Never heard of premium aggregation? You are not alone. Premium aggregation is an administrative function that allows a health insurance exchange to collect premium payments from multiple sources and then submit them to the carrier, instead of individuals paying the carrier directly. While the task may seem arcane, premium aggregation has a significant impact on exchange operations and the consumer experience.
Final exchange regulations require SHOP exchanges to perform premium aggregation functions. The exchange must provide each employer with one bill for all employees, even if the employees are enrolled in different plans from different carriers, and the exchange must collect premiums from employers and make payments to qualified health plans. This is designed to ease the burden on small employers and to make the SHOP exchange more attractive for small business participation.
States have a choice of whether to have the individual-market exchange perform premium billing and collection functions, or whether to have carriers play that role. Exchanges must also allow an individual to pay their premium to the carriers directly. Premium aggregation would ideally allow the exchange to receive individual premium payments and premium tax credits from the federal government. Below we examine some of the initial decisions states are making related to aggregation in the individual exchange.
Exchanges moving forward with premium aggregation
- Nevada has decided to implement premium aggregation and integrate public coverage so the family receives one bill, even if some family members receive Medicaid/CHIP and some receive private coverage through the exchange.
- Utah’s existing exchange provides aggregation services, which pools defined contributions from employers, employee contributions, and other sources, such as a second employer or a state assistance program.
Exchanges that will not aggregate premiums
- California’s board decided not to aggregate premiums in the individual-market exchange after considering three approaches and determining that direct payment of premiums to carriers was less expensive and simpler to administer than aggregation of premiums by the exchange.
- Colorado’s board decided to have individuals pay carriers directly for the plan, rather than pay through the exchange. In a blog post, Executive Director and Chief Executive Officer Patty Fontneau indicates that some policy decisions, including premium aggregation, may be revisited in the future once the exchange is operational.
Exchanges that are still undecided
- Maryland has not yet decided whether to perform premium aggregation, but in the interim, the exchange is moving forward with building the technology. Exchange staff presented premium aggregation options including issues and workflows, but recommended postponing the decision. A final decision from the board is planned for October.
- Washington approved building premium aggregation functionality into the exchange IT system with the option to turn the function on or off. Exchange staff presented a number ofadvantages and disadvantages to building the functionality into the exchange, and ultimately, the board supported the measure, but wants to ensure the exchange will also be able to receive and aggregate premium tax credits. However, the ACA indicates that the Treasury will pay tax credits directly to the carrier, and HHS has not yet indicated if they will be able to pass through the exchange instead.
As more states consider premium payment and billing issues in the future, they may consider the following advantages and disadvantages to premium aggregation:
- Potentially simpler for the consumer; family can receive one bill if they are in different plans or have medical and dental plans from different carriers
- Strengthens role of navigators as they can help consumers from start to finish, and include assistance with payment
- Carriers can receive enrollment and payment information at the same time
- Building the necessary technical infrastructure may be expensive
- Potentially duplicates services carriers can already provide
- Process would require additional coordination between exchange and carriers
Has your state made a decision related to premium payment and billing? Tell us in the comments below.