Competing Demands: Operational Imperatives for the California Health C A L I FOR N I A H EALTH C ARE Benefit Exchange F OU NDATION Introduction mix of public- and private-sector experience, California is home to nearly 15% of Americans and a solid understanding of the varied market expected to gain health insurance coverage under constituents. the Affordable Care Act (ACA).1 Thus California’s ◾◾ Internal systems and processes. The progress toward establishing its ACA-mandated Exchange will need to secure the basic systems Issue Brief health benefit exchange will be closely watched and process for operations, including the both within the state and nationwide. In physical space to house the entity, computers order to be seen as credible and effective, the and office equipment, an accounting and California Health Benefit Exchange (CHBE) financial management system, and the must demonstrate early on that it can provide organization’s policies and procedures. the health insurance options and level of service needed to attract consumers into the Exchange, ◾◾ External-facing infrastructure. The operate as a reliable business partner in order to Exchange will need to establish an attract insurance carrier participation, and serve infrastructure for external-facing functions, as an effective steward of both state and federal such as a system for determining eligibility, resources. a web-based selection platform, a customer service call center, consumer decision support In order to meet this complex set of demands, tools, an enrollment process, and a public CHBE must develop a core set of operational relations function. Since many ACA-mandated competencies regardless of the particular strategy functions have not yet been defined through it adopts. Moreover, the Exchange’s operations regulation or guidance, designing this will be conducted in a unique posture, with infrastructure will require both content CHBE operating simultaneously as a public entity expertise and great flexibility. implementing ACA’s provisions and as a marketer ◾◾ Health insurance products. The strategic of health plans, fully subject to the market selection of the right carriers and qualified pressures that influence insurance carriers and health plans is foundational for the Exchange’s consumers alike. success. This paper focuses on the foundational ◾◾ Financial management, legal and regulatory requirements needed in order for the Exchange to compliance, and public reporting. Ensuring operate efficiently and accountably, and in order compliance with myriad federal and state to be perceived as such by its varied public and obligations, as well as structuring thorough private stakeholders. These requirements include: and timely financial and management reporting, will go far to establish CHBE’s ◾◾ Staffing. The Exchange will need to find credibility in the eyes of the legislature, the executives and senior level staff with the right public, and market participants. A ugust 2011 ◾◾ Sales, marketing, and communications. CHBE departments, including Medi-Cal, the state’s Department will need sales and marketing capabilities that of Insurance, the Department of Managed Health Care, simultaneously attract and retain participants from and the Department of Finance. both individual and small group consumers and health insurance carriers. Assertive outreach will In particular, CHBE staff will have to formulate positions be critical to achieving sufficient volume for the and coordinate responses that reconcile potentially Exchange’s credibility. disparate government agency views, so that key partners such as health insurance carriers receive a consistent ◾◾ Metrics. CHBE will need to develop and track a message. These interactions will need to be conducted number of operational metrics designed to monitor with an understanding that government agencies performance of the Exchange. differ from private enterprise in how they approach communications, information disclosure, and in their With the complex issues CHBE’s board faces, process for contracting for materials and services. maintaining focus on operational aspects of the Exchange will be one of its greatest challenges. CHBE will also have considerable ongoing interactions with a number of federal government entities such as the Staffing Department of Health and Human Services (HHS), the Unlike most organizations, CHBE will operate at an Internal Revenue Service (IRS), and the Social Security intersection of public entities and private enterprise. Administration (SSA). It may be important to recruit staff This will create dual demands on staff as the Exchange with experience working with these federal agencies. attempts to relatively quickly implement a complex law with many moving parts and a substantial partnership Experience in the Private Sector with private insurance carriers. As a result, CHBE will In other important ways, CHBE will look and behave like require a balanced mix of senior leaders and director- a private enterprise. It must be financially self-sufficient. level staff who have state government or private sector It will need simplified structures for decision-making that health insurance experience and skill sets, and ideally a allow it to be agile in developing and marketing products substantial number with direct work experience of both. and services that can compete in a constantly changing market. In this respect, therefore, having senior leaders Experience in the Public Realm with experience in the commercial health insurance In some ways, the CHBE organization will look and market will be of great value to the