As funding ebbs, Access Health looks at new business ventures []

April 20, 2015

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As federal funding for the state’s health insurance exchange runs out, Access Health CT is looking into new business ventures to raise more revenues, safeguard its long-term financial position, and potentially curb future premium increases.

Options include offering new product lines like vision, supplemental Medicare or life insurance, ramping up its consulting services, and even selling its technology platform to other states, Access Health CT CEO Jim Wadleigh said in a recent interview.

Significant opportunities exist for Connecticut to cash in on the early success of its exchange, which, while not perfect, has been hailed nationally as one of the best-performing online insurance marketplaces.

Wadleigh said he’s been traveling the country lately talking to other states that have shown interest in partnering with Connecticut, or even adopting its systems.

“A lot of exchanges are struggling with issues that Access Health confronted a year or two ago,” Wadleigh said. “That is providing us opportunities to go into those states and offer some help — paid or not. Why reinvent the wheel?”

One major opportunity that awaits, Wadleigh said, is if the Supreme Court rules this summer that residents in states using the federally run insurance exchange can no longer receive premium subsidies. That would likely force some of the 34 states currently using the federal exchange to create their own insurance marketplaces; Connecticut would be in an ideal position to offer up its expertise, business practices and technology.

Wadleigh said several states have contacted him about that possibility. And Access Health already has experience assisting other exchanges. It was paid over $200,000 last year, for example, to provide training and operational support to Maryland, after that state’s exchange was dogged by technology glitches and other shortcomings. Maryland also adopted the same computer code Connecticut used for its online platform.

Several Access Health employees traveled there to train staff. The assistance proved effective, said Carolyn Quattrocki, executive director of the Maryland Health Benefit Exchange.

This year, the Maryland exchange nearly doubled its enrollment in qualified health plans and saw consumer satisfaction increase significantly, Quattrocki said.

“We wouldn’t have been as successful without the assistance from Connecticut,” Quattrocki said.

Deals with other states are in the works, Wadleigh said, but he declined to elaborate, citing political sensitivities. Most states interested in Connecticut’s exchange want the expertise, business processes and technology, but not the Access Health brand.

That’s why Wadleigh is pushing a bill that recently passed through the Insurance and Real Estate Committee that would allow Access Health to establish subsidiaries that make it easier to sell its services to other states. The bill also would give Access Health the ability to offer additional products such as vision benefits or life insurance. Currently, federal regulations prohibit state-run exchanges from offering additional lines of business, unless they are provided through a separate legal entity.

With 107,000 customers currently on Connecticut’s exchange, there is significant opportunity to cross-sell various insurance lines, Wadleigh said.

“We want to work with brokers and carriers to sell these products,” Wadleigh said.

Not all lawmakers, however, are convinced an expansion of Access Health’s business makes sense.

State Sen. Kevin Kelly (R-Stratford), who voted against the subsidiary bill, said he’s concerned it could put taxpayers at risk, especially since Access Health is a quasi-public entity.

“What if we don’t do it right and costs start to overrun?” Kelly said. “How are we going to ensure state taxpayers won’t be put on the hook in the future by these ancillary subsidiaries.”

Financial issues

Access Health is pursuing new revenue streams to safeguard its long-term financial health.

As of Jan. 1, the federal government essentially shut off its money spigot to state-based exchanges, meaning they have to become self-sustainable. Access Health CT received about $150 million in federal funding since its inception, and still has about $20 million left to spend. After that, however, the exchange is on its own.

Wadleigh said Access Health is currently one of the few state-based exchanges that is self-sustainable. That’s because it generates revenue through a 1.35 percent premium assessment charged to virtually all small-group and individual- market insurers in the state, even if they don’t offer health plans on the exchange. The assessment raises about $25 million in annual revenue.

The exchange also gets reimbursed about $30 million from the federal government for its Medicaid development and enrollment services. Right now Access Health, which is a not-for-profit entity, breaks even but Wadleigh said they need to develop more of a financial cushion, including about a $10 million reserve so they can continue to reinvest in the organization.

Rather than increase the premium assessment further (under federal law it can go as high as 3.5 percent), which would likely mean higher premiums for customers, Wadleigh said the smarter option is to seek out new revenue streams.

The exchange is also working to reduce expenses by at least 25 percent. About 80 percent of the exchange’s budget goes toward its call-center and IT maintenance/operations, but Access Health is trying to renegotiate contracts with its two major vendors. It currently pays Virginia-based Maximus about $18 million to $20 million to run its call center; Deloitte collects $8 million to $12 million for IT-development and production support.

Wadleigh said the exchange paid a premium on its original contracts with both because it had to move quickly to get its online marketplace up and running in about a year’s time. The deal with Maximus, for example, was negotiated in just three months; a similar contract done in the private sector would take a year or longer.

There are also opportunities to shave costs and find new efficiencies by collaborating with other exchanges. Wadleigh said he’s been talking to other states about forming regional/group purchasing organizations.

Several collaborations are being discussed, but Wadleigh said it’s too early for him to comment.

“We are eager to share our experiences, but also build on best practices to make us all sustainable,” Wadleigh said.