With the Supreme Court’s decision to uphold the Affordable Care Act, states in the U.S. will now need to move forward with plans to implement health insurance exchanges. However, exchanges have been around since the pre-health reform era – such as those that serve the Medicare market – and a number of innovative states have moved forward with such implementations to drive down costs and increase efficiencies prior to the ruling.
The state of Nevada is one such example as its Public Employees’ Benefits Program
(PEBP) encountered a $111 million funding gap to maintain the same level of benefits for its public employees and retirees. The PEBP decided to deploy a health insurance exchange for its Medicare-eligible retirees from
Microsoft partner Extend Health
, a health benefits manager service provider.
Extend Health’s exchange, based on Microsoft technology such as Microsoft Lync, Microsoft SQL Server, and the .NET Framework, is the largest private Medicare health insurance exchange in the U.S. As a result of the implementation, which involved transitioning almost 12,000 retirees to the exchange over a five month Special Enrollment Period, the PEBP is able to provide retirees with similar benefits to what their old plans offered as well as expanded coverage choices – something they would not have been able to sustain before the exchange.
Recently we spoke with James Wells, executive officer of the Public Employees’ Benefits Program in Nevada, regarding how the state deployed the health insurance exchange for Medicare eligible retirees to reduce costs and maintain benefits for that group of retirees.
Microsoft: Can you tell me a little bit about the Public Employees’ Benefits Program (PEBP) in Nevada?
Wells: The PEBP provides healthcare and related benefits to approximately 23,600 state employees, including those working within the system of higher education, and 250 employees from several participating local governments in Nevada. We also support approximately 8,700 state retirees – about 3,600 non-Medicare and 5,100 Medicare beneficiaries, as well as 8,400 local government retirees – about 3,900 non-Medicare and 4,500 Medicare beneficiaries. We provide a range of benefits, including health, dental and life insurance and extra services such as wellness and diabetes programs to help our participants maintain their health.
Microsoft: How did you come to the decision to deploy an HIX prior to the 2014 government deadline?
Wells: We projected a funding gap of about $111 million dollars between what the state could afford to provide for healthcare subsidies for employees and retirees and the dollars required to maintain the same level of benefits and contributions for our participants. Faced with the prospect of dramatically increasing premiums or reducing benefits, the PEBP Board tried to think outside the box to come up with solutions to minimize the impact on the participants. Recognizing it could not provide the same level of service and benefits to our active employees and retired participants while staying within these challenging budget parameters, the PEBP Board examined various options for the different populations it serves. For Medicare retirees, the Board decided to transition this group to the private insurance market using a health insurance exchange and providing monthly contributions based on retirement dates and years of service to a Health Reimbursement Arrangement (HRA) account to subsidize their health care premiums and out-of-pocket expenses.
Microsoft: How did the new system impact retirees?
Wells: PEBP staff, in cooperation with Extend Health, developed an implementation plan outlining the eligibility requirements to participate in the exchange, exception guidelines for those eligible to remain on the group insurance plan, the Health Reimbursement Arrangement rules and contribution amounts as well as a communications campaign and timeline. In advance of the transition to the exchange, we sent an official announcement to our 12,000 Medicare retirees. At first, retirees were understandably skeptical, so it was very important to us that each retiree understood the change in benefits and their options. Understanding that education and communication would be critical, we worked with Extend Health to send co-branded mailings that focused on helping retirees gather information needed to enroll in a new health plan, as well as hold informational meetings – about 80 total – throughout the state that were attended by more than 7,400 retirees.
As part of the implementation, Extend Health dedicated a customer service team to assist PEBP retirees in the transition. Extend Health also established a unique toll-free telephone number and website landing page for PEBP retirees prior to the enrollment start date. Retirees were given access to a secure online profile to confirm contact information as well as their prescription drug usage and provider needs. Each retiree spoke with an Extend Health benefits advisor to evaluate available plan options and choose the one that best matched their geographic location, lifestyle, and provider and prescription needs. The benefits advisor also helped the retiree complete and submit the application to the carrier. Through the Medicare exchange, PEBP retirees collectively chose from 342 different medical and prescription drug plans from 53 carriers.
Over the initial Special Enrollment Period, more than 10,300 retirees enrolled in a plan through the Medicare exchange while approximately 1,100 retirees met PEBP criteria and remained in the group plan. Fewer than 400 people opted to enroll in coverage outside the Extend Health exchange, some of whom had access to a spouse’s insurance while others did not meet the eligibility requirements for a Health Reimbursement Arrangement account and therefore did not benefit from enrolling through the Extend Health exchange.
Now, as early retirees approach their 65th birthday, PEBP notifies Extend Health of the retiree’s information through an electronic data exchange. Extend Health’s system then prompts the issuance of an election form and enrollment guide to the retiree reminding them to choose their new health plan through the exchange. Follow up phone calls and assistance by the Extend Health benefits advisors through the enrollment process continues for these new retirees.
Microsoft: What did you find to be your biggest success and biggest challenge with the transition to an exchange model for your retirees?
Wells: The PEBP Board has a fiduciary responsibility to insure the long term sustainability of the program. The transition to the exchange will allow us to continue to provide solid benefits to our Medicare retirees at reasonable premiums, while reducing the overall cost to the State. The biggest success for our Medicare eligible participants is that the exchange will allow us to sustain a level of benefits for this population we probably would not have been able to maintain had we not transitioned them to the private market. The transition of Medicare retirees to the exchange, as well as changes made for other populations, also significantly reduced the state’s Other Post-Employment Benefits (OPEB) liability, further ensuring the long-term viability of the program.
In terms of challenges, the exchange was new to us and is relatively new to the public sector. We would have benefited from having an extra six months to a year to plan and implement the transition, especially our ability to manage the perceptions and expectations of our Medicare retirees through supplemental communications. The additional time would also have allowed us to work through some of the challenges we encountered, such as the reimbursement issues experienced by some of our participants and the ongoing data transfers necessary to allow new people to enroll through the exchange.
Microsoft: What advice would you give other states that are planning to implement a HIX?
Wells: I would tell those who are contemplating a transition like the one we made, or those who are already in the implementation and roll out process that you can never communicate enough with your constituents. Many times, it was the little things that seemed to be insignificant to us that generated a strong reaction from our participants. Managing expectations and perceptions is a key component to success as is following up on issues when they arise as they ultimately will.
It is also important to establish and work through any electronic data exchanges and ongoing operational processes to insure the project continues to run smoothly after the initial transition. Lastly, it is imperative to ensure there is sufficient staff capacity to implement and operate the exchange and not to underestimate the resources it will take to make the project successful.
Microsoft: What is the next step for the PEBP HIX?
Wells: While we have no immediate plans to change the structure of our Medicare exchange, we are subject to continued oversight by our Board as well as the state legislature. Furthermore, we need to be cognizant of decreases in the buying power of Health Reimbursement Arrangements as a result of increasing premiums charged by the carriers who now insure our retirees. PEBP will be required to go out to bid for these services in 2014 and intend to use our experiences with the transition to write a request for proposals. Lastly, we still have a significant number of non-Medicare retirees and will continue to monitor the impact of Federal Health Care Reform Exchanges on the marketplace as we try to identify any opportunities for an exchange to benefit the non-Medicare population.
Communication, education and seamless data exchange were vital in the roll out of the Nevada PEBP HIX. As the first state to use a private Medicare HIX in the country, Nevada’s successful implementation can be an example for states that are looking to reduce costs and increase choice for their retired employees.
Note, on May 13th Towers Watson, a global professional services company, agreed to acquire Extend Health.