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Insurers realize enormity of challenges posed by health exchanges

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New Jersey took a key step toward health reform last week when Gov. Chris Christie announced the federal government would run its online insurance exchange. But experts say time is short for the government to build the technology to run and operate the exchange — and to educate thousands of individuals and small-business owners on how to shop for complex health insurance plans.

Larry Altman

The exchanges are set to go live in October to begin enrolling people for Jan. 1, 2014. Under the Affordable Care Act, most Americans without coverage after that time will pay a fine.

That timeline is top of mind for Larry Altman, vice president and head of the office of health care reform at Horizon Blue Cross Blue Shield of New Jersey.

"The whole industry is very concerned about the tight time frame," Altman said. The exchange, he said, "will be very complicated from the consumer perspective."

Consumers will choose among competing health insurers selling plans with a range of coverage. Premium subsidies will be paid on a sliding scale of up to four times the federal poverty level, phasing out at about $94,000 for a family of four.

Altman said Horizon has more than 100 people working on exchange implementation, at a cost so far of several million dollars. The company is revamping its website, launching a mobile app, training call center employees and operating a retail store in Moorestown as a laboratory for making Horizon a more consumer-driven company. He said the exchange could be a significant new business opportunity for Horizon, which now has 3.6 million members and a 47 percent overall share of the New Jersey market.

Christine Stearns, vice president of health and legal affairs of the New Jersey Business & Industry Association, said employers want to know what plans they can buy on the exchange and how much they'll cost — information experts say will be available Oct. 1. Those employing fewer than 50 won't have to offer health insurance, while those with 50 or more who don't provide coverage will be subject to fines of $2,000 or $3,000 per employee; that penalty doesn't apply to the first 30 employees.

In New Jersey's existing state-regulated individual and small-group health insurance markets, "The biggest challenge and the biggest concern I hear from my members is affordability — whether or not the exchange is going to provide more affordable coverage," Stearns said. "And I can't even begin to answer that."

Joseph Parente, health care advisory principal at the accounting and consulting firm KPMG, said, "The feds are being very collaborative with the insurers, and trying to approach this in the most practical way to get as many people on the exchange as possible, taking advantage of the (subsidy) benefit."

Experts predict an education and marketing outreach to the public, led by the federal government, will start late spring or early summer.

'Tremendously complicated'

Creating the IT infrastructure "is a very big lift," Parente said. Individuals will be eligible for premium subsidies, plus subsidies for co-pays and deductibles when they receive medical care. The Urban Institute has estimated more than $700 million a year in subsidies will flow into New Jersey.

But for insurers, it "is tremendously complicated," Parente said.

"The insurer has to track the claims, and where there is a subsidy, they will collect it from the federal government," he said. "You are taking a very complicated product, health insurance — which is not something consumers understand — and then you are laying on top of it a very complex legislation to administer and then providing subsidies and tracking them. It is quite an undertaking."

And it may be tough for insurers to get their plans noticed in a crowded field.

"If you line up 12 health plans side by side and you highly standardize the product, it forces (insurers) to differentiate on price, service and brand — but largely on price," he said. "In order to be competitive, health plans have been very active in looking at their provider network structure to optimize costs, so they can price their products in an optimal way to compete."

Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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