On The Public Exchanges

April 22, 2015

A look back at open enrollment, and a look forward at the individual mandate

Given the rocky rollout of the federally managed and state-run health insurance exchanges in their first year, it’s safe to say that both advocates and critics held their collective breath as the second open enrollment period began on October 1, 2014.

Overall, second year enrollments went much more smoothly than the first. Some states did have glitches, but by and large technology was not the issue.

The individual mandate and its associated tax penalty was, however. Specifically, exchanges became concerned that not enough people were aware of the tax implications of not having purchased health care coverage for the plan year 2015.

The penalty, also called the “Shared Responsibility Payment,” is either 1% of annual income or $95 for the 2014 plan year (whichever is higher). In 2015, it goes up to 2% of yearly income or $325.

So, on February 20, 2015 the Centers for Medicare and Medicaid Services (CMS) announced a “special enrollment period” for those enrolling on the federally managed exchange, which covers 35 states and the District of Columbia. It will end on April 30th.

To be eligible, individuals would have to “attest that they first became aware of, or understood the implications of, the Shared Responsibility Payment after the end of open enrollment [February 15, 2015] in connection with preparing their 2014 taxes.”

After the CMS announcement, six of the state-run exchanges followed suit with special enrollment periods of their own. Just three states — Colorado, Idaho and Massachusetts — did not enact special enrollment periods.

Arguably, the most anticipated number at the end of this enrollment period will not be the final enrollment count, but rather the number of individuals who get hit with the penalty. Unlike final enrollment numbers — for which hopes are high — hopes for the tax penalty is that numbers are low.

So otherwise, how did public exchanges fare?

Amidst all the turmoil of shifting deadlines and the looming threat of tax penalties, public exchanges actually performed pretty well during the original enrollment period — although some did better than others.

As of this writing, Maryland doubled its enrollment compared to the last open enrollment period and California was on track to reach its goal of enrolling 500,000 people. Some states’ enrollment periods were uneventful, with a steady tick upward of enrollment numbers to levels that, while not staggering, surpassed the first open enrollment period. For states that implemented special enrollment periods, enrollment figures will continue to climb.

Some exchanges were plagued by issues beyond enrollment — including financial and technical issues, as well as staff turnover. Iowa saw one of its health insurance options, a co-op called CoOpportunity Health, fail due to having an insurer pool that was larger and sicker than anticipated, resulting in more risk than it could afford to bear. Colorado and Minnesota both experienced financial shortfalls and received $322,000 and $34 million respectively to fix their online enrollment portals. Executive directors of some state-run exchanges, including Massachusetts and Vermont, resigned and were replaced.

Despite these difficulties, the overall outcome on the public exchanges has been mostly positive this year. According to a recent Gallup poll, another 3.6 million adults have been added to the rolls of the insured during the latest enrollment period – which means that nearly 9 in 10 Americans now have insurance.

Joe Murad, Managing Director with Ex

For highlights of my perspectives in articles and other forums, see me on Twitter at #TWJoeMurad

This post is part of our Exchange Innovator Series featuring leading private exchange, health care reform and Medicare experts from Towers Watson.

I’m Joe Murad, managing director with Exchange Solutions for Towers Watson. I oversee our individual exchange solutions that serve Medicare-eligible and pre-65 retirees, part-time employees and their families.

Every day, my goal is to figure out how we can leverage our position as a technology leader to connect employers and the consumers they represent with better value while selecting health insurance. Our mission is to create cost savings for our employer-clients and provide our individual consumers with improved choice and control over their health benefits.

My health insurance roots

I grew up in Silicon Valley, surrounded by technology, innovation and disruptive market forces. Of the four start-ups I’m fortunate to have been a part of – my last two have been in the health insurance space – but I got my start in the world of relational databases.

It’s very typical of Valley ventures that innovation comes from outside an industry – from those who are not entrenched in industry thinking. Given my tech and my health insurance experience, I’m now one of the few people in our industry who has brought technological advancements to health care twice.

