In the wild-west world of online exchanges, sometimes it may seem like anything goes. Case in point: a public entity building its own marketplace to mirror public exchanges under the Affordable Care Act.
Such an arrangement began when a Los Angeles-based brokerage was contacted to partner with a Joint Powers Authority that also has offered traditional pooled health plans to employees of public school districts for about 20 years.
“It’s ironic that most school districts wouldn’t qualify for the California state exchange because of their size and other issues,” observes Tony Lee, CEO of Dickerson Employee Benefits, one of just four companies chosen as a wholesaler for the Covered California state-run public HIX to provide services for small businesses. He notes that the 50-employee threshold for 2014 doubles to 100 in 2016 as the small-business definition is tweaked.
He also notes that the JPA, “has seen what they think would work with the state and decided to essentially create their own private exchange. We see a public entity taking something from the feds and the state and re-engineering it for their members, and there’s been a huge amount of interest with public school districts accessing this new mechanism.”
School district employees are able to go online and pick among bronze, silver, gold or platinum plan with a defined contribution as part of a Blue Cross offering. “It looks and feels just like the California SHOP exchange would look and feel,” Lee explains. “And at the end of the day, I think there’s a big administrative overhead that’s taken off these school districts when you can just tell an employee, ‘go here, pick the plan you want, and you’ll see how it impacts what your employer or employee contributions would be.’”
About four or five school districts are currently part of the arrangement, whose enrollment is done on a rolling basis (i.e., July 1, October 1 and January 1). “It’s just beginning to gather steam, and they’re relying on us to be their marketing arm because they’re a public entity and it’s not what they do,” he says.
Many of these employees are currently enrolled in the California Public Employees’ Retirement System, known as CalPERS. “Generally a lot of the school districts are union contracts, so some have very antiquated plans that are still around,” according to Lee. “It’s all around the board.” The JPA’s strategy “was not to compete with the state, but to potentially see if they could do a better job at providing service than what other pools might do.”
Michael Wolff, president, COO and CFO of DEB, explains that the JPA approach to health care delivery “isn’t a private exchange” per se so much as it basically involves pooling risk inside of the marketplace and giving people a choice based on underwriting by a carrier. The JPA also has other pooled plans outside of their marketplace.
He says what’s so appealing about the private HIX model is its “predictability and transparency” given that health insurance rates “go up, down and sideways,” but the defined contribution approach enables business to plan ahead. Wolff also notes that the precious-metal approach of standardized benefit tiers in the HIX marketplace makes it much easier to compare plans from multiple carriers.
DEB has helped Covered California certify agents to help raise the HIX marketplace profile – an effort that has exceeded expectations. “Covered California expected about maybe 5,000 agents to be interested in being certified, but we are having now 16,000 licensed insurance agents create accounts and asking to be trained,” he reports.
Anticipating the impending small-business threshold change, he notes that insurance carriers are now wisely modifying their underwriting practices to focus on just five questions and allowing consumers to pick their own rate.
