In a recent Health Affairs blog, William Kramer lists five ways the federal government and other stakeholders could motivate states to establish robust quality and affordability standards for plans sold in the exchanges. What Kramer didn’t focus on is that at two years into health reform implementation, six states—almost half of states with exchange legislation or executive orders—have already given a “green light” to “active purchasing” strategies: using selective contracting to negotiate better prices and higher quality from plans, or setting certification criteria beyond the federal floor that reflect the state’s goals.
Many states have used active purchasing in other contexts, like state employee plans, purchasing pools, or Medicaid programs. Advice from peers with experience in these areas can help states craft exchange approaches. We encourage you to share lessons from past experience that could inform states setting up exchanges in the comments below.
What Do We Know So Far?
Green Light States: In six states, state legislation or a governor’s executive order explicitly allows or requires active purchasing strategies.
- California’s exchange enabling legislation requires the exchange board to establish and use a competitive process to select participating carriers. It also requires that in the course of contracting, the board seek to provide health care coverage choices that offer the optimal combination of choice, value, quality and service. California’s exchange board is beginning to consider how to define a qualified health plan to meet the “choice, value, quality and service” requirements in California’s enabling legislation. At a recent board meeting on February 21, stakeholders gave presentations on ways to define it, and the board aims to make a decision in July.
- Connecticut’s enabling legislation authorizes and empowers the exchange to use selective criteria to determine which plans to offer as long as individuals and employers have an adequate number and selection of choices.
- DC’s exchange enabling legislation allows the board to limit the number of plans offered in the exchange using selective criteria or contracting, provided that individuals and employers have an adequate number and selection of choices.
- Oregon’s enabling legislation allows the exchange to enter into contracts with insurers to offer qualified health plans. But it requires the exchange to limit the number of plans offered in the exchange provided the same limitations apply to all insurers.
- Rhode Island’s exchange executive order gives the exchange discretion to choose plans beyond meeting certification requirements.
- Vermont’s exchange enabling legislation allows the Commissioner of Vermont Health Access to contract with a health insurer to offer a qualified health benefit plan. The Commissioner must determine that making the plan available through the Vermont exchange is in the best interest of individuals and qualified employers in the state, and must consider affordability, promotion of high-quality care, prevention, wellness, access to heath care, participation in the state’s health care reform efforts, or other criteria as the commissioner deems appropriate.
Yellow light states: Three states have legislation that is silent about active purchasing, and one state has pending legislation that would allow active purchasing in the future.
- Maryland has pending legislation that would allow the exchange to employ active and prudent purchasing after the first two years of operation. Beginning on January 1, 2016, the exchange can engage in: competitive bidding and negotiation with carriers to achieve optimal participation and plan offerings; partnering with carriers to promote choice and affordability for individuals and small employers among qualified plans that offer high value, patient-centered team-based care, value-based insurance design, and other high-quality, affordable options. However, before employing a purchasing strategy, the exchange has to submit to certain legislative committees a plan for the use of alternative contracting or active purchasing and the legislative committees will have 90 days for review and comment.
- Washington’s recently passed legislation does not address whether the exchange can set additional criteria for or selectively contract with qualified health plans. However, a previous version of the legislation would have allowed the exchange board to request that the insurance commissioner adopt additional requirements in rule.
- West Virginia and Nevada’s exchange enabling legislation does not address whether or not the exchange can actively purchase.
Red Light States: In two states, the exchange is explicitly prohibited from actively purchasing from health plans.
- Colorado's exchange enabling legislation prohibits the exchange from being an active purchaser.
- Hawaii’s legislation stipulates that all qualified health plans that apply must be included in the exchange. The Insurance Commissioner determines eligibility and retains full regulatory power over insurers and qualified health plans.
How Can States Influence Quality and Efficiency Without Active Purchasing?
States that are prohibited from setting additional certification criteria or selective contracting in the exchange can use other methods to support quality and efficiency goals. A recent paper by Georgetown University Health Policy Institute and the National Academy of Social Insurance points out other options, including:
- providing information to consumers that promotes choice of plans that achieve high performance on cost and quality metrics;
- encouraging plan investments in primary care and better coordinated care such as medical homes and other delivery system reforms; and
- recruiting new insurance carriers, possibly even Medicaid carriers, particularly in states with highly concentrated markets.
As the green and yellow states move forward, and other states decide whether or not active purchasing is the right fit, State Refor(u)m will continue to host discussions on these issues. Weigh in with your own insights and experiences in the comments below.