Authority sees red in budget, plans assessments on insurers to generate funds
by Statehouse News ServiceDecember 14, 2006 -- A new state authority will run millions of dollars in the red until fiscal year 2009 as it pushes to expand health insurance access to 500,000 uninsured individuals, according to preliminary projections revealed today at the Commonwealth Health Insurance Connector Authority meeting.
Based on “very preliminary” figures, Patrick Holland, chief financial officer of the Connector board, said the authority could lose $18 million in Fiscal Year 2007 and $2 million the following year and start seeing net revenue of between $6 million to $11 million during Fiscal Year 2009.
“There are a lot of assumptions going in these projections,” said Holland.
The three-year financial projection to implement a pioneering health care reform law is based on two different enrollment scenarios; one that assumes 129,000 people by the end of 2009 would have enrolled in Commonwealth Choice, the state-sponsored commercial health plans for those who earn above 300 percent of the federal poverty level, and another one assuming 60,000 people would have enrolled in Commonwealth Choice by the end of 2009.
According to Executive Director Jon Kingsdale, the assumption of 129,000 enrollees is “aggressive” and 60,000 is “moderate.”
Board member Jonathan Gruber said he thinks there will be a “very large group” who are not insured but will eventually have to purchase health insurance due to a mandate that kicks in July 1, 2007.
“I think you’re underestimating a lot,” said Gruber to Holland.
Members agreed that the assumptions did not take all the variables into consideration. Holland said part of the loss in fiscal year 2007 has to do with upfront payments.
“There are a lot of expenses upfront, not only for Commonwealth Care but Commonwealth Choice as well,” said Holland.
The Connector was given $25 million to implement the new law until it could start generating revenue. For fiscal year 2007, it is estimated the Connector will spend some $24 million, said Holland. Some of the expenses have to do with contracts for service, salaries, web design, marketing, advertising, among other items. Holland said the Connector is projected to begin generating revenue in March of 2008, which is the third quarter of fiscal year 2008.
As its main source of revenue, the board intends to charge managed care organizations an administrative fee of 4 to 5 percent of the value of their contracts with the Connector, said Kingsdale.
Members talked about securing a line of credit to guarantee cash on hand during the periods of deficit. Holland said before the Connector starts seeing revenue, cash-on-hand may be as low as $2 million during the second quarter of 2008.
Besides voting in favor of the financial projection, the board also voted unanimously in favor of adopting a number of “emergency regulations” which define who is eligible to receive state-subsidized health insurance and who is eligible for premium waivers based on financial hardship.
Under premium waivers, the board discussed providing waivers to victims of domestic violence and to family members or partners who experienced the death of a relative or partner responsible for child care.
The board also voted to enter into a $13.2 million two-year contract with Maximus, a company that is supporting the Connector’s call service center, billing system, marketing and outreach programs.
Rosemarie Day, deputy director and COO of the Connector, presented another two-year contract to the board for interdepartmental services with the Executive Office of Health and Human Services. The $12 million contract will allow the Connector to use MassHealth services to process applications and determine if individuals are eligible for Commonwealth Care. It will also allow the Connector to use EOHHS as a hearing board for eligibility appeals, and use resources and support from the Office of Medicaid, among other services.
Board member Dolores Mitchell said she agreed to work with Medicaid, but hopes the Connector becomes a more independent public authority as time goes on.
“As a long-range plan, we need to think about some level of disengagement,” said Mitchell.
Member Beth Waldman, the state Medicaid director, said it would be significantly cheaper for the Connector to rely on an integrated system with EOHHS. “I don’t see down the line how you could completely disengage,” said Waldman.
The board also approved a $670,150 contract with CSC Consulting for web site development. The payments will be made in five steps from February to September of 2007. Each payment will reflect a different work phase.
As the state approaches the New Year, when it starts enrolling uninsured individuals who earn between 100 and 300 percent of the federal poverty level in “affordable” health plans, the board plans to launch a web site on Jan. 2, 2007. The website will include information in Spanish and English and offer self-service enrollment options to eligible individuals, said Melissa Boudreault, director of Commonwealth Care.
For now, the only premium payment method is through checks, said Boudreault, “but we are considering other types of payments in the future,” she added.
She also said other languages besides English and Spanish are also under consideration to help inform members.
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