With the constitutionality of the federal health care reform law settled after last year’s Supreme Court ruling, health insurers in Western New York are focused on the changes that will take effect in the next 12 months, especially the launch of the insurance exchanges.

“It is very complicated, and what makes it more challenging is the rules are not final,” said Nora K. McGuire, senior vice president and chief marketing officer for Williamsville-based Independent Health Association.

First, insurers must submit the details of their products, benefits, provider networks and rates to the state for review and approval by April 1 – even as they’re busy studying and understanding the requirements coming out of Albany.

“We intend to be ready for submitting plans by then,” said Arthur Wingerter, regional president of Univera Healthcare, a subsidiary of Rochester-based Excellus Health Plan.

Second, the state must make its final decisions on those plans, and the companies must make any adjustments by summer in order to get the information loaded into the state’s computer systems in time for the exchange to go live Oct. 1. That’s when individuals can begin enrolling for coverage.

And third, the entire system and the insurance plans must be fully operational by Jan. 1.

“We’re working on several fronts,” said Donald R. Ingalls, vice president of government affairs for Buffalo-based HealthNow New York, parent of BlueCross BlueShield of Western New York. “We’re analyzing the regulations as they’ve been coming down, working to understand those, and then working on developing our products and what benefits have to be included and the pricing.”

Meanwhile, besides analyzing the new regulations, the three local companies are also working with the state to provide feedback that will help regulators design and implement the new exchange. In the process, they’re coping with conflicting rules and “time frames that are impossible to meet,” said Dr. Michael Cropp, CEO of Independent Health.

“Everyone’s gearing up for the implementation of the exchanges. It’s a crazy time,” he said. “It’s just complete chaos.”

And they’re working feverishly to educate their members and clients, as well as consumers in general, about what the reforms and exchange will mean for them. In particular, employers still have questions about what provisions of the law might apply to them, whether they will be moving to the exchange or maintaining private insurance for workers, and what they have to do as far as their obligation to provide insurance.

“We’ve found in the last year that there still remains a lot of confusion about the law and what the provisions are,” Ingalls said. “It is sort of a new world.”

Private exchanges

Finally, of course, since it’s not clear how many people will go onto the public exchange, the insurers are still focused on maintaining traditional products and services. At the same time, they’re exploring private exchanges, like that offered by Buffalo-based Liazon Corp.

Its Bright Choices portal has been used by Univera for health plans offered through Chambers of Commerce and is now being used for small group plans by Independent Health. And it gives insurers and brokers a chance to “test-drive” what an exchange will feel like.

“It is very likely we will also see adoption of private exchanges in the community,” Wingerter said. “It would be available for businesses that choose to stay off the public exchange, but it will have that look and feel.”

Through Bright Choices, an employer gives an employee a fixed amount of money or credit to purchase their benefits, allowing them to choose from a much broader selection of options than is normally available to small groups. Besides medical benefits, the “cafeteria plan” service also offers other features, such as vision, dental, disability and life insurance, and health savings accounts.

That was particularly attractive to the Buffalo Museum of Science, one of the first groups to sign up for Bright Choices through Independent Health. Officials at the museum, which has 32 full-time employees, liked the ability to offer real choice and a much broader benefits package, instead of being forced into a single one-size-fits-all plan as in the past.

“It allows choice, which is an exciting thing for an organization of our size to offer,” said Mark Mortenson, the museum’s president and CEO. “And we have the ability to offer additional benefits for our employees that we weren’t able to offer to them before because those benefits weren’t offered before to organizations of our size.”

Predictable budgets

At the same time, it enables the institution to set a more predictable budget each year by allocating a fixed amount to support overall healthcare benefits.

“We’re able to set how much we want to spend every year as an overall organization,” he added. “Employees are excited by it because the choice is up to them. It really empowers them to select the level of their own benefits.”

The efforts by the three local insurers will mark the culmination of a process that has been in the works since the Patient Protection and Affordable Care Act – the formal name for the reform law – was passed in 2010.

Provisions governing new mandates on health insurers or restrictions on what they can do have already taken effect – like coverage for pre-existing conditions, coverage for dependents up to age 26, federal review of premium hikes, minimum requirements for medical spending by insurers and the removal of limits on lifetime coverage.

And some of the reform provisions have had little to no impact in New York because they were already mandated for years under state law. New York, for example, has long had a “community rating” system for small groups, where everyone gets charged the same premium for the same benefits. And there’s no surcharge for pre-existing health conditions.

But the biggest elements – the individual mandate to purchase health insurance and the public health benefit exchanges – will kick in as of Jan. 1, 2014. That makes this year critical.

“We’re all working fairly feverishly to accomplish what we need to accomplish in a short timeline,” Wingerter said. “The exchange model will be a game-changer for employer groups.”

Four tiers of coverage

Under the rules of the exchange, a participating plan must offer at least one standard product on each of the four “metal” benefit levels – bronze, silver, gold and platinum. The levels are distinguished based on cost-sharing. So the lower levels will have lower premiums for members but higher cost-sharing. Specifically:

• A bronze plan pays at least 60 percent of the claims, with the member paying 40 percent.

• A silver plan pays 70 percent and the member 30 percent.

• A gold plan pays 80 percent, with the member at 20 percent.

• A platinum plan covers 90 percent of the costs, with the member paying 10 percent.

The government also set a minimum package of “essential health benefits” that plans must offer as a floor. Those minimums are actually “richer” than many small group plans today, with no limits on certain coverage, a cap on deductibles at $2,000 for individuals and $4,000 for families, and a ban on generic-only prescription drug plans that are allowed now. Plans can vary by cost-sharing and add additional benefits on top of that, and insurers can offer two to three additional products at each level.

“It’s like buying a car with the base model and then adding bells and whistles,” said Gretchen Fierle, chief communications officer at HealthNow.

Benefit changes

The new minimums also will apply across the board to all small group and individual insurance products, both those offered on the exchange and those sold commercially to employers whose workers will still get insurance the same way they have for decades. That means the effects of the reforms will reach farther than just the exchanges.

For example, mental health parity – in which mental health benefits have the same cost-sharing as other medical benefits – is now required as a minimum standard, where it’s an option for small groups currently. Pediatric dentistry is now also mandated for coverage.

“We know that there will be marginal changes,” Ingalls said. “There are some benefits in the required benefits that most small groups don’t offer now.”

Exchange plans can also vary by provider network. Independent Health, for example, may offer some plans with its entire network and others that are specific to one of two networks it is developing for its entire membership – its Primary Connection, which is built around a limited group of about 200 primary care physicians and all specialists and hospitals, and its Catholic Medical Partners product, which is built around all providers connected to the Catholic Health System.

But the regular commercial plans cannot be cheaper than those offered on the exchange.

“I think the intent, from the state and federal government, is that the exchange product at the bronze level is a very affordable product, versus something off the exchange,” Wingerter said.

“They’ve got a lot vested in making the exchange a success, so if there is little or low adoption in the exchange, that will put more pressure on them.”