Quote-of-the-day mailing list
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Subject: qotd: The administrative challenge of the health insurance
Date: Tue, 27 Nov 2012 10:49:02 -0800
From: Don McCanne <firstname.lastname@example.org>
To: Quote-of-the-Day <email@example.com>
November 25, 2012
Obama faces huge challenge in setting up health insurance exchanges
By Elise Viebeck
The Obama administration faces major logistical and financial challenges
in creating health insurance exchanges for states that have declined to
set up their own systems.
Since different states have different insurance markets and different
eligibility requirements for Medicaid, Obama's Health and Human Services
Department can't simply take a system off the shelf as a
"You can't simply deploy one federal exchange across the board," said
Jennifer Tolbert, director of state health reform at the Kaiser Family
"Each state is different — their eligibility systems are different,
their insurance markets are different. [HHS is] going to have to build
these exchanges to fit into the context of each state."
Experts have predicted that the department will soon have to tap budgets
from its other programs to cover exchange costs. Other have said it
might charge fees on the insurance purchased in its exchanges once they
The idea behind the exchanges is to match the uninsured with plans that
meet their needs and reflect their eligibility (or lack thereof) for
In practice, the process will require websites that can process massive
amounts of personal information from users and yield search results for
Each portal will require a front end — the interface consumers will use
to submit their information and shop for plans — and a specialized back
end that is customized based on the state.
HHS will also construct a range of other systems: a federal data hub for
verifying user identity; programs for user assistance; a way to certify
that health plans meet federal standards; a way to navigate the
exchanges via phone or apply for coverage by mail; and so on.
Experts expressed one main concern across the board — that people
eligible for Medicaid but not for the exchanges might fall through the
cracks in federally run systems, since enrollment in the program is run
Comment: One unique feature of health care financing in the United
States is our shameful administrative excesses. The new state insurance
exchanges required by the Affordable Care Act (ACA) add to that waste,
whether run by the states or by the federal government by default.
To begin with, since the plans offered by the exchanges will be in the
individual and small group markets, under ACA they will be allowed to
keep 20 percent of the insurance premiums for their own administration
Next, the exchanges will be much more complex than a mere website from
which to compare and choose plans. These portals (exchanges) will
require a complex front end to determine eligibility or lack thereof for
Medicaid or for the premium subsidies which vary based on the actuarial
values of the plans and the incomes of the applicants. Also the managers
of the exchanges will have considerable work on the back end in
establishing plan eligibility to participate in the exchanges,
evaluating the essential health benefits of each plan, confirming that
each metal level (bronze, silver, gold, platinum) meets actuarial
standards, meeting regulatory requirements that vary from state to
state, and providing a mechanism for the purchaser to intelligently
navigate the maze established by the exchanges.
Obviously there will be considerable administrative costs associated
with these exchanges - costs that are beyond the 20 percent retained by
the insurers. ACA requires that the exchanges be self-sustaining,
meaning that these administrative costs must be paid by the insurers
(beyond the 20 percent) or by the purchases of the plans. Either way,
those enrolling in plans through the exchanges will ultimately bear the
costs of these administrative excesses.
Finally, physicians, hospitals and other providers of care will continue
to bear the costs of the excessive administrative burden placed on them
by this fragmented, complex financing system. Instead of providing
administrative relief, the exchanges further increase the administrative
burden and excess costs of allocating our health care dollars.
Readers already know how over 99 percent of this portion of our
administrative waste could be eliminated. Enroll each individual once,
at birth, in a single national health program - an improved Medicare
that includes everyone. So why aren't we doing it?