From Alan Weil

Executive Director

National Academy for State Health Policy

We are already seeing a tremendous amount of state activity in health insurance exchange development. We have gathered more than 200 state-level documents including grant applications, summaries of stakeholder input, analyses of policy options, and the like. You can find these and other resources at http://www.statereforum.org/indicator/exchanges. And if you register (at no charge) on State Refor(u)m you can post your own documents as well.

There will be a great deal of variation in state approaches. While Massachusetts and Utah are viewed as the models today, we will see more variation as other states move down the path of implementation.

From Alex Hunter
Managing Director in Navigant's Healthcare practice

Will states step up to the plate and innovate?
Many states recognize the opportunity to innovate, but are limited by the implementation timeframe. Once the Exchanges are developed and successful, there will be some states that will evolve their Exchange to become a key component in quality improvement and cost reduction. This will only occur if providers and insurers are fully engaged. There may be some innovation within the provider arena as ACOs and CO-OPs are considered.

How much variation will there be?
Too soon to tell is the short answer. What we see with states right now is a race to produce their planning document and identify next funding opportunities so they can begin implementation. A key concern that is being widely discussed by states is how their policy decisions may impact the selection process (e.g., adverse selection). At first there will probably be only slight variation in overall Exchange design and policy; however, once it becomes a successful mature market, states will understand the powerful engine they have created that can drive the health care delivery system. That will take time – right now many states are trying to understand how to create an Exchange that can be financially self-sustaining and maintain affordable insurance premiums. With only 10 states passing legislation to establish an Exchange, it makes it difficult to review the variation that may occur in the design.

Will there be blue state exchanges that lay out clear roles for insurers, and red state exchanges that encourage more competition?
It started out that the design of the Exchange would be either “blue” or “red”, but now that the underlying principles of success - adverse selection mitigation and substantial participation are being widely understood, most states may feel comfort somewhere in the middle of blue and red. Some states that originally wanted to lay out clear roles for insurers heard from the insurers that they may not be interested in dealing with those Exchanges and so some states have backed off. As each state is finalizing their planning market research they will be able to understand better how to design an Exchange that is most responsive to their marketplace and complements their states’ policy objectives.

Will Massachusetts and Utah serve as good examples? Or will it be a big mishmash that's confusing for everyone?
Massachusetts and Utah have served as good examples for everyone to understand the complexities behind designing an Exchange to meet the state objectives. Although each state will be different, the IT experts are communicating actively about developing platforms that can be leveraged with other state infrastructure and Health Information Technology (HIT) efforts. This will assist in states investing in technology foundations that can interface with other systems. The average consumer will not think it is mishmash especially if the Exchange can deliver affordable choices. The mishmash will be experienced by the insurers and providers that conduct business in multiple states.

What pitfalls will there be?
There are many pitfalls but the most serious will be creating an Exchange that cannot sustain itself. The on-going operational costs will be expensive and states need to continually attract and retain members (individuals and small business employers) to gain any efficiency and cost savings. Also, the skill set that is necessary to manage an Exchange is different than any other state agency – state government will need to consider hiring people with some commercial insurance business, sales and marketing background to run a competitive and lean business. Another pitfall will be the lack of IT infrastructure that exists and the short timeframe to implement such systems.