The Connector Board met on Thursday morning to discuss staff recommendations for Commonwealth Care FY2010 enrollee contributions and the draft Affordability Schedule. The Board debate exposed significant differences in opinion regarding the concept of affordability. The Board was also presented with information about the Seal of Approval process for new Commonwealth Choice plans to be introduced in 2010. Materials for the meeting can be found here, and our full report is after the jump.
Governor’s FY10 Budget
Connector Board member and Administration and Finance Secretary Leslie Kirwan began the meeting by recapping the economic situation of the state. Secretary Kirwan provided an overview of the Governor’s FY10 budget, which was released in late January. Secretary Kirwan emphasized that the state had to “tighten its belt” as it was faced with a $6 billion gap in FY09 and FY10. According to Secretary Kirwan, the Administration did its best to mitigate the harmful impact of budget cuts with revenue proposals, such as the elimination of sales tax exemptions for alcohol and sweetened beverages, and a considerable amount of money withdrawn from the Rainy Day Fund. The Governor’s budget proposal also assumes additional funding from the federal government through increased Medicaid reimbursements. Despite the state’s financial crunch, Secretary Kirwan assured the Board that Medicaid eligibility and benefits would be preserved and no caps on enrollment would be made. Secretary Kirwan added that the Administration plans for increased enrollment in CommCare, and has provided $880 million in funding for the 180,000 members projected by the end of FY10.
Executive Director’s Report
In his Executive Director’s Report, Jon Kingsdale updated the Board on the progress of the Commonwealth Choice contributory plan, which now has sixteen accounts covering almost fifty lives. Board member Celia Wcislo questioned what the Connector’s goal are for the contributory plan; Kingsdale replied that the Connector had not set an exact goal but would like 100 accounts set up during the pilot phase, therefore the Connector is on schedule. Kingsdale reported that MCO bids for the CommCare program have been released and responses are expected next week. Kingsdale promised the Board a further update on the MCO reprocurement process at the February 26th meeting. Following a public comment period, the Board will vote on the MCO bids at the March 12th meeting.
Next, Kingsdale explained the logic that guided the Connector’s development of the CommCare FY10 enrollee contributions and the draft Affordability Schedule. The Connector considers the enrollee contributions as a way to help defray some of the costs of CommCare. In FY09 $42 million will be collected through enrollee contributions, which comprises roughly 5% of the overall CommCare budget. Also, the Connector views enrollee contributions as political equity to retain support for CommCare and to prevent crowd-out. The Connector benchmarks CommCare cost-sharing levels with employer-sponsored insurance plans to ensure equity between private and public insurance options. Kingsdale also noted the link between the Affordability Schedule and the Individual Mandate; in tax year 2007, 75,000 residents were exempted from the individual mandate because there was no affordable plan available.
CommCare FY10 Enrollee Contributions & Draft Affordability Schedule
Kaitlyn Kenney, the Connector’s newly promoted Manager of Policy and Research presented the Board with the staff recommendations (Word) for the 2009 CommCare premium contributions and Affordability Schedule.
Kaitlyn reviewed the guiding principles for this process, which include preserving the affordability of CommCare, minimizing crowd-out, maintaining affordable premium contributions as a percent of income, maintaining applicability of the individual mandate, and accounting for special circumstances through Board decisions and the appeals process. Kaitlyn explained the data which was used to develop the draft Affordability Schedule: the federal poverty guidelines for 2009, projected premium increases nationally and in Massachusetts, the Consumer Price Index (CPI) and the median income for MA households. While the federal poverty guidelines increased 4% from 2008 and the CPI increased 3.8% from 2007 to 2008, premiums increased 6-10% nationally for 2008-2009, 9% in Massachusetts, 5% for the lowest cost Bronze CommChoice plan and a hoped-for 2% or less for CommCare MMCOs. Board member Nancy Turnbull inquired whether the national increase in premium prices takes into account benefit changes; Kaitlyn responded negatively. According to Kaitlyn, the Connector is recommending a 2% increase in CommCare premiums in 2009, which translates to no more than $2 more per month in premiums.
The Connector proposed two options for the Affordability Schedule:
Option 1: 2% increase in premium contributions for people below 300% federal poverty level (fpl) and 5% for people with income above 300% fpl
Option 2: 2% increase in premium contributions for all income categories
The Connector modeled the potential impact on the Individual Mandate for both scenarios. Under both proposals couples aged 27-39 in the central zone (includes Bristol, Essex, Hampden, Middlesex, Norfolk, Suffolk and Worcester counties) would be exempt from the mandate in 2009, as the lowest cost CommChoice plan would not be considered affordable. Option 1 would subject several new groups of people to the mandate in 2009. Both options would exempt more people in 2009 than in 2008, but Option 1 exempts fewer people than Option 2. Turnbull clarified that these groups of people would only be exempted from the mandate if CommChoice is the only available option. Because most people get coverage from their employers, it is not known how many people would actually be exempt from the mandate, Turnbull reminded the Board. Secretary Kirwan remarked that the Board was fortunate to be considering 2% and 5% increases in the Affordability Schedule, compared to the initial proposals of 10% and 14% last year. Turnbull voiced several concerns with the ideas behind the draft Affordability Schedule:
- Chapter 58 intended for the Affordability Schedule to maintain consistency across all income levels, therefore Option 1 is troubling.
