The information contained in this document and in any attachments is not intended by Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or imposed by any legislative body on the taxpayer or plan sponsor.

Services provided by Mercer Health & Benefits LLC.


Appendices

1. Additional Slides – Potential Financial Impact to Consumers

2. Idaho’s Mercer Team


Appendix 1

Additional Slides – Potential Financial Impact to Consumers


POTENTIAL FINANCIAL IMPACT TO CONSUMERS

Gender eliminated as a rating characteristic and age compressed 3:1Rating factors increase considerably for males through age 49

Rat

ing

Fac

tor

Age/gender factors for single contracts


9.50% 9.50% 9.50%

6.30%

4.00%

3.00%

2.00%

8.05%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

100 150 200 250 300 350 400


Individuals with incomes less than 400% FPL will be eligible for refundable premium tax credits for coverage purchased through an exchange

Max

imu

m P

erce

nta

ge

of

Inco

me

FPL

Refundable premium tax creditBased on minimum applicable percentage of family household income

Notes: FPL is $23,050 for family of four and $11,170 for single in 2012

Affordability exemption if “…required contribution exceeds 8 percent of individual’s household income…”

Annual premium $5,800

Income at 300% FPLApplicable percentageMaximum contribution

$33,5109.5%

$3,183

Refundable premium tax credit

$2,617

Example of refundable premium tax credit



Premium rate changes in the individual market after premium assistanceMales ages 19-29 with incomes greater than 200% FPL will pay considerably more for coverage

Number of insureds and premium increases due to the elimination of gender and age compressionMales ages 19-29

Nu

mb

er o

f In

sure

ds

FPL

Prem

ium

Increase



Premium rate changes in the individual market after premium assistanceFemales ages 19-29 will be relatively unaffected, though low income females will see a large reduction in premiums

Number of insureds and premium increases due to the elimination of gender and age compressionFemales ages 19-29

Nu

mb

er o

f In

sure

ds

FPL

Prem

ium

Increase



Premium rate changes in the individual market after premium assistanceMales ages 55-64 will see large reductions in their premiums

Number of insureds and premium increases due to the elimination of gender and age compressionMales ages 55-64

Nu

mb

er o

f In

sure

ds

FPL

Prem

ium

Increase



Premium rate changes in the individual market after premium assistanceFemales ages 55-64 will also generally see large reductions in their premiums

Number of insureds and premium increases due to the elimination of gender and age compressionFemales ages 55-64

Nu

mb

er o

f In

sure

ds

FPL

Prem

ium

Increase


Appendix 2

Idaho’s Mercer Team


Russ Ackerman – Principal

Mercer - Government Human Services Consulting (GHSC)

Russ is Mercer/GHSC’s Public Exchanges National Practice Leader. He has over 20 years in the health insurance and actuarial consulting arenas, with eight years consulting

employer groups, payers and providers, and twelve years leading insurance company actuarial and underwriting departments. Prior to Joining Mercer, he functioned as chief

actuary for Medica Health Plans, serving Minnesota, Wisconsin, North Dakota, and South Dakota, where he led various Health Care Reform and Exchange efforts. Previously he

has also consulted for Deloitte, Aon, and Watson Wyatt.

Russ is an Associate of the Society of Actuaries and a Member of the American Academy of Actuaries. He graduated with a Bachelor of Science degree in Statistics/Actuarial

Science from Brigham Young University.


Shelli Stayner - Principal

Mercer – Health and Benefits

Shelli is a Principal and the Office Business Leader for Mercer’s Boise Office. She has over 25+ years of extensive experience in the employee benefits arena. She has held regional

and local consulting and management positions in the benefits market. Her career has encompassed all aspects of the employee benefits world, including both fully insured and

self‑funding of employee benefit packages. She provides creative solutions and recommendations on alternative funding of employee benefits programs. Her expertise is in

plan designs and cost management strategies, including wellness and Total Health Management initiatives. She has devised and implemented cost‑effective plans in all areas of health, wellness, prescription, dental, vision, short term and long term disability, and life insurance alternatives. As a senior level consultant on behalf of large complex clients, she

is very involved in the overall strategic management of employer's or plan sponsor's programs. She is well versed in Health Care Reform and it's impact on employer plans today

and in the future. Mercer, is the leading Employee Benefits Consulting organization in the country and is a recognized Advisor regarding PPACA and Health Care Reform's impact on

Employers of all sizes.

Shelli holds a Bachelor of Science in Marketing from Boise State University


Charles Lassiter – Project Manager


Charles is a Senior Associate with expertise in physical and behavioral health systems development, management, program compliance and evaluation. Since joining Mercer in

early 2012, he has worked on procurement support projects and establishment of the Health Insurance Exchanges for Mercer clients.

Prior to joining Mercer, Charles worked for five years for the Washington State Department of Social and Health Services (DSHS). While at DSHS, Charles managed

several large procurements, including vendors for innovative health care pilot programs and information technology initiatives. He also served as in-house counsel to all the

State’s managed care programs before becoming program administrator for the State’s behavioral health managed care program and crisis system.

Charles graduated with a Bachelors of Arts from Eastern Washington University and holds a Juris Doctorate from the Seattle University School of Law


Sheree Swanson – Actuary


Sheree is an Associate of the Society of Actuaries and a Principal in Mercer’s GHSC practice. She has over 30 years of experience as a consulting actuary. She has been with Mercer for 14 years, initially as a benefit program consultant to large public and private

employers in the Northwest, and more recently working with state government programs on health insurance exchange development, Medicaid expansion, and other actuarial

assistance for Medicaid programs. Prior to joining Mercer, she was a Principal at Coopers &Lybrand (now PWC) and provided actuarial consulting assistance to public and private employers, health plans and providers, and also assisted several state governments with

their health care reform efforts.

PUBLIC EXCHANGES Preparing for 2014 Launch

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