Legislators Get Glimpse of Insurance Exchange’s Draft Business Plan

December 22, 2011—Oregon’s health insurance exchange is taking a conservative approach when it comes to how many people will need to purchase health coverage for the exchange to be financially solvent.

Financial and enrollment projections were the main topics of a presentation to the Legislature’s House and Senate healthcare committees, which convened in a joint, all-day meeting Tuesday to discuss the two major health reforms that have sucked most of the oxygen out of any discussion about healthcare in Oregon—the insurance exchange and the overhaul of the Oregon Health Plan by creating coordinated care organizations.

Preliminary financial modeling done by Jonathan Gruber, PhD, an economist at the Massachusetts Institute for Technology, provides low, moderate and high estimates of enrollment in 2014 and 2015, ranging between 127,850 to 280,250 enrollees in 2014, and in 2015, between 183,000 and 398,450 enrollees, Rocky King, executive director of the exchange, told legislators.  

To break even, Oregon’s exchange must have between 100,000 and 125,000 people enrolled by the end of 2015.

To put those numbers in perspective, the state’s Healthy Kids program, which provides health insurance to low-income and uninsured children under the age of 18, has enrolled approximately 100,000 children since starting in 2009. And there are between 700,000 and one million Oregonians who would be eligible to purchase insurance through the exchange, either as individuals or employers with fewer than 50 employees.  

“We feel pretty comfortable that, given the models, that we’ll be self-sufficient by 2015,” King said. The exchange could also draw revenue from its six-month capital reserve account.   

However, it’s critical that the exchange be financially independent by 2015 because the state doesn’t anticipate contributing general fund dollars, and the federal grant, which currently supports its work, will run out by then.

The exchange is expected to support itself through a 2.52% administrative fee, which equates to around $16 for everyone who buys coverage.

“Given the uncertainties of the economy and the unknown impacts of the health insurance market reforms, it is difficult to know how many Oregonians will enroll in the exchange,” according to the draft business plan.  

King emphasized that these financial and enrollment models “are estimates only,” and don’t include marketing and outreach efforts.

Also, “we’re not quite sure what the product is,” King said, referring to the health plans that would be offered by the exchange, “or how much marketing we’re going to do.”

Rep. Julie Parrish (R-Tualatin), who voted against creating the exchange during the legislative session, asked if there’s “a shut off valve mechanism,” or a way of shutting down the exchange, if it doesn’t meet enrollment projections.  

If that were to happen, ultimately, it’s up to the exchange’s board of directors to alert legislators,  and “have a serious discussion about phasing down,” said King, adding that he intends to share  quarterly enrollment reports so legislators can see its progress.  

Part of the 2.5% administrative fee will be used to pay for insurance agents, rather than the insurance companies, which is current practice, according to King.

That statement drew consternation from Greenlick, who said he’d “be very unlikely to support” the insurance exchange’s development if such fees are paid. “I have a problem with people being charged when they don’t use an agent,” he said. “They ought to know what they’re paying for. It should not be hidden, or buried in the costs.”

Greenlick instructed King and Amy Fauver, deputy director of the exchange, to determine if it has the legal authority to set different premium rates based on whether insurance agents are used.

It’s unlikely that the exchange can set different premium rates because that authority rests with the Insurance Division, said Cheryl Martinis, spokesperson. Insurance companies can use part of their premiums or rate increases to pay for insurance agents.

“The price of insurance is the same whether you pay for an agent or not,” Martinis said, adding that Oregon law would need to be changed for it to be otherwise. “It’s a policy question.”