ARKANSAS HEALTH INSURANCE EXCHANGE PLANNING GRANT PROJECT NARRATIVE

ARKANSAS HEALTH INSURANCE EXCHANGE PLANNING GRANT PROJECT NARRATIVE The Arkansas Insurance Department (AID) has been designated by Governor Beebe to submit the state s application for the State Planning and Establishment Grant for the Affordable Care Act s Exchanges. The following is a description of how Arkansas plans to use Exchange planning funds. Background Research Arkansas has a population of approximately 2.89 million residents, with 1.15 million being rural residents and 1.74 million being urban residents. The state population consists of 79% Caucasian, 15% African-American, and 6% Hispanic. The poverty rate is 19.7% in rural areas and 15.7% in urban areas. An estimated 650,000 (22.5%) of Arkansas residents are enrolled in Medicaid and 505,000 (18%) in Medicare. Nearly half a million individuals do not have health insurance coverage, approximately 17.3% of the state s residents. More than 90% of children and almost all seniors over the age of 65 years have either public or private health insurance. Of those aged 19 to 64 years, approximately 25% do not have a third party source of coverage. For those aged 19 to 44 years 30% are estimated to be uninsured. For those with health insurance, employers comprise the primary source of coverage (~75%). Almost all large Arkansas employers offer health insurance as a benefit (AR 93%, US 95%). Only 29% of small Arkansas employers offer health insurance and the majority of Arkansas employers are classified as small (<50 employees). Three traditional key components of the state s Medicaid program are ARKids First, ConnectCare, and TEFRA. In addition to the ARKids A population [covering children under age 6 in families up to 133% of federal poverty level (FPL) and those aged 6 to 18 in families earning up to 100% FPL], ARKids B provides coverage for children with family incomes up to 200% FPL through a full benefit package requiring co-payments. Children also receive health care through a Medicaid waiver (SCHIP) program. ConnectCare is Arkansas s Medicaid managed-care program which operates as a primary care case management program administered by the State's Department of Human Services Page 1 of 15

(DHS) Division of Medical Services. TEFRA 134(a) extends Medicaid coverage to provide care to disabled children in their homes rather than in institutions. A profile of insurance coverage in Arkansas is reflected below. Having accurate information on various aspects of the health insurance market is essential for states developing plans for the health insurance exchange. Such information serves as the backbone of any actuarial models, business and operational plans, education and outreach plans, technological assessment plans, and, ultimately, the development of an overall project strategic plan. This data is also essential when educating and discussing policy directions with executive and legislative policymakers, consumer groups, private carriers, providers, and all other interested stakeholder groups. Arkansas will contract for in-depth research, including but not limited to, determining the number of uninsured individuals in the State; those potentially eligible for Arkansas s Insurance Exchange (Exchange), and those eligible for Medicaid or their employer s coverage and currently not enrolled. A detailed analysis of the existing legacy Medicaid eligibility system will be undertaken as well as the determination of the best pathway for an effective partnership between the Medicaid Management Information System (MMIS) and the new exchange. A survey of health insurance carriers will be conducted to determine plan designs being sold in our state market, market share, premium levels of those plan designs, and the size of each market segment (uninsured, non-group, small group). Economic and actuarial modeling will also be contractually conducted to identify accurate data and project trends in the newly insured, market changes, related policy issues, exchange products, Page 2 of 15

