Wyoming cautiously reviews insurance exchanges

Dianna and Dallas Engler of Gillette would love to offer healthcare benefits to the 18 or so employees who work at Value Villa, the retail consignment shop they own. But they can’t. No quality, affordable insurance package exists for a small business like theirs in Wyoming. “It’s very sad when people in this country cannot afford health care,” says Dianna, 63. She and her husband pay $2,400 every month for their private health insurance.

The Englers have owned Value Villa, which sells everything from clothing and books to furniture and motorcycles in Gillette, Wyo., since 1983. Over the years they’ve employed up to 34 people at a time. Their son, Scott Engler, 44, manages and runs the store. Dianna trains new employees during the summers.

In the 80s and 90s, they offered good health insurance benefits to their employees. The package had a $500 deductible and Value Villa paid 85 percent of the premium while the employee paid 15 percent. In the early 2000s premiums started going up and Value Villa had to agree to higher and higher deductibles to afford the plans. Eventually, Value Villa could only pay half the premium for a plan with a deductible of $5,000. The employees, many of whom are young women, could not afford the other 50 percent of the premium, and the $5,000 deductible was too high to help them with routine healthcare needs.

That’s when, “Scott did research on every insurance known to mankind. We spent a lot of time looking into what we might be able to do,” Dianna says.

But they couldn’t find anything that would work. In 2004 Value Villa had no choice but to stop offering health insurance. A few of their workers get insurance through their spouses, but others are now uninsured. “It’s our civic responsibility to help people out,” Scott Engler says. “But it just wasn’t affordable.”

The Englers are typical of many small business owners whom a Wyoming Health Benefits Exchange, a requirement of federal health care reform, is targeted to help. The purpose of an exchange, supporters say, is to improve the accessibility, quality and cost of health insurance for individuals and small businesses by creating a regulated, transparent marketplace and pooling thousands of individuals and small businesses together to give them buying power. Under the federal Affordable Care Act, each state will have an operating exchange by January 1, 2014. States decide whether to design and run their own exchanges or let the federal government run it.

Wyoming has cautiously studied and is beginning to draft a bill to create a state-run exchange. Some say the state is foot-dragging, reluctant to engage because of political opposition to the federal healthcare reform law. Supporters believe that even if the Affordable Care Act crumbles under scrutiny of the Supreme Court this spring or if a Republican is elected to the White House next fall and repeals the law, uninsured individuals and small business owners in Wyoming would benefit from a robust exchange. Others say that controlling costs should be the first priority of fixing the healthcare system, and the state should look to solutions other than an exchange.

Glimpse of a Wyoming Health Benefits Exchange

Under the federal Affordable Care Act, every state will have an insurance exchange, a device meant to address the three pillars of healthcare reform – accessibility, quality and cost – for small businesses and individuals. Members of the U.S. Congress and their staff will also be required to get their health insurance through the exchanges.

To address the first of the three pillars, access, the exchange makes shopping for insurance easy. It also matches low-income buyers with federal insurance subsidies and directs those who qualify into Medicaid. It lets buyers clearly compare plans side-by-side, making insurance packages more transparent and competitive. Like Expedia or Travelocity (travel websites which compare airfare from several airline companies side-by-side to help shoppers make an educated purchase), the exchange will have a website that clarifies the differences between insurance plans so consumers know exactly what they are buying.

To address quality of health insurance, the exchange defines minimum essential benefits that must be offered by each insurance plan and puts a cap on deductibles. States have some flexibility in deciding how rigorous the requirements will be. Side-by-side comparisons of plans are also expected to improve quality, in contrast to the current system where it’s very hard to tell what plans cover and how they differ.

To address cost, the exchange combines individuals and small businesses into a large pool of buyers who share risk and have buying power, much like a large corporation with thousands of employees. The Congressional Budget Office estimates that transparency in insurance plans, a competitive marketplace and reduced administrative costs for doctors and employers will drive premium costs down 7 to 10 percent.

In October of 2010, Governor Dave Freudenthal created the Wyoming Health Benefits Exchange Steering Committee, which continues under Governor Matt Mead, to study the feasibility of a Wyoming-run exchange. Wyoming received an $800,000 planning grant from the federal government to fund the study. The 17-member committee includes representatives from the state legislature, several state agencies, insurance providers and the business community.

Over its first year of operation, the committee hired Public Consulting Group, a Boston-based company working with several states on health care reform, to help them understand what a Wyoming-based health exchange would look like. Their market study determined that 83,000 Wyoming citizens – 15 percent – are uninsured.

Of the 208,000 people with individual insurance in Wyoming, half face a deductible of $3,000 or more. Insurance plans for individuals in Wyoming have an average actuarial value of 43 percent. The actuarial value is a measure of how good the insurance is, determined by the average percentage of medical costs the plan ends up paying as opposed to what the insured person pays. The national average is between 55 percent and 60 percent, and the minimum value allowed under the Affordable Care Act is 60 percent.

The small group market in Wyoming is better off than the individual market: almost two thirds of these plans have a deductible of less than $1,000 and the average actuarial value is 63 percent.