Exchange. operate like a governmental body. It will, for example, act like a public entity in the process by which it procures In particular, it will be critical for the Exchange to hire goods and services, in its legal obligations under the key staff with experience in health insurance benefit Bagley-Keene Open Meeting Act as it pertains to board design, risk allocation, broker relations, web-based meetings, in its need to respond to information requests enrollment, risk-based contracting, financial management, from the media and public interest groups, and in its and carrier internal decision-making. Ideally, key staff overall need for transparency and stakeholder input in would have specific experience with both individual and decision-making.2 The Exchange will also have complex small group market segments. interactions that require extensive coordination and cooperation with other government entities. CHBE will thus need staff who understand how state government works and how best to communicate across agencies and 2  |  California HealthCare Foundation Internal Systems and Processes during the start-up phase for internal systems (staffing As a new independent state agency, CHBE will need to and technology) — when CHBE will be using federal develop a number of internal systems and processes, while funds and enrollment — is unknown, and will need to be simultaneously developing and building its large, external- sustainable as enrollment grows and the Exchange shifts facing information technology (IT) functions. CHBE will to reliance upon assessments on qualified health plans need to ensure that basic operational elements have been (QHP) as its primary revenue source. properly assessed and planned, and that the core systems are running efficiently, well before the Exchange begins Unlike a purely private-sector start-up operation, CHBE public operations for policies to be effective January 1, may have the opportunity to meet initial operational 2014. Early, basic operational requirements include requirements by tapping into existing state administrative physical space to house the entity, computers and office systems for core internal functions such as accounting, equipment, an accounting and financial management payroll, banking, and human resource systems. From system, a banking function, and the organization’s CHBE’s perspective, this shared-service approach could internal policies and procedures. be efficient and cost-effective compared to alternatives. Moreover, from a state finance perspective, costs would The Exchange will also have to establish or arrange for be fully covered by the Exchange through its federal an eligibility determination process that can easily collect establishment grant. Such an approach would allow a and readily confirm data on potential enrollees. This will more deliberate and unhurried assessment by CHBE of require a means for accessing federal data from HHS, its internal operational needs, which would provide a IRS, and the SSA, perhaps through a federal data services particularly useful grace period until the ultimate size of “hub” planned by the Center for Medicare and Medicaid enrollment can be confidently calculated. Services. External-Facing Infrastructure If CHBE achieves enrollment at projected levels, it will Developing IT and other consumer contact functions to have very large operational requirements. However, there handle CHBE’s projected volume will be a significant is some uncertainty as to how large and how quickly endeavor. In its earliest stages, the Exchange will enrollment will grow. Operational demands will depend need to determine its IT and other external-facing in part on CHBE decisions regarding which functions communications needs, assess existing systems and it outsources to third-party vendors, and the degree to capabilities, identify gaps between needs and existing which it is able to automate functions such as customer systems, and work out how best to fill those gaps. service. Because of this uncertainty, CHBE will need to develop operational plans that provide for appropriate In order to meet stakeholder and public needs and management, oversight, and resources at various expectations, the Exchange must be highly automated enrollment levels. and interoperable with government partners such as the federal HHS and the state Department of Health Care This planning becomes further complicated by the Services (DHCS), the IRS, and the SSA, as well as with ACA requirement that the Exchange be self-sustaining private-sector partners such as health insurance carriers by January 1, 2015, and by the state of California’s and small businesses. requirement that no general funds be used for Exchange operations without a specific legislative Accessible, efficient service will be particularly important appropriation. Thus, the cost structure established because the Exchange will be vying for business from Competing Demands: Operational Imperatives for the California Health Benefit Exchange  |  3 consumers who may have had little experience (or be able to assist with questions regarding eligibility, in some cases negative experiences) with the process subsidies and their tax implications, enrollment, of obtaining health insurance. Although significant billing and payment, and dispute resolution enrollment will be driven through CHBE because tax with QHPs. Service representatives must also be credits and cost-sharing subsidies will be available only skilled enough — working with a highly developed through the Exchange, there will still be the potential protocol — to offer help beyond such