How Massachusetts SHOP-ed for a new Small Group Marketplace
Earlier this spring, the Massachusetts Health Connector (Health Connector), the health insurance exchange of the commonwealth, announced that it would be joining Washington, D.C.’s, exchange, DC Health Link, in a first-of-its-kind collaboration to develop a joint platform for their small business exchanges. This partnership is an exciting example of the collaborative possibilities for states. By building off of DC Health Link’s successful platform, Massachusetts is leveraging expertise and existing infrastructure, while yielding cost-savings for both exchanges. Together Massachusetts and DC will benefit from shared investment in the technology to not only maintain, but also improve the platform in response to evolving customer needs.
The Small Business Health Options Program (SHOP) was created under the Affordable Care Act (ACA) to help small employers (those with up to 50 or, at the discretion of the state, 100 employees) facilitate the enrollment of employees into qualified health plans. Initially, the Health Connector leveraged a “legacy” platform, first built under Massachusetts’ 2006 health reform law, for its SHOP exchange; however, low enrollment meant the Health Connector began to lose money annually on operation of its SHOP. Driven by a desire to make the SHOP more appealing for employers and brokers, yield cost savings, and bring the Connector into ACA compliance, Massachusetts sought an upgrade. After two cycles of reviewing proposals for a new SHOP—none of which achieved its desired targets for financial and technical specifications—the state began to explore a new option, leveraging the SHOP of another State-based Marketplace (SBM).
Massachusetts contacted peer states to gage interest and feasibility of leveraging another state’s system. Each interested state filled out a detailed questionnaire about the capabilities of their SHOP platform, including capacity to support the additional and unique needs of a new state. After considering proposals sent from three states, Massachusetts selected to partner with the District of Columbia, hoping to leverage the flexibility built into its system by using the agility of DC Health Link’s open source code, the marketplace’s proven ability to hold up under high volume, its scalability, and cost effectiveness.
DC Health Link prioritized focus on its small business community early on. Currently, DC has more than three times as many people enrolled through SHOP than through the individual marketplace, with over 4,300 businesses and nearly 70,000 consumers currently participating—a contrast with any other SBMs where enrollment is more heavily concentrated in the individual market (to compare, Massachusetts has 1,435 groups and nearly 6,000 covered persons). Last year, NASHP wrote about how DC Health Link had developed a new agile, open source, cloud-based solution for its small business market—in non-tech terms, an easily adaptable technology built using shared public code. Rather than paying high licensing fees to a software vendor for a commercial off-the-shelf product, DC used local small IT businesses to develop custom open source to create its marketplace. The District was able to leverage this system to streamline their website, improve the consumer experience, and reduce operation and maintenance expenses. DC Health Link has reported significant cost savings as a direct result of its new award winning technology, as well as a reduction in consumer complaints.
Beyond wanting to leverage the efficiencies of DC’s platform, Massachusetts was especially attracted two qualities of the DC SHOP 1) an infrastructure designed to accommodate rapid growth, an important concern as Massachusetts dedicates itself to growing its small group market; and 2) ability of the technology to allow Massachusetts to offer employers “employee choice”, an option by which an employer can set a benchmark contribution and then allow their employees to select from a range of comparable plans. In a presentation to the Board of Directors in February, Health Connector staff noted employee choice increases carrier competition and estimated that allowing employee choice may reduce costs to consumers by approximately 30 percent. Additionally, assuming current enrollment levels remain constant, the ongoing operational costs for the new platform are estimated to be approximately 50 percent less than the cost of Massachusetts’s previous SHOP. With organic growth anticipated due to the addition of new product offerings, the Health Connector projects that the SHOP market will become totally self-sustaining by its second year of operation.
Massachusetts is intent on minimizing customizations, which will make transition to the joint-platform quick and efficient. DC Health Link, with assistance from IT staff in Massachusetts, will complete the six-month development process in mid-August and conduct an early launch phase for coverage with an October 1, 2017 effective date. The SHOP will be fully operational during this early launch phase, and carriers who are ready to transition to the new platform will be able to do so immediately. The Health Connector will work with its carriers throughout the pilot to help them make a smooth transition before full participation begins in 2018.
States continue to raise the bar as laboratories of innovation. The partnership between the Massachusetts Health Connector and DC Health Link is one example of how states can and are partnering with each other in order to bring the best practices from around the country into their own state. For several years, NASHP has engaged with states to help foster shared resources, services and innovation across states. We will continue to monitor these developments as states strive to implement ground-breaking and sustainable strategies to address coverage needs.
Thank you to the officials from DC Health Link and the Massachusetts Health Connector who generously reviewed and contributed to this work. In particular, thank you to Rob Shriver of DC Health Link, and Jason Lefferts and Jason Hetherington from the Massachusetts Health Connector.
The State Health Exchange Leadership Network is a project of the National Academy for State Health Policy (NASHP), which works to support state officials and staff working on the operation and implementation of health insurance exchanges.