The study estimated that between 38,000 and 41,000 Wyomingites would enroll in an exchange, some individually and some through their small employer. About 61 percent of them would be people who are currently uninsured while 19 percent would be those who currently have employer insurance and 20 percent would be those who currently buy their own individual insurance.

The consulting group determined that a Wyoming-run exchange would cost about $4.2 million per year to maintain. To make the exchange self-supporting each enrollee must pay a monthly fee. For example, if 30,500 enroll, the fee would be $11.46 per month.. If more enroll, those monthly fees would go down. States also have the option to partner with neighboring states on some aspects of the exchange, which can cut costs a bit.

The steering committee took their findings to the state legislature’s Labor, Health and Social Services Committee in October 2011. In December, the committee voted to sponsor a bill with three parts. First, it would extend the deadline to create the exchange until after next year’s legislative session in April 2013. That doesn’t meet the federal government’s January 2013 deadline for states to show their plans for an exchange, but it’s the next chance for the legislature to consider a bill. Second, the committee’s bill excludes the governor or anyone else from creating an exchange without the legislature’s approval. And third, it provides $20,000 to pay expenses for the four legislators working with the Exchange Steering Committee on the exchange bill for 2013. The state will use federal funds to design the exchange.

“Our next step is to take the show on the road,” says state Rep. Elaine Harvey (R-Lovell), co-chair of both the Exchange Steering Committee and the legislative Labor, Health and Social Services Committee. Over the coming months, the Exchange Steering Committee will hold seven town hall meetings around Wyoming to learn about the concerns and needs of individuals and small business owners. The committee will use information gathered at the meetings as it writes a bill for Wyoming’s exchange.

The first meeting took place January 10 in Cody. The next town hall meeting is scheduled for Tuesday, January 17, 2012 from 6:00 p.m. to 8:00 p.m. at Central Wyoming College’s Wind River Room in Riverton. The meetings in Gillette, Casper and Cheyenne will occur in January, information to be released soon. There will also be town hall meetings in Rock Springs and Jackson later this winter. Check the “Latest News” tab on Governor Mead’s website for the schedule.

Existing exchanges

Two states – Massachusetts and Utah – were already operating exchanges before passage of federal healthcare reform. The Massachusetts exchange, called the Connector, provided the model for the federal law. The Connector is an “active purchaser” exchange, which means the state approves insurance providers, ensuring that the exchange sells only the best possible insurance packages. The Connector launched in 2007, where to date over 39,000 people buy their health insurance. More than 33,000 of them are individuals. As of August 2011, three different plans for small businesses within the Connector covered only 6,500 people through about 2,250 small businesses. In Massachusetts, 98.1 percent of residents have health insurance.

By contrast, the Utah model is an “open marketplace” exchange, where any insurer can sell. The state has less oversight than in Massachusetts. The Utah Exchange launched in 2009. About 160 small businesses were enrolled as of August 2011 covering 4,200 people. About 86 percent of Utah’s population is insured.

On the Utah Health Exchange, small business owners determine a set amount to pay toward each employee’s health benefits. Then the employee, who can add additional money if desired, goes to the exchange’s website and selects his or her insurance. If the employee changes jobs, he or she can keep the same insurance plan as long as the next employer is part of the exchange.

“The Utah exchange I find extremely interesting and intriguing,” says Al Harris, owner of a Green River-based radio broadcasting company and a business representative on the Wyoming Health Benefits Exchange Steering Committee, “but the Utah exchange does not meet the federal guidelines.”

“Nobody knows what ‘compliant with the Affordable Care Act’ means because the federal government hasn’t established those criteria yet,” says Norman Thurston, Utah’s Health Reform Implementation Coordinator. “We’re definitely still in development. We think we are on a trajectory to be certified when the time comes, but we’re not finished yet.” So far, small businesses, but not individuals, can purchase insurance through the Utah exchange, which creates a transparent marketplace, but doesn’t include some of the federally required mechanisms for improving access, ensuring quality or controlling costs.

“The lesson is that Utah’s health exchange as a model of health reform has not done anything for those three pillars,” says Judi Hilman, executive director of the Utah Health Policy Project, a nonprofit trying to improve healthcare access for Utah residents. She says for an exchange to work everyone available must participate, which will only happen with a mandate. “Those are the kinds of changes, the very levers that Utah – for political reasons, and I’m guessing Wyoming, which is more conservative than Utah – was not able to pull. So we are grateful for federal reform for pulling those levers for us.”

Several other states are designing their own exchanges, too. Among Wyoming’s neighbors, Colorado has passed legislation to create an exchange governed by a governor-appointed public board. Colorado’s exchange is scheduled to launch in October 2013, fifteen months before the federal deadline. Montana’s legislature created a committee similar to Wyoming’s to study an exchange. South Dakota’s governor created a large taskforce working on many aspects of the exchange. Idaho and Nebraska failed to pass legislation to create study commissions or start developing exchanges. Florida and Oklahoma have returned the federal planning grants they received and decided they will not actively participate in exchange design in their states.

The federal Health and Human Services Department will set up and operate exchanges in states that don’t create their own. If a state wants to run its own exchange, but isn’t ready by January 2014, HHS will operate the exchange until that state is ready.