provider access, potential customer mix, suitability of product for the local/regional area, and pricing considerations. Most importantly, a financial model will be created that determines break even analyses for the Exchange, required fee structures, and cash flow sources and forecasts. Stakeholder Involvement To facilitate inclusive, transparent, and coordinated Exchange planning, AID will employ an Exchange Planning Project Director to manage and coordinate planning processes with internal and external stakeholders. An integrated, financially viable, and consumer supported implementation plan is the goal. Influenced by past successes in Arkansas when key stakeholders have stretched beyond their own perspectives and constituencies to partner with others in solving complex health issues (e.g. small employer-medicaid insurance plan, Medicaid insurance waivers), this planning effort will actively engage diverse stakeholders early in the planning process. To facilitate meaningful stakeholder involvement, AID will use grant funds to enter into a professional services agreement with the University of Arkansas for Medical Sciences (UAMS) Partners for Inclusive Communities (Partners) to develop and implement specific stakeholder involvement activities. Deliverables will include the development and dissemination of a stakeholder report that includes recommendations to be used in designing the Arkansas Insurance Exchange Implementation Plan. Partners will assemble a team of skilled, community-based researchers that has extensive experience in inclusive, consumer involved planning and a successful track record of working together to improve the health of Arkansans. Team members will be recruited from the University of Arkansas Medical Sciences College of Public Health (COPH), Partners for Inclusive Communities, Arkansas Center for Health Improvement (ACHI), and Community Health Centers of Arkansas. Deliverables relative to stakeholder involvement will be proposed in the first month of the planning grant and approved by AID. These deliverables will include activities for disseminating known exchange planning information and processes to stakeholders and obtaining relevant feedback from diverse stakeholders Page 3 of 15

about their needs and concerns. In particular, feedback related to end-user access and barriers and Exchange financial viability and sustainability will be obtained. The Stakeholder Inclusion team will interface with other planning workgroups/contractors to keep abreast of evolving information. Their work will insure two-way information exchange with under-represented stakeholders from distinct regions of the state including those with literacy, disability, language, access and government trust issues. A stakeholder Summit will be held in the Spring of 2011 and a final stakeholder report will include recommendations for Arkansas Exchange Implementation. An initial list of key stakeholders has been compiled. In addition to potential enrollees in the Arkansas Health Insurance Exchange and consumer advocates such as Arkansas Disabilities Rights Coalition, Arkansas Minority Health Commission, Arkansas Autism Resource and Outreach Center, Welcome the Children (outreach to low income, Spanish speaking families), and Arkansas Advocates for Children and Families, this list includes key state agencies such as Arkansas Insurance Department, Arkansas Department of Human Services home to Arkansas Medicaid and County Operations, the division that enrolls Arkansans for various public assistance, and the Departments of Health, Education, and Finance and Administration. It also includes Arkansas Center for Health Improvement (ACHI), the State s Office of Health Information Technology which has responsibility for the development of the statewide health information exchange, legislators and other elected officials, health insurance companies providing or likely to provide individual or small group plans, licensed health care providers and provider associations including practitioners, facilities, and safety net providers such as community health centers and public hospitals, business leaders, including those from small businesses as defined under Arkansas Insurance law, labor unions, and insurance agents/brokers. Involved stakeholders will be catalogued during planning. Early discussions among members of the above described team have included methods for data collection and dissemination including community-based focus groups, telephone surveys, community forums, and key informant interviews. Interview questions and processes will be developed in the first month of grant funding and pilot tested before statewide implementation. A report of research findings Page 4 of 15

will be widely disseminated in keeping with our plans to insure transparency in the planning process. During the final months of the planning grant, the stakeholder report and recommendations will be disseminated via appropriate media outlets, and a series of public hearings will be held across the state using interactive video and on-site methods. Letters of interest and participation will be solicited from stakeholders for the Arkansas Health Insurance Exchange Implementation Grant. Program Integration Effective and efficient program integration is a mandated basic building block of the exchange program. The major players in the creation of the exchange, and in the state s overall health reform implementation efforts, have already come together at the request of Governor Mike Beebe. Governor Beebe designated Insurance Commissioner Jay Bradford to lead in health exchange planning and insurance-related health reform; Department of Humans Services Director John Selig to lead in Medicaidrelated expansions and enrollment changes; and State Coordinator for the Office of Health Information Technology Ray Scott to lead in matters involving health insurance technology-related issues. Dr. Joe Thompson, Arkansas Surgeon General and Director of the Arkansas Center for Health Improvement (ACHI), will provide team leadership in coordinating and integrating state health initiatives. An accurate assessment and detailed analysis of the technical capabilities of current state information systems, information technologies, and related programs to perform the various technological functions that will be necessary to carry out the required functions of the Exchange must be undertaken (covered in greater detail in Technical Infrastructure ). As an example, with the coming expanded coverage, Medicaid enrollees could comprise the majority of enrollees in any integrated future Exchange in Arkansas. This expanded Medicaid coverage will require intense assessment and analysis of current and future Medicaid enrollment and eligibility structures as well as the most efficient integration of its programs and technologies with that of the Exchange. Included in analysis of all systems and programs will be functions such as eligibility determination, choice and enrollment into health plans for state Page 5 of 15