Joe Murad, Managing Director with Exchange Solutions

Skiing with the kids in North Lake Tahoe

I helped found the nation’s first private Medicare exchange start-up a decade ago. Today I continue to apply that expertise to help employers leverage opportunities in the individual market made possible by health care reform.

It was true then and remains true today that health insurance – the largest sector of the nation’s largest industry (health care) – is burdened by inefficiencies, making it ripe for innovation and change.

The evolution of private exchanges

Private exchanges emerged as a result of three factors coming together at just the right time. The first was the idea of managed competition in health care, pioneered by Alain Enthoven in the 1970s. We were very fortunate to work closely with Alain early on as we were designing our private Medicare exchange.

The second factor was health care reform – which took the form of the Medicare Modernization Act in 2003 and now the Patient Protection and Affordable Care Act (PPACA, aka the ACA) of 2010 – both of which created a viable individual market for health insurance, first in the Medicare world and now in the pre-65 world.

Joe Murad, Managing Director with Exchange Solutions

On the beach

The third factor is powerful platforms for consumer technology, which emerged in other industries – think of Amazon and Travelocity – and which we applied to health insurance.

Today my focus is on helping employers provide quality health benefits at a lower cost and to empower consumers with more choice and control over their health benefits. I also believe that over time our exchange model will drive more consumerism in health care – which will lead to a more efficient and effective health care industry.

Where I see health insurance going

On the Medicare exchange side, the market has hit its stride in the private sector. Two years ago when IBM announced moving to OneExchange for its retirees, the whole nation sat up and took notice of the exchange concept. It was no longer seen as a nascent technology play – it’s now understood as a practicable strategy that crosses all industries and company sizes. We are also seeing strong uptake in the traditionally conservative public sector.

As we move forward, the next logical frontier is how to make health insurance more reflective of the voluntary insurance and employment markets, which have become more personalized and portable in recent years.

If you think about all the other insurance coverage people have access to – auto, home, life – and combine that with the leading retirement savings programs – 401ks and IRAs – these are portable, individual plans and accounts that aren’t tied to where someone works. Why should health insurance be any different?

In the past, because employers were the purchasers of health insurance, they made all the decisions. With exchange technology enabling employers to offer retirees and employees more choice and control of their own health coverage decisions, it raises the question: Why can’t employees take the coverage they’ve chose for themselves when they move to another job? The law isn’t there yet but the consumer mindset is. If health reform catches up to that thinking, we will be there to provide the business model and technical solutions to enable it.

Apple’s latest gadget — and perhaps the most anticipated fitness wearable ever — was unveiled in March and will be available for purchase on April 24. But to many in the medical research community, Apple Watch was upstaged by the surprise release of ResearchKit, an open-source biomedical platform that will allow users of iOS devices to enroll in tests of new drugs and therapies by downloading apps from hospitals and providers who are recruiting patients. It works with HealthKit, a developer’s tool that allows health and fitness apps to share data that Apple introduced last year.

Apple announced earlier this year that it has shipped 1 billion iOS devices, including iPhones, iPads and iPods. Future iOS sales numbers will include Apple Watch, which also runs iOS.

So what does it mean that 1 billion+ devices now exist that people can use to voluntarily contribute their health information in support of medical research? Said Jeff Williams, senior VP of operations for Apple, “There are hundreds of millions of iPhone users that would contribute [to research] if it was easier to do so. ResearchKit turns HealthKit into a diagnostic tool.”

Bottom line, it could make high-quality medical research on diseases such as bipolar disorder and Parkinson’s easier and less expensive to conduct.

Apple developed ResearchKit in conjunction with an impressive list of organizations and hospitals, including Massachusetts General Hospital, Mount Sinai Hospital, UCLA’s School for Public Health, Stanford University School of Medicine, the University of Oxford, and the Dana Farber Cancer Institute.

Of course, Apple Watch also has many health and fitness features that one would expect of a fitness wearable. These include a heart rate monitor, apps for tracking workouts and goal setting and the ability to work out untethered by an iPhone.

It remains to be seen whether consumers will flock to Apple Watch as they have done with other Apple products. But if they do, it could be the first fitness wearable to spur employee engagement and adoption of corporate wellness programs.

