Director, Minn. Dept of Commerce
An Interview with
The Civic Caucus
8301 Creekside Circle #920, Bloomington, MN 55437
Notes of the
David Broden,Janis Clay,Pat Davies,Rick Dornfeld,
(coordinator), Verne Johnson (chair),
Dan Loritz (vice chair), Walt McClure,
McDonald, Dana Schroeder, April Todd-Malmlov.
Summary of Discussion:
April Todd-Malmlov, exchange executive director at the Minnesota
Department of Commerce, argues that getting better health care quality and
value information to consumers through the state's developing health
insurance exchange will drive competition in the health care marketplace,
lowering costs, increasing innovation and improving quality. She describes
the process Minnesota is using to design and develop its exchange and the
significant challenge of the short time frame for doing that. She explores
the impact the Affordable Care Act and the exchange will have on health
care choices and coverage in the individual and small-group markets. She
closes by saying that health reforms enacted in Minnesota in 2008 will
allow the state to build a better health exchange than those developed in
other states and the default exchange to be devised the Federal
Introduction of the speaker.
Todd-Malmlov is the Exchange Executive Director at the Minnesota
Department of Commerce. She is responsible for leading the design and
development of Minnesota's health insurance exchange. Prior to this role,
Todd-Malmlov served as Minnesota's State Health Economist and was
responsible for monitoring the health care market and informing state
health policy related to health care access, cost and quality.
has also served as Director of Competitive Intelligence for United
Healthcare and Vice President of Strategic Analysis and Communications for
Government Affairs at UnitedHealth Group.
holds a master's degree in public health from the University of Minnesota
and a bachelor's degree from
She was named one of the top business leaders to watch in 2012 by the
Minneapolis-St. Paul Business Journal and the StarTribune.
speaker outlined the problems the health insurance exchange is intended to
address, including the lack of competition in the health care market. She
addressed the goals of the exchange and strategies it will incorporate for
improving innovation, competitiveness and quality in that market.
Background: What is a health insurance exchange?
Exchanges are new organizations that will be set up to create a more
organized and competitive market for buying health insurance. They will
offer a choice of different health plans, certify those plans that
participate and provide information to help consumers better understand
Beginning in 2014, exchanges will serve primarily individuals buying
insurance on their own and small businesses with up to 100 employees.
States can choose to include larger employers in the future. States are
expected to establish exchanges, but the federal government will step in
if a state does not set up an exchange on its own. An exchange can be a
government agency or a nonprofit organization. States can create multiple
exchanges, as long as only one serves each geographic area. States can
work together to form regional exchanges. The federal government is
offering technical assistance to help states set up exchanges.
The Henry J. Kaiser Family Foundation,
outlined the problem health insurance exchanges are intended to address.
She said the problem has three parts:
Health care is very complex and hard to understand.
There is too little consumer engagement in making health care and health
health care market does not operate like a true competitive market, due to
the complexity of health care and the lack of information and incentive
for consumers to make rational choices.
delineated the following goals for
Simplify and streamline access. Make it easy for people to get coverage.
Provide information people can and want to use, something that's useful
and helpful. Provide a process and incentive for people to meaningfully
engage with the system.
Drive health care and health care provider competition on innovation and
value. Consumers must be engaged and making well-informed decisions on the
information that drives value. A competitive market can drive down costs.
identified the following strategies for meeting the goals outlined above:
Streamlining access to public and private coverage. We can focus on the
person's needs instead of on how each program or source of coverage
operates. Everyone should be treated the same and have the same
experience, regardless of the type of coverage for which they may be
eligible. Streamlining the process will help more people obtain and
maintain health care coverage and reduce the number of uninsured.
Developing new information sources and using existing ones to drive
decision making and encourage competition on value. We can use existing
sources of information, such as Minnesota Community Measurement and
develop new information as required under the Affordable Care Act to
provide consumers with information on health plan quality and customer
satisfaction. We're using some research about how to use decision-support
tools to help people make decisions.