employees and any public programs managed by the state, administration of subsidies, collection of premiums, disbursement of payments, and other related functions. Part of this assessment will focus on aligning policy needs with system capacity and technical development. This assessment will include, but not be limited to, capacity and development of the Office of Health Information Technology, State Department of Information Services, Department of Human Services, Department of Health, Department of Finances and Administration and its Employee Benefits Division, Arkansas Center for Health Improvement, University of Arkansas for Medical Sciences Center for Distance Health, and all other applicable state technology related entities. Successful integration with applicable federal agencies, such as the U.S. Department of the Treasury (IRS); the U.S. Department of Labor; the U.S. Department of Homeland Security; the U.S. Department of Health and Human Services (HHS), including the Center for Medicare and Medicaid Services (CMS), the Office of National Coordinator (ONC), the Office of Consumer Information and Insurance Oversight (OCIIO), and others as necessary will be required for a successful exchange operation. Exchange planning will include analyses of emerging options for state-federal integration. There will also be a need to integrate future Exchange education and outreach efforts with education and outreach efforts of other state health programs, health information technologies, and health reform initiatives (see Stakeholder Involvement ). To address these integration needs, funding is requested to develop an assessment of integration needs and costs for education and outreach. Resources and Capabilities Skilled personnel, reliable data, technological and organizational infrastructure, and adequate financing are key resources needed for successful Exchange implementation. The skills and tasks required of staff and contract personnel in this planning stage include, but are not limited to, project management, conducting research, analyzing data, communications, developing and issuing RFPs, and facilitating interagency work among key stakeholders. Page 6 of 15

Given the state s current budget and personnel circumstances, the capacity of staff to take on new projects is limited. Wherever possible, however, Arkansas will deploy existing staff to work on this project in order that planning resources will assist in developing internal capabilities and capacities that will be needed for future Exchange development. More than three-fourths of Exchange Planning Grant funds will be used to contractually purchase much of the professional support required in the execution of the specified planning activities. Project funds will also be used to employ a full-time project director and project specialist dedicated to Exchange planning. The business operations section of this application outlines plans to assess the needed resources for Exchange start-up and sustainability. In addition to some staff resources, the State will be able to utilize some existing research tools in order to obtain needed data. Data will be compiled from the Behavioral Risk Factor Surveillance System (BRFSS) data, the Arkansas Center for Health Improvement s Health Data Initiative (HDI), Medical Expenditure Survey-Insurance Component (MEPS-IC), and Census Population Survey (CPS). Additional data needs will need to be purchased if not available from other public sources. In addition to State budget, staff, data resources, and other needs for Exchange planning, end-user (enrollee) capabilities must be assessed. Many residents of Arkansas have limited internet resources and access which will limit the ability of the exchange to operate successfully. To address this internet access gap, the University of Arkansas for Medical Sciences (UAMS), with support from multiple public and private providers, has been awarded a $102 million grant from the U.S. Department of Commerce (economic stimulus funding) to expand broadband services in the state. The grant will provide broadband connections or upgrades in all of Arkansas's 75 counties and in 135 communities, greatly increasing the ability of the state s residents to access the internet, and therefore the health insurance exchange, without requiring full funding and personnel resources from the State. Governance Arkansas will consider all governance options (state, regional, and federal) for the State s health insurance exchange (Exchange). A fundamental question must be addressed concerning whether the Page 7 of 15

