How to Build an Insurance Exchange

By John Moore
04:44 PM

For Rick Howard, chief information officer of the Oregon Department of Human Services, the job of building a health insurance exchange"a state mandate tucked into the health reform law" means taking a leap into the IT unknown.

Like other states, Oregon provides Medicaid services and subsidizes insurance premiums for low-income residents. But building and operating an electronic insurance exchange will require a feat of systems engineering and integration that has not been attempted before by most state IT and health program leaders.

With it will come a new way of delivering services, a new set of citizen expectations and new demands for state IT systems. Think of it as e-commerce meets social services.

"We are looking at a whole new business model," Howard said. "State agencies are, in the broadest terms, serving as brokers, serving to match individuals with benefit plans that their employers or themselves are willing to pay for. The overlay of the exchange and the new set of requirements is really going to challenge our existing infrastructure."

The job presents state governments with a lengthy to-do list. They must build a platform that will enable thousands of people and small-business owners to compare plans and purchase health insurance policies. From an IT perspective, that means setting up a Web-based point of entry"a portal for insurance information seekers and shoppers.

And that might be the easy part. More daunting, according to state officials, will be renovating age-old back-end systems to provide reliable eligibility determination, a means for income verification and interfaces to private insurance providers participating in the exchange.

Most states are just beginning to come to grips with the task at hand. For many, the first step is just determining who's on the hook for building and operating the exchange. The state insurance commission? State Medicaid department? A purpose-built agency? That decision must be made before states can start focusing on technical issues.

To make matters more vexing, governance structures, technologies and standards must come together rapidly if states hope to meet the Jan. 1, 2014, target date for launching an exchange. That's a window of a little more than three years for turning states into quasi-insurance brokers.

"Health insurance exchange is probably the most complex aspect of health reform as far as implications for the states," said Harvey Chute, director of state and local health and human services for Northrop Grumman, which is eying the market for integration services. "The complexity is exacerbated by the implementation deadline."

A few states have had running starts. Massachusetts debuted what it calls its Health Connector exchange in 2006 after passing state health reform legislation. Utah has been running a health insurance exchange since 2009. Oregon also had an early start, having drafted a health insurance exchange plan months before national health reform was passed. Wisconsin has already issued a request for proposals for an exchange contractor.

Most states will draw upon the work of their peers. They also will have at their disposal a set of basic enrollment standards to help with some of the stickier problems of sorting data across isolated financial, healthcare and social services programs. To support those efforts, a Department of Health & Human Service panel has been on a quest since June to identify common protocols for sharing eligibility and enrollment data among parties involved in an exchange.

At press time, the group was expected to submit its standards recommendation this month [See sidebar].

Pathway to eligibility
The health reform law identifies an Internet portal as the best mechanism for helping users evaluate different healthcare plans. Information provided through the portals will "assist consumers in making easy health insurance choices," according to the law.

In doing so, state health IT planners must set up a system that caters to the economic and healthcare circumstances of thousands of different residents, and at a level of personalization that has not been attempted by most states.

"To the extent that the exchange is a shopping mall for health insurance it has to support decision-making on the part of the consumer," said Tina Edlund, deputy director of the Oregon Health Authority, which will oversee most healthcare-related programs in the state. Where the exchange will reside will be determined by the Oregon legislature, which convenes in January, 2011.

Exchanges must also determine whether users are eligible to purchase insurance via the exchange and whether they qualify for tax credits that subsidize insurance premiums. To make matters trickier, the reform law's "enrollment simplification" requirement calls for exchanges to serve as a gateway to other state-run social services such as Medicaid and Children's Health Insurance Program (CHIP).

Bobbie Wilbur, co-director of Social Interest Solutions, a California-based non profit that promotes expanded access to social services, said that as a first step, exchanges must determine whether a user qualifies for Medicaid. People who are eligible will be directed to Medicaid; others will be routed to the exchange.

"The exchange and Medicaid will need to be inextricably linked," Wilbur said.

Social Interest Solutions provides middleware that can link different health and human services systems, potentially allowing information to flow between insurance exchanges and other programs. The organization's One-e-App suite is used in four states: Arizona, California, Indiana and Maryland.

At any rate, states will need to route users hitting their insurance portals to the appropriate benefits program. "I've heard it described as a pathway to eligibility," Howard said.

To create that pathway, a state will need to link the exchange to eligibility determination systems. That could mean linking to one core system or several systems. Some states operate systems that handle eligibility chores for Medicaid and other programs such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps.

Wilbur estimated that 40 states manage Medicaid, TANF and SNAP eligibility in a single system, while the others lack a common eligibility system. Many states run separate systems for determining CHIP eligibility, she added.

"The current eligibility and enrollment systems range in technologies from old mainframes to new service oriented architecture systems and everything in between," Wilbur said.

States with disparate systems will face an interoperability challenge.

In Oregon, for example, the Department of Human Services' Division of Children, Adults and Families uses systems that are 30 to 40 years old, lack interoperability and require significant manual data entry by caseworkers, noted Kathryn Naugle, the department's deputy CIO.

Oregon aims to help residents apply for self-sufficiency programs remotely, while automating eligibility determination and other processes to support case workers. The department will look for opportunities to coordinate this upgrade with the exchange rollout.

"Exchange requirements associated with eligibility intake, determination and provision are likely to have a common denominator with the scope of the self sufficiency modernization initiative," Naugle said.

In West Virginia, officials are discussing how the state's exchange will connect to in- ROADS, the public front-end to the state's Recipient Automated Payment and Information Data System (RAPIDS). RAPIDS determines eligibility for Medicaid, food stamps, CHIP and West Virginia Works.

"I've been told the technical capability to make tha