Nine out of 10 employers (89%) say retirement benefit security is somewhat to extremely important to their retirees. While employers want to honor their promises to retirees to provide medical benefits, rising costs and a lack of strategic alignment with their workforce management strategies is causing them to evaluate new alternatives.

These conclusions are based on results from the Towers Watson 2015 Survey on Retiree Health Care Strategies, which surveyed 144 HR executives at large and midsize employers that sponsor retiree medical benefits. Of these, 78% said their company currently provides health benefits to both pre-Medicare and Medicare-eligible retirees, and 70% said they will offer benefits to most of their current full-time employees when they retire.

However, according to the survey, just 38% of employers said their retiree medical benefit program is effective in attracting and retaining employees. Even fewer — 26% — said the benefit is integrated into broader workforce management and retirement strategies.

Thus far, most employers have relied on traditional levers to control costs and risk, including:

  • Shifting costs to retirees
  • Capping subsidies
  • Changing eligibility requirements
  • Limiting or ending retiree benefits for new hires

Increasingly, however, employers are looking at new options:

For pre-Medicare retirees, these include providing services that enable retirees to purchase individual health plans either directly from carriers or via public exchanges. For 2015, just 8% of employers are confident in public exchanges as a viable alternative, but confidence rises to 35% by 2017. By 2017, more than half of employers (53%) will reassess their current approach to providing retirees under the age of 65 with health benefits and will consider public exchanges and federal subsidies based on family income where the employer subsidy is nil or modest.

For Medicare-eligible retirees, nearly eight in 10 (78%) employers are already using or considering the services of a private Medicare exchange to assist retirees with finding individual coverage. In addition, insurance products are emerging that enable employers to transfer the liability for retiree medical benefits to a highly rated insurance company through the purchase of an annuity that gives retirees tax-free funding to pay medical plan premiums for life.

For more information on the survey, read the full report.

On March 25th, President Obama issued a statement commemorating the 5th anniversary of the Affordable Care Act (ACA). Despite mixed reviews, the numbers speak to its success in achieving its stated goals.

Topping the list, between Medicaid expansion and public exchange enrollment, according to the U.S. Health and Human Services (HHS) Department, an estimated 16.4 million previously uninsured Americans now have health insurance. As the President said in his statement, the ACA “has cut the ranks of the uninsured by one third.”

Here are some other ACA numbers worth noting, courtesy of the federal government:

  • 3 million. The number of young people who didn’t have health coverage before the ACA, but do now because they can stay on their parents’ health plans until they turn 26
  • 9 million. The number of seniors and people with disabilities who have saved an average of $1,600 per person on their prescription medicine — adding up to more than $15 billion since the ACA became law
  • 76 million. The number of Americans who have gained access to preventive care with no additional out-of-pocket costs
  • 50,000. The number of preventable patient deaths avoided in hospitals over the last three years, largely due to the uptick in preventative care
  • 30 million. The number of young adults who can no longer be denied health insurance because of a pre-existing condition

President Obama acknowledged that it has been a tough five years for the ACA. “The Affordable Care Act has been the subject of more scrutiny, more rumor, more attempts to dismantle and undermine it than just about any law in recent history,” said the President.

However, the ACA survived a challenge to its constitutionality in 2012, when the U.S. Supreme Court upheld the law in a 5-4 decision. If it survives the latest attack, King v. Burwell, which seeks to eliminate federal subsidies for all but the state-run exchanges, it may see less pushback going forward. A decision is due when the Court recesses for the judicial year in June.

We’ll just have to wait and see.

By the end of 2015, approximately 1.2 million employees, retirees, and eligible family members sponsored by 1,500 different employers will be choosing their health care coverage via Towers Watson’s private health insurance exchange solutions. That’s up from 800,000 at the end of 2014, or nearly a 50 percent increase.

Convergys Corporation, a global leader in customer management, was one of the first companies to adopt OneExchange for its full-time employees. Envision Healthcare, a leading provider of medical transportation and facility-based physician services, and global branded media company Time Inc. are among the new employers that adopted OneExchange for their full-time employees for the plan year 2015.