exchange will be operated by a private non-profit; an existing state agency or agencies; a newly created state agency; or a quasi public-private entity. The state will need to examine several key questions before a final determination can be made concerning the governance of the exchange. Ultimately, the final decision on what governance model will work best for the state of Arkansas rests with the Governor. In reviewing various governance models, Arkansas will consider a number of factors including public accountability, regulatory function, necessary expertise, market flexibility, procurement issues, personnel issues, and public and private sector integration. Regardless of the governance chosen, the Exchange will need to comply with both state and federal laws in establishing the Exchange. As in the Exchange planning efforts, the implemented Exchange must work with all of the appropriate stakeholder groups and operate in a transparent manner. It should be noted that support for selection of a state exchange option in Arkansas exists because of the remarkable assets of leadership and cooperation existing within the state. This includes healthcare stakeholders, state entities such as the Insurance Department, Department of Human Services, Department of Health, Arkansas Economic Development Commission, University of Arkansas for Medical Sciences, Department of Education, Office of Health Information Technology, Arkansas Center for Health Improvement, and the Department of Finance and Administration, as well as the state constitutional officers and the state legislature. Arkansas has a rich history of successful teamwork regarding meaningful statewide issues such as healthcare. Another positive factor favoring the state option in Arkansas is the ongoing and robust activities of the state entities engaged in health information technology. This group has produced outstanding results in a relatively short period of time. Various technological exchange functions that the state will need to perform will be identified and evaluated in collaboration with this group. If the state option is utilized, the planning grant will produce recommendations for organizational location, structure, and lines of accountability and oversight for the Exchange. Like the state, regional, or federal option choice, the residence and governance structure of the Exchange will be carefully studied and reviewed by state leaders as well as qualified outside experts. Page 8 of 15

Workgroups consisting of leadership staff from applicable state agencies and affiliated stakeholder groups will be fully utilized. In addition to staff and consulting resources, other active and diverse advisory groups will play a key role in the exchange governance planning. These groups will be populated by a broad cross section of state residents and consumers whose views on all topics will be strongly considered. Finance The Finance Planning group will be responsible for documenting and recommending State accounting and auditing requirements to be in compliance with Section 1311 of the Affordable Care Act (ACA). This planning will focus on the following sections: Section 1313; Financial Integrity: Accounting for Expenditures (in general and audit); Section 1311; Publication of Costs: (on internet site and including average costs of licensing, regulatory fees and any other payments required of the Exchange and the administrative costs of the Exchange and report of monies lost to waste, fraud and abuse); and Section 1311; No Federal Funds for Continued Operations: (Exchange is self-sustaining beginning on January 1, 2015; Exchange allowed to charge assessments or user fees to participant health insurance issuers, or to otherwise generate funding to support its operations). The Finance Planning group will explore and identify the State s capability, gaps, and costs for complying with the accounting and auditing requirements as above. Recommendations will be submitted in the form of a Financial Planning Report that will include: Alternatives for meeting accounting and auditing requirements of the Exchange; System requirements to ensure the handling and safeguarding of cash collections; Requirements for an accounting system including a general ledger, payroll, accounts payable and accounts receivable functions, and financial management and reporting tools; Requirement for reconciliation of premium tax credits and cost sharing subsidies; Page 9 of 15

