The Big Glaring Problem with the HHS Exchange Application

Last time,  I took issue with the Associated Press's characterization of HHS's proposed application for Exchange insurance eligibility, making the case that, considering all the information they have to gather in order to assess income and other eligibility factors, they actually didn't do all that bad of a job.

But, there is one glaring problem that, so far at least, I've not seen anyone point out. It surfaces in the text that appears right beneath the signature lines:

Congratulations, you’re done! What happens next? 

We’ll contact you in 1–2 weeks and let you know how to take the next steps, like joining a health plan 

This is one the big, fat problem in the whole mix: with this form (and this is the form for someone not applying for any government subsidies) you are not applying to be covered by a particular health insurance plan but rather applying to be allowed to shop for health insurance.

Can you imagine going to the mall and not being allowed to enter and browse until you fill out a form and get approved?

Perhaps not surprisingly, since this process has been designed by the Centers for Medicare and Medicaid Services, that this application process works just like Medicaid: first you apply to determine whether you are eligible for Medicaid coverage and then, once you've been approved, you select the plan you want. It makes total sense in the Medicaid world, since you are apply for a public assistance program, and the eligibility determination is the biggest and hardest part.

But, to those coming from the commercial insurance world it turns things on their head. In that world, you shop and select your plan first, and you fill out an application only when you've decided what plan you want to buy. The only real thing that determines if you're "eligible" to shop is whether you live in that carrier's service area, and all it takes is a ZIP code to figure that out.

It's long been a best practice in commercial insurance sales that you require users to enter as little personal information as possible until you absolutely have to have it. You need to know people's age and ZIP code to provide a premium rate quote, so a user does have to enter that in, but no online brokerage or carrier sales site requires you to enter your address and phone number just to shop. It's been well established that the greatest "session abandonment" (i.e. people leaving the site) occurs at the point where they have to enter their full name and contact information. Why? Because they are just shopping around and aren't ready to apply yet.

Watch CMS's YouTube demo video of the online application, and you'll see that their flow breaks these best practices in several ways:

1. You have to set up a user account before you shop
2. You have to read and agree to a pretty hefty disclaimer allowing the government to query data sources and use personal information before you even know if you need to bother applying for financial assistance
3. You have to enter your full contact information before you can shop

Only after these three steps can you specify whether you even want to apply to get help paying for health insurance.

Who knows--maybe this will work out okay for the Exchanges. Costco, for instance, does a bang up business, and you have to apply for membership before being allowed to browse. But, the trade off is that once you get in the door you can buy a zillion rolls of toilet paper for a couple of bucks.

But, in the insurance world, consumers will pay the exact same premium for plans purchased on the Exchange as they will for plans purchased through a private brokerage or directly from a carrier, unless their income qualifies them for a subsidy. (Subsidized plans can be purchased only through the public Exchange.) There are plenty of companies already offering exchange-like multicarrier private marketplaces and more rushing to launch new ones.

The danger for Exchanges is that having a high bar to get in the door will mean that the only people who will shop on the Exchanges will be those that have below 400% of the Federal Poverty Level and are thus eligible for a premium tax credit. And that's exactly the sort of two-tiered approach that policy makers have been trying so hard to avoid. Let's hope they figure it out and scramble the order of operations in the shopping and enrollment process.

A Hatchet Job from the AP on the Exchange Application

Ricardo Alonso-Zaldivar of the Associated Press took a swing at the draft Exchange eligibility application, which was released for review and comment by CMS back in January. The story seems to be getting picked up pretty widely but, unfortunately, its commentary seems, to my eye at least, to be way over the top and sensational. Here's the first line:

Applying for benefits under PresidentBarack Obama's health care overhaul could be as daunting as doing your taxes.

This is bound to get a lot of people worked up and scared, but it really is a long way from the truth.

First of all, it starts off by saying that the draft application runs 15 pages and doesn't mention until the very end of the article that there's a shorter application for those who don't want or know they aren't eligible government subsidies for purchasing insurance. 

If you look at the shorter six-page application for those who know they don't qualify for a subsidy, you'll see that it's really not all that onerous. It's actually an eight-page package, but two of the eight pages are instructions, and they're in large and accessible type. Page 2 is the standard information about the applicant: name, address, phone, email, preferred language, SSN, birthdate, and checkboxes for citizenship status and ethnicity and race (both optional).  Pages 3 and 4 ask for the same information about each person you're going to include in insurance coverage. Page 5 is about American Indian status, and requires a single checkbox if no one in your family is a Native American. Pages 6 is a signature page. The optional Page 7 lets you specify an "authorized representative" who can discuss your application on your behalf.

Frankly, this is the same information you complete on just about any form you fill out for any reason today, and it's hard to imagine how CMS could get away with asking you for less information. I've scratched my head again and again, and there's only one problem that I can see with the whole application--and I'll get to that later.

But what about the 15-pager that Alonso-Zaldivar plays up so much in his article, the one that he claims runs "counter to the vision of simplicity promoted by administration officials" and are raising fears that "a lot of uninsured people will be overwhelmed and simply give up?"

For starters, of the 15 pages, the same two pages repeat six times, since you fill out the same information about up to six people. And, yes, the questions do get a little complicated. They ask about the federal income tax filing status of each person and details about a person's current job and income. If you know the details behind the Affordable Care Act and its subsidy provisions, each of the things being asked makes sense. All this is trying to get to household income, since families with a household income up to 400% of the Federal Poverty Level are eligible for subsidies.

It would be nice, I suppose, if there was just a single line you could fill out that says: enter your household income: ___________ But, to figure out what should go in that box, you would have to know all the rules of what counts and doesn't count and work up to that . . . in other words, fill out all the information that's in those two pages per person.