Minnesota is working with 11 other states on a project called User
Experience 2014. The project focuses on how people understand health
insurance, how we can make things simple for them and how we can help them
make good decisions. The state is also looking at market research it has
done recently on what information people trust and want.
said that a small percentage of the public now uses information on health
care quality. She hopes the exchange will alter that. "Hopefully, making
good decisions on value and quality will drive competition," she said.
offered an example of how a diabetic might use the new health exchange.
The person could enter the system saying, "I want to find the best clinic
that treats diabetes within 10 miles of my home." The person will be able
to find the clinics within 10 miles and see what health plans the clinics
are associated with, who's in the network and what their cost-sharing and
deductibles would be for that tier of provider. The person can find out
what programs the clinics and health plans use for management of diabetes
and how they help someone with that condition. The diabetic person can use
all that information to pick the best plan for him or her.
health care market based on that type of information, Todd-Malmlov said,
encourages providers and health plans to improve the quality and value of
services they provide.
The Affordable Care Act is intended to create a more competitive health
care marketplace, along with more valuable insurance coverage for more
said the broad, high-level goals of the Affordable Care Act include:
Making coverage more affordable and
valuable through competition, tax credits and a minimum benefit set;
Incenting higher quality and value of
care, through transparency of understandable information and
Getting more people covered; and
Making it easier for people to access
percent of uninsured people in
are eligible for public programs, she noted, "but for some reason, they
are not making use of them." Less than 25 percent of the uninsured are
children. However, when she was the state health economist, she saw that
more and more children have become uninsured because of the recession,
because a lot of people laid off have been young workers who have young
Minnesota's Department of Commerce had been leading the effort to design
and develop the health exchange.
(Note to readers: On Tuesday, September 18, just as the Civic Caucus was
completing work on notes of the meeting with Todd Malmlov, Governor Mark
Dayton reassigned responsibility for developing the health exchange from
the Department of Commerce to the Department of Management and Budget.)
absence of state legislation creating a health exchange (a bill to
establish the Minnesota Insurance Marketplace as a state-based health
insurance exchange failed to pass during the 2012 legislative session),
the Department of Commerce had led the state's exchange planning
initiative. In October 2011, Governor Mark Dayton issued an executive
order directing the Commerce Department to work with the Departments of
Health and of Human Services to design and develop the exchange.
Oct. 31, 2011,
the Department of Commerce introduced the Minnesota Health Insurance
Exchange Advisory Task Force to guide the design and development of a
health insurance exchange. The 15-member task force, appointed by the
Commissioner of Commerce, includes representatives of employers,
consumers, organized labor, health plans, health care providers, brokers,
counties, tribes and four legislators. In addition, the commissioners of
Commerce, Human Services and Health serve as ex-officio members.
force began meeting regularly in November 2011 and established 10
technical working groups, with roughly 20 members serving on each group.
Members include stakeholders, such as small employers, individual
consumers, community organizations, health plans, providers, brokers,
people serving Medicaid patients, counties, tribes, state agency and
legislative staff and content experts. The working groups will continue to
make recommendations to the task force this fall.
The health-exchange task force released early recommendations in January
January 2012, the task force released a set of recommendations related to
governance, financing, adverse selection, and navigators/brokers that
included the following recommendations to the governor and the legislature
on design of the exchange:
A board of directors with 15 to 20
members, some appointed and some elected, should govern the exchange. A
majority should represent the interests of small businesses and
consumers and have expertise in the health care market.
Health plans both inside and outside the
exchange should have the same market rules, certification requirements
and regulatory provisions.
Funding mechanisms should be in place by
July 1, 2013. A variety of sources should fund the exchange and the
funding should not disproportionately burden one group. The sources
should be proportionate to the benefits received by the paying group.