- As benefits are cut by employers and cost-sharing increases coverage is actually less affordable.
- The Affordability Schedule should not be tied to increases in premiums. The Connector is using flawed logic when assuming that as premium costs rise people should be able to afford to spend more on health insurance.
- The Connector should not try to maintain the same percent of people covered under the Individual Mandate each year.
- The Connector should be extra cautious this year given the scope of economic hardships.
- People in upper-income levels, especially older folks often have to pay twice as much for non-group coverage than younger people. The Affordability Schedule should address this age inequity. Turnbull urged the Connector to consider a cap in the percent of income people pay for health insurance to protect older people.
Turnbull also requested that the Connector present data on the Affordability Schedule as percent of income. Melissa Shannon, sitting in for Connector Board member and Medicaid Director Tom Dehner, echoed Turnbull’s serious concern that the Affordability Schedule is tied to increases in premiums.
Board member Lou Malzone threw his support behind Option 2 and added that the Connector needs to delve into the basis of premium costs. Board member Rick Lord questioned what would cause the Connector to revise the draft Affordability Schedule; Kaitlyn responded that the Connector might amend the Affordability Schedule based on information from the CommCare MCO bids and public comments received. Rick also stated that the difference between a 2% increase in the Affordability Schedule versus a 5% increase is $12 per month. Board member John Gruber voiced strong support for Option 1, describing this option as the “right thing to do” to maintain the effectiveness of Chapter 58, as the Individual Mandate is critical to the success of health reform and a model for the nation. Gruber stated that he has not seen any evidence of problems with affordability and added that a robust appeals process is in place to deal with affordability issues. Gruber challenged the draft Affordability Schedule by asking what the reasoning for a 2% increase was as 2% is lower than the increases in inflation and premiums. According to Gruber, a 2% increase in the Affordability Schedule would be a “step backwards.” Wcislo disagreed with Gruber’s comments by stating that the Board should judge affordability, not premiums. Wcislo vocalized her support of Option 2 and advised that, given the economy and the resulting uncertainty, now is the time to be reasonable and cautious. Secretary Kirwan attempted to assess how comfortable the Board was with releasing Option 1 for public comment.
Lord then suggested that since the income brackets increased 4% under the revised federal poverty guidelines, the Affordability Schedule should increase 2% for people earning less than 300% fpl and 4% of people earning more than 300% fpl. The Board discussed this option as an alternative to Option 1. Turnbull asserted that even if the income bracket increased by 4%, some people within the bracket may pay more than a 4% increase in premiums. Gruber adamantly defended the original Option 1 by affirming that a 5% increase makes more sense. Board member Nonnie Burnes stated that she had no preference for a 4% increase versus a 5% increase, but recommended that the proposal involving a 5% increase be released for comment so that the public can get a wider range of options. Wcislo requested that the Affordability Schedule presented for public comment explicitly state that Option 1 does not reflect the opinion of the entire Board. Wcislo stated that she’d prefer a 2%/4% increase than a 2%/5% increase, if those were the only choices, and would like to get clarification on the legislative intent of the Affordability Schedule. Furthermore, Wcislo commented that the Board needs to have a debate about the link between premium levels and the Affordability Schedule.
Kingsdale suggested that the original Option 1 (2%/5% increase) be presented for public comment since the 2%/4% increase was a last-minute idea, with the caveat that it is the staff’s recommendation and not endorsed by the Board. Connector General Counsel Jamie Katz reassured the Board that the Affordability Schedule language would specify that it was the recommendation of the staff and not the Board. Secretary Kirwan confirmed that the Connector will post Option 1 (2%/5% increase) for public comment. Before the February 26th Board meeting, the Connector plans to review public comments and CommCare bid submissions and revise the Affordability Schedule as necessary. The Connector is scheduled to vote on the FY2010 CommCare enrollee contributions and CY 2009 Affordability Schedule at the March 3rd Board meeting.
Commonwealth Choice CY2010 Seal of Approval
Next, Connector CFO Patrick Holland presented the Board with a timeframe for granting new CommChoice plans with the Seal of Approval. The new plans will be offered starting in January 2010. According to this timeframe, the Board will review draft CommChoice Seal of Approval goals and baseline data on February 26th, discuss an overview of the staff’s Seal of Approval recommendations (on products, benefit design and copay options and carrier incentives) on March 12th, review CommChoice Seal of Approval carrier specifications on April 9th, receive an update on discussions with carriers on May 14th, and vote on the Seal of Approval at the second June Board meeting. Gruber inquired if the CommChoice Seal of Approval timeframe was tied in with the MCC timeframe; Kingsdale answered that that the two timeframes are in sync. Gruber also questioned if the Board is required to revise MCC regulations each year; Kingsdale responded that it is up to the Board to decide how frequently, if ever, the MCC guidelines are changed. Voicing concern with the annual benefit caps included in the CommChoice Young Adult Plans (YAPs), Turnbull requested an estimation of the expected premium increase if caps are eliminated and information on the medical expense ratios for CommChoice plans. Wcislo seconded Turnbull’s request by stating that increased transparency is needed on the medical expense ratios and administrative expense ratios for the CommChoice plans. Patrick replied that the Connector can provide the Board with this information.
Catherine Hammons