As for the other pages, most of them can be skipped by answering a single question: Is anyone offered health coverage from a job? Does anyone have another health insurance now? Is anyone in your family American Indian or Alaska native? Do you want to name someone as your authorized representative? Answer no to these and you knock out four more pages from the fifteen. When you fill out an application online, you'll never even be presented with many of the questions.

The real problem is that figuring out household income and prior or other health insurance information is complicated and requires a lot of information. In his article Alonso-Zaldivar quotes Sam Karp of the California HealthCare Foundation, which on its own designed a separate model application and, one can only assume, knows the pain of trying to capture all the information needed to determine subsidy eligibility. Karp, the article notes, "gives the administration high marks for distilling it all into a workable form." And I love Karp's quote: "We are not just signing up for a dating service here."

But, I suppose "Government does a pretty good job asking complicated questions on health insurance application" just isn't quite as dramatic a story.

Oh, and one other small detail not mentioned by the AP: this same application will determine individuals' eligibility for Medicaid or CHIP programs, too. 

And that brings us to the one big problem with the whole application process that no one else seems to be picking up on. I'll touch on that in a later post.

Member Level Rating Challenge #2: The Monthly Invoice

This is the second in an ongoing series looking at some of the thorny operational challenges created by the shift to member-level rating as required by the Affordable Care Act. See here for background on the series.

Here's an interesting area that you might not think of as being affected by the shift in rating methodology required by the ACA: the invoice that small business owners receive from their insurance carrier each month. We're not talking about the new consolidated invoices that will be created by the SHOP Exchanges (that's a different animal altogether). We're talking about the insurance bills received by small businesses that buy their coverage through their old familiar channels, which means, in most cases, through their neighborhood insurance broker.

"Why would rating changes affect the bill?" you might ask. "The rates were calculated during the sales process. Now the customer is just paying what he or she owes each month." Yes, but, a small business health insurance bill is a little different from the power bill or the landscaping bill.

Two key factors:

1. A health insurance bill is a snapshot in time 
2. A health insurance bill often triggers an enrollment transaction

This all a shorthand way of saying that the monthly insurance bill represents a snapshot of what employees (and their dependents) are enrolled in health insurance coverage at a particular point in time--that is, the point at which the bill was generated. And, that snapshot of coverage very often is what reminds a small business owner that he or she needs to submit some sort of enrollment change.

Every health insurance carrier does things a little differently (a common theme that constantly plays into Exchange and healthcare reform issues), but two common features of the group medical insurance bill is the coverage summary and detailed roster.

The coverage summary provides counts of the number of employees enrolled into each coverage level of each plan offered by the company. For example, a company that offers its employees the choice of a PPO and a High-Deductible Health Plan (HDHP) might see the following summary:

Plan	Employee Only	Employee + Spouse	Employee + Children	Family	Subtotal
PPO	2	1	2	0	5
HMO	1	3	4	1	9
Total	3	4	6	1	14

The detailed roster would show employee by employee what each person is enrolled in, offering the detail behind, for instance, which 4 employees chose the Employee + Children level of the HMO.

It might look something like this:

Last Name	First Name	Plan	Coverage Level	Premium
Adams	John	PPO	Employee Only	$198.23
Anderson	Margaret	PPO	Employee Only	$198.23
Carter	Ann	HMO	Employee + Spouse	$318.29
Hendrick-Smith	Nancy	PPO	Employee + Family	$498.73

etc.

Now, in the old world of rating, this is pretty much all you need to know to figure out where the total amount that's printed on the "Please Pay" line comes from.  Once you bought the plans for the year, you pay the same for each employee enrolled in the Employee-Only coverage level of the PPO, which is why John Adams and Margaret Anderson share the same premium on the detailed roster. Take the total number of employees enrolled into each coverage level of each plan, multiply it by the premium for that particular plan and coverage level, then sum it all up and that's your bill.

Flash forward to the new world of member-level rating. Now, the summary may still have some use in getting a quick tally of the number of employees enrolled in plans ("Wait, 14? We only have 13 now, since we canned Jakey last week.") But, it no longer tells you everything you need to know in order to figure out where the total bill came from, and for a simple reason: the rate charged for each employee's policy is now based upon the age, tobacco use, and location of each dependent being covered. 

The detailed roster, in its current form, at least, isn't going to be much use, either. Nancy Hendrick-Smith may have enrolled her full family in the PPO, but that isn't enough to determine the rate. Instead, we need to know Nancy's spouse's age and tobacco use and the age and tobacco use for each of her children, too.

Now, suppose next month Nancy has a baby and adds him to her policy. In theory, she still has "family coverage", and in the old world her employer would be charged the same rate for both months.  Not in the new world. Assuming she still has fewer than three children, then the premium charged for Nancy will go up for month 2, since it's calculated on a per-member rate, and she just added a new member to her coverage. Under the old summary and detailed roster format, the employer would have no way of seeing why the premium charge for Nancy's family went up this month over the previous one. He or she needs to see the full detail not just for each employee but also for each depended being covered under the employees' policies. 

So, to wrap it up, here are some basic implications for billing:

1. Carriers will need to rethink the summary section of invoices to determine whether there is a more relevant set of summary information that will let small business owners quickly review and evaluate whether their bill is correct. Perhaps, instead of count of number of employees enrolled in coverage levels, it will show the total number of employees and dependents enrolled in each plan. 

2. The detailed roster will need to be expanded to present not an employee-by-employee roster but rather a full roster of employees and dependents, with each line itemed out and explaining the premium being charged for each.

3. Carriers can expect an increase of calls to their customer service centers in the first months of 2014, since their small group customers are suddenly going to see something different than what they are used to and will be bound to have questions.

Just one of many examples of the potentially unforeseen downstream ripples of what seems like, in theory, a relative simple change in the way premiums are calculated.