The Navigator/agent/broker program
should support multiple roles. The program should meet the needs of all
consumers who need and want assistance, especially those most likely to
face enrollment barriers. The program should consider performance-based
said recommendations on design and development are coming to the Task
Force on a rolling basis. Some recommendations have already been voted on
by the Task Force and more will be considered by the Task Force this fall.
minimum-benefit set requirements will raise premiums for individual
insurance that will be offset by tax credits for those with incomes below
400% of the federal poverty level.
the Affordable Care Act (ACA), most people will be required to have health
insurance at least at the "bronze level", which provides payment of 60
percent of total covered expenses. So the "bronze level" insured, on
average, would pay 40 percent of the cost of health-care services through
things like deductibles and copays. This "bronze level" requirement could
be a higher benefit set for some people, which will lead to higher
premiums for them, Todd-Malmlov said.
Currently, people who are denied coverage because of preexisting
conditions can get coverage through Minnesota's high-risk pool, MCHA
(Minnesota Comprehensive Health Association). Their premiums are about 20
to 25 percent higher than average premiums in the individual market.
said that guaranteed issue under the ACA for people with preexisting
conditions will also raise average premiums. To offset that, she said,
many people will be getting insurance premium tax credits. Because of the
credits, on average, people will see a 20 percent reduction in their
premiums on the individual side.
The small-group market will not be impacted as much by new minimum benefit
Currently, she said, actuarial value levels for the small-group market are
higher than those in the individual market. So the ACA's minimum benefit
levels will not impact the small-group market as much as on the individual
market rules under the ACA starting in 2014 will encourage defined
contribution in the small group market. That means an employer, instead of
providing one benefit plan for their employees, can establish a dollar
amount they will give to their employees, who can then pick whatever plan
they want. Defined contribution is assumed to reduce costs for the
employer and the employees.
small employers with 25 employees or less and $50,000 or less average wage
can receive federal tax credits through the exchange, so their premiums
will go down through the exchange, as well.
Insurance agents and brokers are concerned about coming changes.
response to a question about the Minnesota Chamber of Commerce's concerns
about the exchanges, Todd-Malmlov said she thinks agents and brokers
associated with the chamber are nervous "because the market will be
changing in a short period of time. It's very expected that people would
be nervous about what is coming down the pike," she said. "But even though
we're trying to simplify the system, we're going to need agents and
brokers and community organizations to help people make decisions. We're
working with them to figure out the best way to do that."
the nature of the agents' and brokers' concern is what their role will be
going into the future, whether their income will change and whether they
will lose business. Agents and brokers will still be needed, she said,
especially for small-group employers, who "really don't want anything to
do with health insurance. They want to run their businesses. They want to
help their employees and they want to make sure they're well take care of,
but they really don't want to deal with the administrative hassle of
exchange will help employers, but they're going to need people to help
them understand how to make that transition. "Brokers, agents, exchange
'navigators' trained to help people use the exchange and community
organizations are really going to essentially be our effective sales force
to get the word out about the exchange, to bring people there to get them
engaged and enrolled," she said.
Minnesota's earlier health exchange went out of business.
McClure pointed out there was an exchange in
and asked why it went out of business. Todd-Malmlov said in the early
1990s, Minnesota and a lot of states had purchasing pools for small
groups. "Most of them died a very sad death," she said.
employers participated in the purchasing pool as a group, but
participation was voluntary over time, so the healthy groups dropped out.
"Each consecutive year, the premiums would go up and up and up," she said.
"It's the death spiral issue." The sickest groups stayed and the healthy
groups broke off and got better rates.
things were put into the ACA specifically to prevent this problem. One is
the requirement that risk pools span both inside and outside the exchange
for individuals and small groups, so risk is pooled for the entire market.
Another is risk adjustment, where money will transfer among the plans
based on the risk they actually attract.
two things should be very helpful," she said.
helpful is the requirement in the ACA that 80 to 85 percent of the money
collected by insurance companies is spent on health care services and
health care quality improvement. In other words, medical loss ratios, the
amount spent on administrative and overhead costs, cannot exceed 15 to 20
said that recently, plans around the country with administrative costs
above that level had to give rebates, so millions of dollars across the
country went back to premium payers. In response to a question, Todd-Malmlov
said the administrative costs for insurance in
are, on average, below 10 percent of the total cost of insurance.