transactional for carriers, agents, and brokers to redirect consumers to assistance. Many consumers, particularly those who non-CHBE options. Consumers will be more favorably are accessing health coverage for the first time, may inclined to use these options if CHBE fails to provide require basic education on health insurance, such easy access and good customer service. as the application of copayments, use of networks, and other aspects of benefit design. They may have Customer Service questions about features peculiar to the ACA, such as Two critical structures by which the external, customer- mandatory participation, penalties, and guaranteed facing functions will be performed are the Exchange’s issue. Additionally, the Exchange will field consumer website and its customer service call center. questions regarding services or data provided by others, such as the IRS, HHS, Medi-Cal, and health ◾◾ Website. Its website will be the most public face of plans. The call center will need to provide smooth the Exchange, where consumers and stakeholders will paths toward problem resolution across issues make initial substantive contact with the Exchange and organizations so that consumers can have a and form their first impressions of it. Even the one-stop experience without being shunted from one current web presence of the Exchange, before it is information site to another. operational, has an impact, as it allows the Exchange Eligibility, enrollment, and other service issues will be to begin to generate goodwill and to provide different for individual versus small group populations, transparency into its development and decision- and for first-time versus returning customers. The making. website and the call center must have the capacity The Exchange site, once ready for public use, must to provide customized support under all these be structured in such a way as to allow for easy circumstances. consumer navigation across four key dimensions: eligibility determinations, tax credit and cost-sharing Individual Eligibility and Enrollment subsidy information, health care plan information CHBE will also be responsible for determining eligibility and decision support, and enrollment functions. The and enrollment criteria, and for coordinating that process Exchange will need to work closely with its partner with Medi-Cal and other publically-sponsored coverage government entities and health insurance carriers to programs. The ACA specifies that the federal Secretary develop a design that fulfills these dimensions in a way of Health and Human Services shall develop “a single, that is culturally and linguistically appropriate, and is streamlined form” that may be used to apply for all state responsive to diverse consumer needs and preferences. health subsidy programs and may be filed “online, in person, by mail, or by telephone.”3 Subsequent federal ◾◾ Customer service call center. A highly scalable, guidance envisions a system that will: accessible, and responsive customer service call “support a first-class customer experience, as well center will be the human face of the Exchange for as seamless coordination between the Medicaid and its customers. This customer service function must 4  |  California HealthCare Foundation CHIP programs and the exchanges. Customers should when consumers previously enrolled in Medi-Cal sought experience this process as representing the highest level coverage through the Exchange, and when consumers of service, support, and ease of use, similar to that move among Exchange QHPs. experienced by customers of leading service and retail companies and organizations doing business in the Small Group Access United States.”4 Developing systems and processes for easy participation by employer groups in the earliest days of the Exchange Verification interfaces are expected to be automated and would not only boost early overall enrollment, but capable of real-time eligibility determination.5 could also be a powerful marketing tool for CHBE to increase its influence in this market. Online enrollment Eligibility determination will be the first CHBE process capabilities that allow an employer to electronically individual consumers will actively experience. Therefore submit relevant employee data; self-service employer providing easy, transparent, and rapid access to the account set-up via a web-based portal; employee choice appropriate health insurance program will be crucial to supported by an easily identifiable separate web pathway, winning or losing customer confidence. The eligibility call center staff, and email or online chat service; and fully determination and verification process will be an automated generation of plan renewals via email are just internal administrative operation that uses technologies a few of the features that would add significant value for to accept and gather prospective enrollee demographic small employers by simplifying the administrative burdens data, verify such data, and direct eligible consumers of managing health insurance selection and enrollment. to the most appropriate option for plan selection. As part of this process, the Exchange must also determine Stakeholder Engagement eligibility for tax credit and cost sharing subsidies. Before the Exchange is open for public use in 2013, Also within this function, CHBE must be capable its work will include policy development, contract of connecting Medi-Cal-eligible consumers directly negotiation and management, and building positive to program enrollment. The modified adjusted gross public perception. During these next two years, CHBE income eligibility