Internal controls requirements and the development of financial statement reporting for disclosure to the public; Technical requirements such as the appropriate accounting system, servers, warehousing of data, and data security, as well as the hiring of specialized accounting and finance personnel due to the complexity of the public/private hybrid of the Exchange; and Options on how to make the Exchange self-sufficient by January 1, 2015. Assessments to determine financial costs for Exchange start-up and sustainability of Exchange business operations are addressed under Business Operations section of this application. Technical Infrastructure The state Exchange should operate using a combination of existing state health information technology capabilities and the technical capabilities to be acquired as the result of recommendations from contractual evaluations. The effective implementation of this partnered infrastructure will ensure standard interoperability and will provide citizens, providers, payers, and governmental entities a consistent interface whether for health benefits or health information. It also mitigates costs by ensuring like-services are not developed independently. Planning technical infrastructure (HIT) of the state exchange should begin with the following eight principles: The exchange HIT components must be compatible and fully integrated electronically with eligibility, enrollment, and data interchange functions of all applicable Arkansas Medicaid components. The exchange HIT components must be functionally integrated with all applicable state and federal agencies. All aspects of the technical infrastructure must support a user friendly exchange web portal. The exchange processes must avoid HIT component duplication within the state and utilize existing state HIT resources to the fullest extent possible. Page 10 of 15

The Arkansas Exchange will provide an infrastructure that is secure and protects the privacy of consumers, providers, and other constituents. Participants can be confident that their health care data is secure, private, and appropriately accessed. Best practices and standards for information technology infrastructure will be utilized to the extent possible and practical in the creation of the benefits exchange. The architecture will support an incremental deployment of a statewide exchange capability. National standards for electronic data exchange will be utilized. The first priority for Arkansas will be to evaluate and inventory, through competent outside contractors, all major existing health-related computer and technical systems within the state. With the expansion of Medicaid in 2014, the majority of enrollees in the Arkansas exchange will likely be Medicaid recipients. For that reason, an independent evaluation of the current state Medicaid electronic eligibility and enrollment systems, related websites, call centers, and other existing HIT infrastructure will be compared to the known future requirements of the state exchange. A gap analysis identifying current capabilities compared to the functional requirements of an exchange will indicate future resource and financial needs. Arkansas will also research, analyze, and assess the capabilities of vendors and the cost effectiveness of make or buy decisions. The impact of the recent University of Arkansas for Medical Sciences grant of $102 million from the U.S. Department of Commerce (economic stimulus funding) to expand broadband services in Arkansas will be a tremendous asset to the state (see previous section for fuller description of grant). Business Operations The operational components and requirements of a successful Exchange must be determined, including optimal staffing needs, operating budget, timelines, compliance, and operational guidelines. Critical risk factors must also be determined. Core capabilities include the ability to: determine eligibility and calculate cost-sharing for subsidized individuals; support choice and decision-making by customers; accurately assess and adjust Page 11 of 15

pricing for coverage for individuals, families and employer groups; and support, track, and manage customer service, enrollment and renewal. Critical risk factors include tracking and reporting tax subsidy flows, data security, lockbox functionality for premium collections, development of a system of internal control, financial reporting, external audit readiness, integrity of third-party systems (SAS 70 compliance), and continuity of operations in case of a catastrophic emergency. If Arkansas chooses the state option, then the state must create the appropriate business model for the Exchange. Considerations would include scope, functions, and role, number, type, and standardization of plans. There would have to be interaction with brokers, carriers, employers, and individual consumers. The components to be considered would be information systems, customer service and protection functions, and management of payments, tax credits, and subsidies. Additional considerations would be type of plans to be offered through the exchange, adequate participation by carriers, avoidance of adverse selection, and a seamless electronic processing of eligibility and enrollment. Based on lessons learned from West Virginia in their early exchange planning, the following exchange components will be considered for Arkansas s Exchange: Eligibility Portal to provide electronic assessment of enrollee-entered data to determine federal subsidy eligibility and connect consumer to all available coverage; Premium Aggregator to provide total of all premium contributions so the consumer will have better information upon which to budget and purchase the plan that best serves his/her needs; Decision Making Assistance Tool to assist the enrollee in navigating the Exchange, including a guided decision-making function and referral to other help sources; a Carrier Menu that would allow consumers to compare and contrast critical insurance metrics with more detailed plan descriptions and link to any available federal subsidies and other account contributions set up for consumer (Menu will be structured in five actuarially determined tiers per federal guidelines, with one being available to only young adults); Premium Collection and Remittance to perform accounting functions to allow remittance of premiums and prepaid amounts to the various insurers and brokers or participating health care organizations, including payroll deduction for premium or prepayment for Page 12 of 15