Minnesota enacted important health reform measures in 2008.
response to a question about cost control, she said that in 2008,
Minnesota enacted a variety of different reforms intended to lead to
payment reform. The goal of those reforms was to make information
available on health care provider outcomes and quality so that payment
could be based on the value, not volume, of services provided. This
information was also intended to help consumers make good decisions, which
would encourage innovation and cost-effective care delivery by health care
is the only state that started doing that then and so it will be able to
fold those reforms into its health exchange.
questioner asked how cost management is going to account for advancement
in medicine and whether it will constrain medical advances. Todd-Malmlov
said that in the past Minnesota had a certificate-of-need process to do
things like build a new hospital. But in the years of the
certificate-of-need process, only a few projects were denied. "The process
didn't really work," she said.
hospital moratorium was then put in place. No new hospitals could be built
unless a study was done and the Legislature agreed the hospital should be
built. The new Maple Grove hospital, after a long process, was one of the
few hospitals built since the moratorium started. The moratorium did not
apply to the new children's hospital at the University of Minnesota,
because the University had an exception in the moratorium law.
said that in recent years,
has been trying to take a more market-based tack and develop information
to help improve care delivery and help purchasers make more informed
health care decisions. With this information, health plans may say, for
example, "We're not going to pay for that if it doesn't improve efficiency
and value." She also said that the ACA puts more money into
cost-effectiveness research on things like drugs and procedures in order
to encourage care that is more effective.
McClure commented, "If we begin to pay for outcomes versus costs for
providers, then nobody will care what services are provided as long as
outcomes keep improving. The biggest improvement in outcomes has nothing
to do with technology. Get people to act healthier...and costs will come
down for providers. Costs will come down if we pay providers for outcomes,
not services. Government won't have to worry about effectiveness research,
because health plans will do it themselves."
The time frame for exchanges is very short.
said the timeline is the biggest challenge facing exchanges now, since
open enrollment is only a year away. "Many of us are working 80-hour
weeks," she said. "There's a lot to do in a short amount of time."
response to a question about whether any legislation will be required, she
said Governor Dayton has stressed that he wants:
To have a bipartisan solution, whether
now or later; and
To ensure that Minnesota has its own
exchange and doesn't give that up to the federal government.
questioner asked what would happen if the ACA gets repealed or changed.
Todd-Malmlov said, "The idea has been there for some time. The need is
there. There may be different terminology and changes in the law, but
hopefully the principles will go forward."
the law gets off the track for a few years, she said, Minnesota will
likely continue to push forward as it always has in an innovative way.
commented, "If we move expeditiously, we will lead. If we don't, other
people will make decisions elsewhere, which will get marvelously in our
way." He said if people can buy diabetes care from providers based on
outcomes, it will cut down the number of diabetics who go comatose or lose
legs or go blind. It costs $1,500 a year to keep a diabetic under control,
but $20,000 to $30,000 if the disease is not under control.
measure by outcomes versus costs, how are you going to mix the
technology?" he said. "It's very different. If I'm paid fee-for-service, I
don't care if patients are under control. I make more money when they're
out of control."
"The Federal exchange will not be good for us."
response to a question, Todd-Malmlov said the Federal government is far
along in the process of developing their health exchange and it will be
ready on time. "The system is very bare bones," she said. "It's
one-size-fits-all-the lowest common denominator for all the states-since
it must work for all of them."
cautioned that Minnesota would be worse off if somehow the state isn't
ready with its own exchange and has to take part in the Federal exchange.
"The Federal exchange will not be good for us," she said. "That is an
commented that Minnesota is the only state putting a market reform
cost-control strategy in place with broadened coverage. Todd-Malmlov
agreed and said, "We're trying to merge things that Minnesota has in place
in terms of reform with increasing coverage. When the exchanges come
online, Minnesota's will look very different. We can put lots of things in
that other states don't have."