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Tale of Two Exchanges Shifting Gears in California

California, like most states, is in the process of creating two new health exchanges — one for insurance and one for information. The two are closely related, somewhat dependent on each other and will have to work well together from birth for either to be successful.  

On one hand, California finds itself in familiar territory as the front-runner in these two new, uncharted efforts. As an early believer in the value of health information technology and the ability to share information, California formed Cal eConnect more than a year ago to oversee the sharing of electronic health information. Last fall, California was the first state to pass reform-driven legislation to create a health insurance exchange.

But as impetus and initial bursts fade into the background, California is shifting from sprint mode to a long-distance strategy. Where the state traditionally has been the trendsetter with innovative new ideas, state officials now are keeping a keen eye out to see what develops in other parts of the country. California’s deep budget deficit is also a factor in the shifting of gears.

“California is in kind of a unique position,” said Chad Grant, policy analyst with the National Association of State Chief Information Officers.

“California has been on the bleeding edge and trying to make things move forward on several fronts, and they have definitely moved forward, but now you can sense a sort of pulling up — a pause to look around and get a perspective,” Grant said.

In a report released last month, titled “On the Fence: IT Implications of the Health Benefit Exchanges,” NASCIO examined the health IT challenges facing states as they create health insurance exchanges under the federal health reform law.

The Patient Protection and Affordable Care Act provides $2.8 billion to help states build the benefit exchanges, expand Medicaid eligibility and continue preventive care efforts. For officials in many states, the biggest challenge to moving forward with reform efforts is opposition from within the state. So far, 41 states have formally filed opposition to some part of the ACA or have proposed alternatives, according to the report. Only six states had established health benefit exchanges as of May. Two of those states — Massachusetts and Utah – already had exchanges in place before the reform law was enacted.

History of Harmony

Even before Democrat Jerry Brown took over from Republican Gov. Arnold Schwarzenegger, like-mindedness in California — at least regarding health care — played a big part in getting the state into sprint mode. The accelerated pace that created Cal eConnect and the California Health Benefit Exchange has brought the state to its current turn in the road, where the long haul comes more clearly into view.

Unlike other states in which governors, legislators or attorneys general are challenging the federal health reform law and each other over health IT issues, California’s three branches of government in large part embrace the need to reform health care and the use of technology to deliver it.

In other parts of the country, opposing parties and platforms have slowed things down, Grant said.

“In some states, the governor may be from one party and the legislative majority from another party. In other states, the attorney general might be working to overturn health care reform while the Legislature is trying to get things started,” Grant said. “That’s not the case in California.”

California Has Good Jump in Two Arenas

There are two basic kinds of health IT: clinical and administrative. Health information exchanges deal primarily with clinical applications of IT in EHRs and hospital and clinic settings, but they also must include clerical information, ranging from insurance coverage to pharmacy records. The health IT for insurance exchanges deals more with eligibility, enrollment, billing and other non-medical issues.

The two kinds of IT and the organizations that use them have to work well together, and California officials feel they have a good start toward that goal in both exchanges.

“The two arenas really are very similar in terms of developmental challenges,” said David Maxwell-Jolly, undersecretary of California’s Health and Human Services Agency.

“In both those spheres, we’re building on the level of expertise out there in the community already. Here in California, we have expertise around electronic IT, telemedicine, and we have some good local working models in information exchange. We have a number of pretty large organizations already in place,” Maxwell-Jolly said.

For the benefits exchange, Maxwell-Jolly said the state’s “head-start on the governance aspect” and experience in two specific areas should help it move forward.

“We have good experience in the eligibility component working with a large Medicaid population, and we also have experience with a statewide purchasing program,” he said.

In the early 1990s, California created a statewide health insurance purchasing pool for small businesses called the Health Insurance Plan of California. It evolved into a public-private partnership called PacAdvantage, which dissolved in 2006.

Despite its head start and experience, Maxwell-Jolly said California will be hard-pressed to make deadlines for the benefit exchange under the Affordable Care Act.

“The big challenge is going to be to do what is asked for in terms of launching between now and 2014. There are a lot of infrastructure policies to be sorted through,” he said.

California’s budget problems are not going to make the job any easier.

Challenges Ahead

While the ACA provides money for reform, most states face considerable financial challenges in the wake of a deep, long-lasting national recession. The NASCIO report urges state officials to consider long-term budgeting impacts of the ACA. In California, with a $21.5 billion budget deficit and a large low-income population, the impacts could be substantial.

The “sheer size of the state” complicates its efforts to set up the exchanges, according to Grant. “In [Los Angeles] County alone, there will be as many recipients getting coverage through the exchange as there will be in entire states,” Grant said. “The size adds to the complexity.”

California faces added complexity because of the number of systems already in place.

“We have different kinds of design problems than other states,” Maxwell-Jolly said. “We have three different computer systems in California that support different parts of the state and the system. Many other states aren’t any bigger than a third of California. We have to figure out how to make these systems all work together.”

The variety and breadth of systems already in use played a large part in California’s decision not to pursue “early innovator” grants from the federal government earlier this year.

In February, the federal government awarded seven early innovator grants — to Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a multistate consortia in New England — to get state exchanges started on designing and building IT systems for health insurance exchanges.

California can look elsewhere for innovations.

“We may be able to be in a position to swipe some ideas from some of those early innovators,” Maxwell-Jolly said. “I’m encouraging our folks to do that whenever possible. We’re planning to develop our systems in an open architecture approach, and we’re hoping others are as well. We’re definitely going to keep our eyes on what’s going on in other parts of the country.

“If they build it, we will take it,” Maxwell-Jolly said.

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