Here’s what Convergys and Envision had to say about OneExchange:

“We’re pleased that OneExchange has helped us manage escalating costs associated with health care benefits for our company and our employees,” said Dennis Hicks, vice president, compensation and benefits for Convergys. “At the same time, we are pleased with how our employees have responded to the change. Post-enrollment data show us that our people chose their insurance options with an eye toward value… and over 90% felt the information they received from OneExchange helped them make informed choices.”

“Towers Watson has developed a program that allows our employees more provider, health plan and price options than previously available, which is almost unheard of in today’s health care marketplace, said Don King, Envision’s vice president of benefits and compensation. “Expanding insurance carrier options spurs competition, which improves long-term cost-mitigation opportunities.”

Towers Watson’s OneExchange has the distinction of having the longest operating history in the private exchange industry. OneExchange supports all workforce populations, from full- and part-time employees to pre-Medicare and Medicare-eligible retirees.

For more information on the growing numbers of employers choosing Towers Watson’s exchange solutions, read our press release here.

Recent data from a Towers Watson employer survey show that by 2018, the percentage of employers that have confidence in private exchanges as a viable alternative for active employees will grow to 37%. This is more than double the 17% that view them as a viable alternative by 2016.

The new data comes from the 2015 Emerging Trends in Health Care Survey, which surveyed 444 midsize to large U.S. employers representing 7.2 million employees.

Survey results also reveal that 26% of employers have extensively analyzed private exchanges, and 20% say they are more interested in adopting a private exchange today than they were a year ago. Companies that have completed extensive analysis of private exchanges are twice as likely to find private exchanges a viable alternative in 2016 than those that have not.

Participants further reported that interest in cost savings and administrative simplicity is driving their companies’ interest in private exchanges. As a result, more than half (53%) say they expect finance to play a role in any decision to adopt a private exchange model instead of traditional employer-managed health plans.

Broader trends also emerged from the survey results:

  • A majority of employers (84%) anticipate making changes to their full-time employee health benefit programs over the next three years, despite the fact that cost increases have remained at historically low levels
  • The main driver of changes to further lower cost increases is the ACA’s excise tax, which goes into effect in 2018. Two in five employers that have done extensive modeling of their plans say they will trigger the excise tax in 2018. Two-thirds say the tax will have an impact on their health program strategies

Other areas that employers will look at for cost reductions include spouse and dependent coverage, defined contribution arrangements, centers of excellence and high-performance networks, telemedicine, specialty pharma, and greater employee engagement in lifestyle and health behavior changes.

For more survey results in each of these areas, click here for the full release.

Starwood Hotels & Resorts Worldwide, Inc., one of the world’s leading hotel and leisure companies, has adopted Towers Watson’s OneExchange for its full-time active employees and their families. OneExchange will begin delivering health care benefits to Starwood’s 26,500 associates and family members based in the United States starting on April 1, 2015. The move will enable the company to offer its associates high-quality, cost-effective health care coverage with a focus on wellness and health improvement.

“OneExchange allows us to offer more choice in health care plans and carriers, continue providing health and productivity programs to keep health care benefits affordable, and sustain our benefit programs for the long term,” said Starwood executive vice president and chief human resource officer Jeff Cava. “We feel that partnering with Towers Watson allows us to take advantage of their core competence in designing and delivering benefits, and the economies of scale they provide.”

To learn more about Starwood’s decision to use OneExchange, read our press release here.

Every year Towers Watson customer support staff receives thousands of calls from people using OneExchange to find and enroll in health plans. The questions they ask us — and their employers –tell us a lot about what’s important to them and the information and guidance they need to make the best decisions they can.

With a growing number of full-time employees using OneExchange to find health coverage, we decided to compile the top 10 questions asked during the recent fall enrollment period for the plan year 2015. The questions underscore the obligation that employers and exchange providers have to help employees become more informed consumers and more active participants in their own health care.

Earlier this month, we issued a press release with a list of the top 10 questions and what they reveal about employees’ concerns.

Click here to read the full release.