coverage; Employer Access to assist small and eventually large employers in streamlining the administrative burden that providing coverage to their employees presents; Portability of Coverage to facilitate portability of coverage as enrollees transition from employer to employer; Navigator Assistance to assist consumers with computer, internet, or other access and literacy issues (could utilize the required Call Center or other methods modeled after the State Health Insurance Assistance Program for Medicare); Multiple Exchange Access Points to assist enrollee in receiving appropriate subsidies and other services as provided by the exchange through methods other than their direct portal interface (given literacy levels, lack of computer access, and currently limited broadband linkages, it is essential that other community access points be explored to include exchange case workers, volunteers, and other community groups to serve as insurance exchange facilitators and counselors); All Payer Claims Database to provide consumers with both provider charges within a carrier network and quality assessments of those providers in carrier networks as an essential tool in developing a risk adjustment policy; Master Client Index to assist the State in knowing how many clients are being served at any one time and tracking individuals across state systems in order to advance case management and continuity of care for vulnerable populations; Exchange Matrix to provide overview of all health coverage available in state of Arkansas (consumers will also have the option of reviewing the universe of available services in a matrix document on the exchange website); Agent/Broker Access to better develop the role of insurance agents and brokers relative to consumer assistance in navigating the Exchange; Other Consumer Tools that would assist the enrollee in making the best choices to meet his/her healthcare needs by identifying providers by network status, zip code, costs, complaints, and eventually healthcare outcomes; and Other Exchange Information such as FAQ, About Us, Common Terms, and a Health Insurance and Exchange tutorial. Steps in the Exchange business operations process will include: 1) Insuring stakeholder inclusion in addressing business operations; 2) Market surveys, studies, analyses, and modeling to assess various Exchange policy and implementation issues; Page 13 of 15

3) Determining needed Exchange technology, infrastructure, integration, and implementation costs; and 4) Developing a start-up and five year sustainability business operations plan to include development of fee options for Exchange sustainability. Regulatory or Policy Actions A key component in planning for Arkansas s Exchange is an analysis and determination of what laws and regulations need to be implemented or modified to implement the Exchange. The scope and detail of the enabling legislation will incorporate key elements that ensure compliance with the ACA and Arkansas laws and regulations relative to whether to implement an exchange at the state level. The key issues to be determined involve the exchange governance structure, market standards, eligibility, benefit design and consumer protections. Under this planning grant, the State will: Research the legal structure needed to support the type of exchange selected by the State. Analyze all rules and regulations issued by HHS relative to the Exchange and its impact on Arkansas. Draft legislation and/or regulations relative to Exchange development and implementation. Circulate drafts of legislation to stakeholders and interested parties for comment prior to the pre-filing date. Hold educational sessions to provide state agency leadership and members and staff of the Arkansas Legislature with resources for understanding federal Exchange requirements and Arkansas policymakers role in the decision- making and implementation processes to ensure the State s compliance. The Arkansas Insurance Department plans to obtain broad rule-making authority for all insurance rate matters and to immediately expand prior approval authority for small groups. The latter will include amending the definition of small group from 2-25 to 2-100. Actuarial and information technology consultation made possible by the Rate Review Cycle 1 funding will be used to evaluate needed process Page 14 of 15

improvements and plan and implement strategic improvements. These regulatory improvements added to recommendations developed through this Exchange planning process will advance transparent processes, routine trend analyses, and active public and industry reporting. The ultimate goals are consumer protection and improved health care access. Page 15 of 15