criterion will require a sophisticated will need to develop a transparent process for policy and user interface and external data verification in order to contract development, including a formalized mechanism make rapid and accurate eligibility determinations, and for stakeholder input and public engagement on a range to minimize the number of applications that require of issues. Two examples of the many topics on which exception processing. stakeholder input will be valuable include identifying metrics for QHP selection, and identifying tools and Once eligibility is determined, the enrollment process processes to assist enrollees in selecting a plan. must be bolstered by web-based decision-support tools. Once a plan choice is made, the individual consumer Health Insurance Products must be able to seamlessly transition from the part of the CHBE will need to contract with carriers to offer QHPs process controlled by the Exchange to the domain of the on the Exchange. Effective carrier management and a chosen health insurance carrier. This transitional element sound procurement strategy will require an operational of the enrollment process must be closely coordinated and analytic capacity to house and understand large with the participating carriers and supported by the amounts of data received from health insurance carriers. Exchange via consumer contact through the call center. CHBE will need to ensure that it has the capability Ideally, seamless hand-offs would also be supported to accept and update data on enrollment, claims paid, Competing Demands: Operational Imperatives for the California Health Benefit Exchange  |  5 benefit designs, and provider networks. It will also need demographics, cost and utilization metrics, and periodic to ensure data integrity, develop quality control feedback surveys of enrollee satisfaction. with the carriers, and employ extraction and reporting tools for analysts. In order to be self-sustaining by January 1, 2015, CHBE will need to make a number of key operational and In addition to having these core operational competencies financial decisions early in the planning and development in carrier contracting, CHBE will need to understand process. To navigate its mix of public and private funding, California health insurance regulation and to know when and to support a complex infrastructure prior to selling and how to coordinate with the Department of Managed its first insurance policy, CHBE must establish basic Health Care and the California Department of Insurance, financial control systems and ensure that its staff is such as in assessing provider networks and plan financial trained and provided with the protocols necessary for solvency. Finally, Exchange staff will need to understand focusing on negotiating and managing vendor contracts, and execute (perhaps in partnership with another state and controlling spending and cash flow. agency or agencies) the three distinct risk adjustment programs specified under the ACA (Sections 1341, 1342 A critical analysis that must be developed as part of the and 1343). Exchange’s finance system is the calculation of ongoing assessments to be charged upon QHPs, upon which the Financial Management, Legal and financial sustainability of the Exchange will depend. In Regulatory Compliance, and Public order to meet the interrelated but potentially conflicting Reporting needs of robust carrier participation and sufficient Mandated legal and regulatory compliance funding, the Exchange must ensure that it is neither activities — such as the Exchange’s role in administering overly conservative nor too aggressive in setting the the individual mandate provisions of ACA, as well as assessment levels. In this regard, CHBE will need a strong the federal reporting of grant funding and of individual, reporting system — highly dependent on quality data employer, and employee data — will require robust data recorded through the Exchange — coupled with expertise collection processes and reporting systems. For example, in forecasting and estimating. granting exemptions from the ACA’s individual mandate will likely require substantial Exchange resources, The Exchange will also need to develop a cost allocation including a system and staff to review applications, system that meets federal requirements for integrating secure data collection capabilities, and an electronic with public programs such as Medi-Cal and Healthy interface with the United States Treasury Department for Families. Coordinating this effort will require partnering individuals granted a certificate of exemption. with and ensuring buy-in from the Managed Risk Medical Insurance board and DHCS. To manage its finances, CHBE will need to develop a basic set of financial statements typically produced by A number of fraud and abuse provisions, including state government agencies, including a statement of net audits, are also contemplated under the ACA. For assets, statements of revenue, expenses, and changes in example, Section 1313 requires an Exchange to account net assets, and a statement of cash flows. Other reports for and annually report to HHS all activities, receipts, would likely include an actual-to-budget variance report and expenditures. Other provisions include an annual and various programmatic reports regarding enrollee audit by HHS and the development of a system of internal controls to ensure the safeguarding of assets and 6  |  California HealthCare Foundation to protect against fraud, waste, and abuse. California For example, there is a general expectation that CHBE stakeholders also will demand a high