Expect to Pay More for Policies Purchased On State Health-Benefit Exchange

Andrew Kitchenman | February 20, 2013 | Health Care
State chooses benchmark plan to make sure coverage is consistent with what's already on the market

New Jersey residents who buy insurance through the state’s health benefit exchange could wind up with a plan similar to what many small businesses offer their employees.

But the high cost of that coverage already has insurers concerned.

The federal government requires that states choose one of 10 existing plans to serve as a benchmark for benefits that will be offered through the exchange.

While every plan offered by an exchange will not be identical, each must be similar in value to the benchmark and cover the federally defined essential health benefits.

New Jersey’s benchmark is based on the largest small-group plan currently offered in the state: Horizon’s HMO Access HSA Compatible coverage. The state had to choose the benchmark from among the three largest small-group, state-employee and federal-employee plans, as well as the largest HMO.

Gov. Chris Christie described the benchmark as the result of extensive consultation with the medical community, insurers, and advocates for children in a letter to U.S. Health and Human Services Secretary Kathleen Sebelius.

Christie decided on Friday to have the federal government operate the exchange. He included the benchmark in a list of programs he submitted to demonstrate how the state is working with the feds on the 2010 Affordable Care Act.

New Jersey’s laws and regulations already require health plans to deliver more services than many other states, including applied behavior analysis for autism. If the state had chosen for its benchmark one of the federal-employee plans that didn’t cover some services mandated by the state, they would have to be added to bring the benchmark up to code.

The benchmark plan offers a wide range of benefits, including the vast majority of primary, specialist, and emergency-care services, as well as prescription drugs. Some services like home healthcare visits require pre-approval; others, such as physical and occupational therapy have a limited number of annual visits.

Benefits that aren’t covered by the benchmark include routine dental services for adults; long-term/custodial nursing home care; routine eye exams for adults; cosmetic surgery; routine foot care; acupuncture; weight-loss programs; and non-emergency care when traveling outside the country.

There also are exemptions for specific services. For instance, while the benchmark covers some infertility treatments, such as artificial insemination, it doesn’t cover others, including in-vitro fertilization.

The value of the plan still must be determined by the federal government based on actuarial calculations. While plans available on the exchange may differ slightly, they must cover similar services as the benchmark.

While it’s unclear how much consumers who don’t receive federal subsidies will pay, it will be more than the current cost of the benchmark plan. The cost to individual customers now differs depending on the members of each small-group plan and was not available yesterday.

The reason that the price of plans offered through the exchange will be higher than the current cost of the benchmark plan is because the federal government requires exchange plans to include two areas that the benchmark currently doesn’t cover: pediatric dental and pediatric vision. In addition, there will be two taxes paid by insurers that will augment the cost of the plans.

New Jersey Association of Health Plans President Wardell Sanders cautioned that some consumers buying coverage on the exchange might experience sticker shock. New Jersey insurers will be paying an excise tax of $5 billion based on their market share over the next 10 years, which Sanders said would add to the price tag of all health insurance in the state. There also will be a 2.5 percent fee on insurance sold through the exchange.

“We’re concerned about questions about affordability,” he said.

Consumers purchasing insurance on the exchange will be able to choose plans from four different levels. Each will require them to pay a different percentage of the value of the plan, through a combination of copayments and deductibles.

The four levels will be set at 10 percent, 20 percent, 30 percent, or 40 percent of the plan’s value. Customers will have to pay higher monthly premiums to have lower copays and deductibles. Those who choose lower premiums will have higher copays and deductibles.

Federal subsidies will be set to offset 30 percent of consumer cost sharing. Subsidies will be available to residents with income between the poverty line and 400 percent of the poverty line, currently $23,550 to $94,200 for a family of four.

The other factors that will affect the cost to consumers are age and geographic location, as well as whether an individual or family plan is purchased.

The exchange will be an online marketplace for consumers who aren’t covered by their employers or government-provided insurance like Medicare and Medicaid. The website will allow consumers and small-business owners to compare plans and determine whether they are eligible for subsidies.

Sanders said the 10 options that the state faced for setting the benchmark were similar. He added that choosing a state-based small-group plan offered an advantage in that small employers will already be familiar with it.

“The selection was important, but it’s not like there were lots of differences,” said Sanders, whose association represents the state’s insurance companies.

Sanders said he expects that consumers buying insurance through the exchange will be able to choose between plans that limit services to in-network providers and those that don’t have in-network limits. There would be financial incentives to choose an in-network plan.

Raymond J. Castro, senior policy analyst for the nonprofit New Jersey Policy Perspective, expressed disappointment that state officials didn’t seek more public input in how they chose the benchmark.

Enrollment in plans offered through the exchange is scheduled to begin on October 1, with the coverage starting on January 1 2014.