The top state insurance executive in Massachusetts urged California lawmakers Wednesday to “start early” in building a new health insurance exchange that will be at the center of the state’s implementation of the federal health reform passed in March.
Jon Kingsdale is executive director of the Commonwealth Health Insurance Connector, which plays the same role in Massachusetts that the new insurance exchange will play in California. The exchange will serve as a government-supervised market where individuals and small employers can purchase insurance, many of them using tax credits and subsidies.
Kingsdale said it took Massachusetts four years to establish the exchange at the heart of the Bay State’s insurance program, and Massachusetts started with several advantages over California. The state had far fewer uninsured people, already required insurers to cover everyone without regard to pre-exisiting health conditions, and its programs for the poor and the children of the working poor were integrated.
“It’s not too early to begin,” Kingsdale told a joint hearing of the Senate and Assembly health committees.
Under the federal law, Kingsdale said, the exchange can be anything from a passive information bank and online sales site to an aggressive regulator of benefits, rates and insurance company practices.
California already has two agencies that regulate insurers and health plans, the Department of Insurance and the Department of Managed Health Care. Kingsdale cautioned legislators not to try to create a third. But he also said simply listing all the carriers and the benefits they offer in California would not be much help to consumers.
“That would be about as useful as the automated Yellow Pages,” he said.
The middle ground, he said, is to use the exchange to reduce administrative costs, increase competition, standardize benefits and give consumers power by making it easy for them to compare plans and their prices.
Kingsdale said he has been stopped on the street and thanked for the simplicity of the Massachusetts web site through which residents can buy their coverage. The plans are grouped by benefit structure and rated either “gold,” “silver” or “bronze” depending on their level of benefits.
“We make it easy for buyers to shop on price and quality,” he said.
He said the state should be selective in the carriers it allows into the exchange but still err on the side of having too many rather than too few options for consumers. He said legislators and administrators should not assume they know what kind of plans consumers will want to buy. Instead, let them vote with their dollars, he said.
The biggest risk to California in setting up its exchange, he said, was dealing with the job of automating the distribution of subsidies and tax credits. He said that would be a “Herculean task.” He suggested that if the state allows its 58 counties to continue to administer the state’s subsidized insurance programs, the result could be a logistical nightmare.
Sen. Elaine Alquist, chairwoman of the Senate Health Committee, said the exchange, with a potential 8 million customers, is going to be “one of the major pieces” of the new health system brought about by the federal reform.
“How the exchange functions,” she said, “is going to be crucial to ensuring that federal health reform is successful in California.”