UTAH HEALTH EXCHANGE - A NEW APPROACH TO HEALTHCARE

September 25, 2009

The Utah Health Exchange opened in August 2009 on a limited test basis for employer enrollment. Initial interest by employers has been very strong. The Exchange offers a web-based shopping mechanism to accommodate an employer-based defined contribution health insurance system. That means, employers can set a fixed health insurance contribution for employees and the employee can use that employer funding along with pretax payroll-deducted personal contributions to shop online for any plan design from any carrier offered in the new Exchange market.

The Exchange opened initially to a limited number (150) of small employers (2-50 lives) on a first-come, first-served basis. After the initial enrollment, which will offer coverage effective January 1st 2010, the Exchange plans to reopen in the Spring of 2010 for additional small employers. Large employers (over 50 lives) may enter the market in January 2012.

The worker’s insurance rates in the Exchange will be based on age and a factor representing a blended health risk of all employees of that employer. In other words, all employees of any given employer will pay the same rates in the same age category. The group’s rates will be regulated within rate-bands just like the traditional small group insurance market in Utah.

Employees in the initial offering will be asked to complete health risk evaluations online between September 28th and October 8th, after which the health information will be evaluated by the participating insurance carriers. Risk rating will be assigned to the employer groups in October and the employee shopping experience, or open enrollment, will begin November 1st. All employees must make a plan election or waive coverage in November, and if employees fail to waive or elect a plan, they will be automatically enrolled in a default plan chosen by the employer. Coverage will be effective January 1st 2010.

The employer’s defined contribution is not regulated, and could be zero as long as at least 75% of the employees in the group elect coverage in the Exchange. The employer may adjust the defined contribution based on age or enrollment tier such as single, employee + children, or family.

Since the healthiest people may be covered by a different insurance carrier than the sickest people in the market, the participating carriers have agreed to share insurance premiums among them in a “risk adjusting” mechanism. Simply put, the carriers that insure the sicker people will be subsidized by the carriers that insure the healthier people. This risk sharing occurs behind the scenes, and is implemented through the oversight of a Risk Adjuster Board created and defined in the 2009 Utah House Bill 188.

Utah’s Health Exchange is in its infancy but has caught the eye and interest of many across the country. It is being watched carefully by many who are investigating ways to reform healthcare in other states.