Connector Conundrums: An Interview With Jamie Katz
Lester Feder | Leave a Comment
Jamie Katz is general counsel to the Massachusetts Connector. The O’Neill Institute’s Lester Feder spoke with him on October 23rd about lessons Massachusetts’ exchange offers for national health reform legislation.
Lester Feder: One of the questions for federal lawmakers is how much authority they give to the exchange or exchanges. Has that been challenged in Massachusetts?
Jamie Katz: I think there a variety of legal issues about how much authority we have. We don’t fit neatly into a lot of existing statutes. Carriers are supposed to offer the same plans inside and outside the Connector but when we set policies, our market is a little different than the outside market, so we do have discussions with carriers and some debate about whether our policies fit neatly with how the carriers operate in the outside market. A lot of that is left for us to work out, often in discussions with our Division of Insurance.
When we were first starting up, there was some discussion about whether our voluntary plans—where employers do not make any contributions to employees but allow them to be processed through the employee’s payroll so they can get the tax advantage—qualify as benefit plans for COBRA purposes or for ERISA purposes. We actually tried to have some discussions of this issue with the US Department of Labor as well. That’s one example of how fitting us into an existing statutory structure is difficult.
Lester Feder: Has your ability to require different kinds of coverage or degrees of coverage ever been contested?
Jamie Katz: There are two levels of discussion. The Connector board made a decision early on that it would not sell insurance through the exchange that did not meet minimum creditable coverage requirements. That limited to some degree the kinds of coverage we could offer and there’s certainly much debate about what’s the appropriate level for minimum creditable coverage. For example, the existing minimum creditable coverage standard requires coverage for prescription drugs. There are those who have advocated that prescription drugs should not be required, which would change the plans we sell.
For licensed carriers selling inside and outside the Connector, they have to offer the same plans inside the connector that they offer outside the connector and they have to be rated generally the same. My understanding is that the when Massachusetts enacted healthcare legislation in 2006, the plan was to have the carriers rate the same inside and outside because one of the downfalls of other exchanges is that there were different rules so that in many cases sicker folks flocked to the exchanges and the exchanges ultimately failed.
Lester Feder: As you look at what Congress is considering, are there things that worried you about the direction that the exchanges might take?
Jamie Katz: There are a lot of nuts-and-bolts kind of issues. One example is that one piece of protection for exchanges that was not provided in our legislation was protection for what I would call commercial and proprietary documents and meetings. If we are in discussions with carriers about pricing or whatever, we have to figure out how to do that in a way that will not trigger a refusal to cooperate on the part of the carrier for fear that they’re going to have to disclose proprietary information. Similarly there are open meeting laws that apply to the board. It’s difficult to have what in a corporation would be a proprietary discussion about business practices, it’s very difficult to have that at the Connector. Part of what we do is a traditional government function of providing subsidized services, and part of it is to be a lean, mean, sales and distribution organization and there are certain requirements that we as a state agency have to meet that make that more challenging on the sales and distribution side of things.
Lester Feder: If health reform legislation hands authority to a national exchange or state exchanges, what kind of authority will that exchange need to have in order to work?
Jamie Katz: I know that there are different kind of exchanges talked about, some that would just simply be a yellow pages and some that would be more selective. My own personal opinion is that our experience seems to show that the ability for a connector to be selective helps purchasers, helps potential buyers, because the information about insurance plans is very complicated, it’s easy to get overwhelmed, it’s easy to look at a large number of plans and a large number of benefit designs and not really understand what are the differences. The authority to do some kind of winnowing or narrowing of the choices in my view makes the Connector more appealing to the people who are buying from us.
Lester Feder: Doesn’t it also protect the insurers too, because they’re less likely to be the victims of adverse selection?
Jamie Katz: That’s probably right.
Lester Feder: A good deal of your laws may be superceded by whatever the federal government does. Are you concerned about that?
Jamie Katz: I would say we are watching it very closely. As the discussions have progressed in Washington, we have begun to see a bunch of suggestions that would, in fact, either change or even eliminate some of the functions that we’re now doing or move them around in substantial ways.
One that we’ve already talked about is minimum creditable coverage. What do you do where the state standard is different than the federal standard? Also, all of the exchange discussions have basically have said we’ll grandfather in any existing plans. What do we do here in Massachusetts where we have standards that are much higher than many of the plans that would be grandfathered?
Another issue is selling beyond state borders. Right now, the licensed plans can sell in Massachusetts, but we don’t sell to anybody from Rhode Island, or Arizona, or whatever. If we were in a situation where basically we had to open it up to outside plans, that would change what we do and how we do it, that would make it really interesting and really difficult.
A lot of the changes in rating rules that are being discussed, we’ve already gone ahead within Massachusetts and we’ve put in place more restrictive rating rules. For example, some of the proposed legislation talks about restricting rating rules so that there can’t be more than a four-one ratio between older folks and younger folks, and we’re already at two-to-one in Massachusetts. There certainly are people in the state who are very concerned about that.
Lester Feder: There’s a lot of discussion about whether this is going to be a federal exchange, whether there are going to be state or regional exchanges. Do you have any thoughts on that discussion?
Jamie Katz: This work has been challenging enough as a lawyer in the context of one state’s laws. My only thought is that I have much empathy for the general counsel for a national exchange or a regional exchange as they try to navigate operating one of these things within three, four, or fifty sets of laws.