Jean Moore, Managing Director with Exchange Solutions for Full-Time Active Employees on OneExchange

For highlights of my perspectives, articles I’ve contributed to and other forums where I’ve shared my thoughts, see me on Twitter at #TWJeanMoore

This post is part of our Exchange Innovator Series featuring leading private exchange, health care reform and Medicare experts from Towers Watson.

I’m Jean Moore, managing director with Exchange Solutions for Towers Watson, overseeing our offerings for full-time active employees on OneExchange.

My overarching responsibility is to meet the needs of the market. Today that means I make sure the exchange works the way it was designed to and I help employers understand how our exchange paradigm can serve their needs – how OneExchange is calibrated to reduce health spend as well as how our model is built on a best-in-class experience for employees.

My health insurance roots

I’m a Fellow of the Society of Actuaries and stay current through ongoing work and analysis within the industry, both for OneExchange and our clients. I’ve spent my career assessing risk and calculating the associated costs for large employers. I started out in our retirement line of business and learned a lot about how to predict the financial impact of future events. When I moved to the health care side of the business I was able to use those skills to help employers predict their future health care costs and then identify solutions to manage them.

Jean More riding Smart Little Laredo

I’m a cowgirl at heart, and I love to spend my weekends on my horses chasing cattle

I had a close-up view of employers’ need to get health costs under control and the increasing difficulty of the challenge. Despite many attempts to manage costs over the years – strategies like self-funding, wellness programs, account-based health plans, prescription drug management, network management and more – it’s been like swimming upstream. The odds have been heavily stacked against them. Now that I’m in the Exchange Solutions business, instead of determining the financial impact for a single employer, we’re doing that for an entire group of employers. So much of the exchange business is tied to financials and my roots as an actuary are really helpful.

Outside of the exchange, our largest employers, the ones who could invest in a whole host of health and cost management strategies, have been more successful at bending the cost curve. But employers who aren’t resourced to throw everything but the kitchen sink at the challenge face crippling cost inflation.

That’s where we came in with our private exchange philosophy. We’ve taken the health and cost management strategies that have helped our best performing clients outperform health coverage cost inflation and built them into OneExchange. And we’ve developed a graded runway to the full model so employers can bring new elements and features on line in a way that works best for their organizations.

We’ve invested over a billion dollars in bringing those strategies into OneExchange so employers don’t have to build it on their own anymore.

That sounds like a story that belongs in the health care start-up space – and it is. I’ve had the best of both worlds by getting to run a start-up business inside a well-established company – I get to be incredibly responsive to the market and to do it with the support of a large, long-standing organization.

Jean Moore hiking in Arizona

My husband, Tom, and I love hiking the peaks and canyons of Arizona.

Where I see health insurance going

I think that the private exchange market for active employees is going to open a lot of eyes and a lot of minds in the next few years.

I believe we’ll see benefits available in more of an individual purchasing environment – and not necessarily in a public marketplace. I’m still talking about a private market that’s employer-supported. The makings are there already with the degree of choice and control and competition we’re turning on with exchanges. The differences between how group and individual plans work are going away. Group used to mean one-size-fits-all. As consumer-centric personalization becomes the norm even in the group space, it won’t feel like that much of a leap to actual individual plans, like what we see with Medicare.

That bodes well for our industry professionals because the benefits that younger workers value and their comfort-level with technology and personal choice are going to have a big impact on how HR and benefits departments work. It’s going to be harder to keep up with the expectations of younger workers in the model where employers hand-select and control benefits for everyone. Private exchanges are engineered to deal with the kind of diverse, personalized environment that millennial workers expect.

I also think we’ll start to see the philosophy of greater choice move beyond medical and insurance coverage to other benefits – even those in work-life areas, like paid time off, flexible working arrangements and learning and development.

Employers will need their benefits professionals to focus more on these new types of benefits, which will allow them to distinguish their employee value proposition better than in the health care space where companies are being regulated into a narrower band of options.

By getting on board with the efficiencies of the private exchange model now, benefits professionals will be putting themselves and their companies in a very sustainable position for the rapid evolution we can expect in years to come.


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