Examining Employers' Use of Massachusetts' Health Insurance Exchange to Inform Best Strategies Nationally Under the Affordable Care Act

Grant Description: This project investigated employers’ use of the Massachusetts Health Connector, in order to inform states and the federal government about best strategies for design and operation of the new health insurance exchanges and market regulations. Federal insurance reform is modeled substantially on reforms in Massachusetts, including its version of a health insurance exchange. Despite this success, the Massachusetts Connector failed to make major in-roads into the employer-based insurance market. However, employer participation has increased substantially over the past year. The reasons for initially low but now increasing employer use of the Massachusetts Connector had not been thoroughly studied by outside researchers. Through key informant interviews and document review, this research produced advice to administrators and government officials about how best to structure various operational elements of the new insurance exchanges to assure employer participation sufficient to maintain risk pooling. The goal of this project was to inform states and the federal government about the best strategies in the design and operation of insurance exchanges to ensure employer participation.

Policy Summary: Key Findings

  • Community rating rules prevent exchanges from offering better prices than those available outside of exchanges.  Therefore, subsidies are critical if exchanges are to offer a price advantage.
  • Choice features of exchanges can be attractive to some employers, but they need to be designed in a fashion that is simple to understand and engage with.  This is difficult to do under a set of market rules that allows rates to vary based on age. 
  • Exchanges create a market space where insurers with more limited networks can succeed.  Individuals are more willing than employers to purchase less expensive insurance that covers fewer providers.
  • The constructive involvement of agents/brokers is critical to the success of new market structures for small employers.  Employers rely heavily on agents, for good reasons. 
  • To engage agents constructively, exchanges should include agents in planning and policy making, pay commissions similar to what they receive outside the exchange, and make the administrative systems user-friendly.
  • Agents do not place a lot of value in simplifying the insurance shopping experience.  Their expertise is in greatest demand when there are more choices to consider.
  • An exchange does not need to offer “one-stop shopping” for a full suite of fringe benefits, such as dental, life insurance, or long-term care insurance.  Agents are well versed in finding different sources for these ancillary benefits.