Is a state-run exchange right for Wyoming?

Promoters of a Wyoming exchange hope it will make insurance accessible, quality and cost effective for the 15 percent of the population,  83,000 people, who are uninsured in the state – plus the tens of thousands more who have poor-quality, high-deductible, expensive insurance that doesn’t cover their healthcare needs.

“So what is concrete so far?” says Chairman Harvey. “We want a Wyoming market. We do not want to partner with the federal government. And we want as much flexibility in our plans as we can have so people can be insured appropriately.”

She predicts the greatest challenge will be designing the “essential benefits” to balance meaningful coverage with affordability. The federal Health and Human Services Department requires that states set essential benefit standards based on the benefits and services provided by a benchmark plan. The benchmark plan is one of the three largest – as determined by enrollment – small group plans, state employee health plans, or federal employee health plans in the state. Every insurance plan must, at a minimum, offer the essential benefits and cover ten categories defined by HHS such as maternity and newborn care, mental health and substance use disorder services and prescription drugs.

Governor Mead has endorsed the Health Benefits Exchange Steering Committee’s work on a Wyoming-based exchange, writing last October that the state should, “establish some components of a state-run benefits exchange and that these efforts [should] be transparent and accountable. I advocate for an approach that gives Wyoming as much flexibility for as long as possible.”

Harvey believes that a state-level, quasi-governmental department made up of experts from around the state, comparable to the Wyoming Business Council, should govern a Wyoming exchange. She wants the Exchange Steering Committee to have a bill or series of bills designing a Wyoming exchange ready to present to the appropriate legislative committee(s) this year.

Harvey, who opposes the federal Affordable Care Act, says while the law triggered the state to work on its exchange, she believes individuals and small business owners could benefit from an exchange regardless of whether the law stands up in court this spring.

“I hope at the end of the day – this is just me speaking – that we have done our work well enough so we can hold our heads high and say we can do it,” she says. She emphasizes that covering the uninsured also benefits those who already have insurance, because hospitals and doctors don’t have to transfer the costs of caring for the uninsured to paying patients.

But state Sen. Charlie Scott (R-Casper), also co-chair of the Labor Health and Social Services Committee (though not a member of the Exchange Steering Committee), is not so sure. He questions the numbers presented by the exchange study and doubts the feasibility of an exchange in a state with such a small population. He believes, “the traditional marketplace has worked moderately well for Wyoming,” insisting that because Wyoming places few regulations on insurance companies, there is adequate competition. His primary concern for improving Wyoming’s healthcare system is controlling costs, and he doesn’t believe a Wyoming exchange would be large enough to do that.

Barb Rea, a consumer advocate for Wyoming Project Healthcare and the Equality State Policy Center, has worked for years to bring a better health care system to Wyoming. She also buys her own insurance. Her plan has a $5,000 deductible and rising premiums. And in 2009 she was diagnosed with kidney cancer.

“It was just a nightmare getting all of my expenses paid,” she told the audience at a public forum to explain pieces of the Affordable Care Act last September. “Now no one will write me a policy because I have a preexisting condition. I’m not satisfied with my product. I did everything right, paid all my bills, and there’s no place for me to go. That’s an example of something we are trying to fix.”

She wants to see an insurance exchange in Wyoming, but is not sure whether it’s better for Wyoming to run its own exchange or have the federal government run it. And while she’s glad to see Wyoming working on reforms, she’s not sure the Health Benefits Exchange Steering Committee is the best approach.

“It’s a politically appointed board,” she says. “It’s too hard for them to get the work done. It’s really a big task. It will take a lot of expertise to get this accomplished.” She adds that it’s important to have consumer input into design and governance of an exchange, but it needs to be run by people with lots of experience and technical expertise. “The states that are really moving forward and making changes to their systems and getting everyone covered have healthcare planning bodies at the state level. We could do that.”

She emphasizes that the first priority of any healthcare reform should be to get coverage for all citizens and turn them into paying customers, something the exchange is designed to help do. “Then, how do we make best use of money that is in the system to take care of what’s medically necessary in people’s lives? The exchange will be part of the answer, but we have more work to do and we need more data.”

The work continues

Rising costs prohibited the Englers from providing insurance to their employees, but driving down costs won’t fix the problem if it results in a cheap product that doesn’t adequately cover healthcare needs, Dianna says. “The main crux for anybody would be the quality of the insurance plan itself,” she says. “It has to be affordable and worth having. If you pay a dollar for nothing, that’s too much.”

She was unaware of the Wyoming Health Benefits Exchange Steering Committee and their work, but suggests that it would be nice if employers could contribute to their employees’ health benefits, but leave selection of the plan up to each individual employee, much as the Utah exchange allows.

Meanwhile, “We have 83,000 people uninsured in Wyoming,” Harvey emphasizes. “We are still seeing them and we are taking care of them, but we’re doing it as uncompensated care. We’re seeing them in emergency rooms instead of doctors’ offices. Medical bankruptcy is happening all over the state. We have to do something.”

Emilene Ostlind was a High Country News editorial fellow in the winter of 2011 and now works as a freelance journalist in Lander, Wyo. 

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