level of disclosure will be able to lower premiums offered by carriers and public reporting on Exchange financial transactions. on the Exchange, and CHBE may want to make Public reporting demands will likely include aggregated early efforts to clarify the likely magnitude of such data describing the characteristics of individual and small changes, so that consumer and stakeholder hopes group Exchange enrollees, including previous health do not greatly outpace realities. Similarly, it will be insurance status, use of medical services, and the sites of important that the overall mission, vision, and reasonable service delivery. expectations for the Exchange be communicated to all constituents — including legislators, carriers, small group Sales, Marketing, and Communications employers, and vendors — as early as possible. As a new entity selling health insurance in the state, the Exchange will need sales and marketing resources to Metrics create awareness and demand for its offerings. Although Each model of the Exchange articulated in the subsidies provided under the ACA will be accessible accompanying papers would focus on a unique set of only through the Exchange, the Exchange cannot rely metrics to determine whether it is successful. Regardless on subsidies alone to create consumer traffic. Instead, of the model, however, the broad performance of the it will need to develop marketing and advertising Exchange will be judged by a range of operational capabilities — both internally and through external metrics. These are outlined below. firms — to create both a message and a brand. C a t eg o r y S a m p l e Me t rics The ACA also mandates that the Exchange develop Price • Premium “navigators” whose primary role will be to help reach and • Premium trends educate potential participants, particularly people who are Cost • Administrative cost per enrollee currently uninsured. However, the ACA does not precisely • Administrative cost as a % of define the navigators’ activities and responsibilities. The premium Exchange will need to coordinate the activities of the Enrollment • Initial volume and persistency/ navigators with those of existing community outreach retention — both for the subsidized and non-subsidized populations workers whose tasks are to explain Medi-Cal and other • Demographics public health coverage programs. CHBE will also need to partner with brokers, agents, and carrier marketing Customer service and • Service quality targets quality of care • Care quality metrics as monitored functions, although its precise approach will vary and reported health plans depending on the strategic model it pursues. Communications should also be an explicit area of focus There is risk of becoming overly ambitious in defining and resources, especially during the start-up phase of the what to measure, especially as the digitization of health Exchange. CHBE will have a broad base of constituents information makes it possible to monitor more types with differing expectations as to what CHBE is and of information. It is important to ensure that reporting should be. It should begin to educate its constituents early requirements do not become so burdensome as to in the start-up phase not only about the aspects of the discourage Exchange participation by regional QHPs or health insurance market it hopes to affect, but also about emerging organizations. areas of the market it will not or cannot reach. Competing Demands: Operational Imperatives for the California Health Benefit Exchange  |  7 Conclusion Endnotes The core operational capabilities outlined in this paper 1.Based on the CBO report, 32 of the 46 million currently must be adequately addressed by CHBE regardless of uninsured would be eligible for coverage through reform. how the Exchange ultimately approaches broader strategic Congressional Budget Office. Letter to the Speaker of the questions. Without these foundational components House of Representatives, March 18 2010, www.cbo.gov. in place, CHBE will be unable to deliver on its most UCLA research estimates that 4.7 of the 7 million basic promises, much less on any of the policy goals currently uninsured in California would get coverage as a it ultimately develops. Effective execution of these result of ACA. Lavarreda, Shana Alex, and Livier Cabezas, foundational operational requirements will also help “Two-Thirds of California’s Seven Million Uninsured May CHBE to establish itself early in its existence as a force Obtain Coverage Under Health Care Reform,” UCLA within the California health insurance market and policy Center for Health Policy Research, Februrary 2011, www.healthpolicy.ucla.edu. landscape, affording it the credibility and visibility it will need to achieve its mission and goals. 2.For details of these requirements, see “A Handy Guide to the Bagley-Keene Open Meeting Act of 2004” by the California Attorney General’s Office, www.ag.ca.gov. 3.ACA, 1413(b)(1)(A). P r o j e c t C o n t r i b u to r s 4.OCIIO-CMS Joint Guidance, November 3, 2010. CHCF Project Lead Marian Mulkey 5.Section 1561 Recommendations. Primary Contributors Lori Chelius Lesley Cummings Rick Curtis Patrick Holland Emma Hoo Ann Hwang, MD Jon Kingsdale Ed Neuschler Chris Perrone Sandra Shewry Nancy Wise Lucien Wulsin About the F o u n d at i o n The California HealthCare Foundation works as a catalyst to fulfill the promise of better health care for all Californians. We support ideas and innovations that improve quality, increase efficiency, and lower the costs of care. For more information, visit us online at www.chcf.org. 8  |  California HealthCare Foundation