PROVIDENCE – As in many good detective stories, the plot line here begins with a seemingly oblique event. Not one but two ledes are buried in this story, in journalistic parlance. That’s because understanding the nuance, the context of what happenend and why, is just as important as trumpeting the news. 

It was amusing if not ironic to read the New York Times coverage of HealthSourceRI in its UpShot article on Jan. 8.

In “A Rhode Island Rule on Health Enrollment Offers a Consumer Experiment,” the reporter, Margot Sanger-Katz, touted HealthSourceRI’s successful strategy to require Rhode Islanders that bought health insurance through the state-run exchange in its first year to choose a health plan, as a form of public education and engagement.

Rhode Island had chosen a different path rather than follow the federal exchange’s policy of automatic re-enrollment in the same plan. [See link to story below.]

But, hardly mentioned in the piece by Sanger-Katz was the fact that a week before the Times published her story, R.I. Gov. Gina Raimondo had removed Christine Ferguson, the architect of the strategy, as executive director of HealthSourceRI.

To help fill in the missing context, ConvergenceRI had shared with Sanger-Katz its story, published three days earlier in the Jan. 5 newsletter, “An unplanned exit interview with Christy Ferguson.” Sanger-Katz thanked ConvergenceRI and retweeted the story. [See link to story below.]

It was a bit droll, then, to see The Providence Journal’s recent front-page coverage about the success of HealthSourceRI on its re-enrollment efforts, published a week after the coverage by ConvergenceRI and The New York Times. [The newspaper has published numerous editorials in favor of returning the exchange to federal control.]

In that story, HealthSourceRI’s new director, Anya Rader Wallack, appeared to take credit for the successful results of Ferguson’s hard work, without ever acknowledging Ferguson. So it goes.

The story the numbers told
The latest numbers, released by HealthSourceRI on Jan. 15, reinforced the validity of Ferguson’s strategy on re-enrollment. Four-fifths – 80 percent – of the first-year customers in the individual market have renewed for 2015, with an additional 6,918 in new customers signing up, bringing total enrollment for coverage in 2015 to 27,690. Open enrollment does not end for another month, on Feb. 15.

And, in HealthSourceRI’s SHOP program, the numbers indicated that there was slow but steady growth occurring. A reported 541 small businesses with 50 or fewer employees had completed applications, with 427 paid enrollments, representing 3,133 covered lives. About one-third of the employer enrollments represented new or renewing coverage effective as of Jan. 1, 2015. About three-quarters of the small businesses that enrolled chose a Full Choice model for their employees.

The high volume of traffic – in person at HealthSourceRI offices, on the phone to the call center, and on the state-run exchanges web site – buttressed Ferguson’s argument that consumers, given the information and the tools, can make good decisions about health insurance.

In the three months between Nov. 7, 2014 and Jan. 10, 2015, there were 180,979 inbound phone calls received, 12,206 walk ins, and HealthSourceRI’s website had 116,255 unique visitors, 229,203 visits, and 447, 102 page views.

Defining return-on-investment
Raimondo, in explaining the reasons for her decision to remove Ferguson, had focused on the agency’s sustainability: “We need a leader who can establish HealthSourceRI as a sustainable and affordable organization that provides clear return-on-investment [emphasis added] to Rhode Island families and employers.”

The critical question, unasked and unanswered, remains: what is the economic equation by which you determine and define return-on-investment?

For sure, the increased enrollment in the individual market and the growing success within the SHOP program for small businesses only tell a part of the story.

For many critics of HealthSourceRI, the costs of the state running its own exchange appear to be “too costly” in a time of $200 million budget deficits, pegged at about $24 million a year.

In response, supporters claim that this view is myopic, given the $9 billion that Rhode Island currently spends a year on health care delivery. Supporters argue that small businesses, using the new tools such as SHOP, can save money on health insurance and use those savings to re-invest in their businesses. Imagine if dynamic scoring were applied to HealthSourceRI, and not just tax-cutting proposals.

What’s been missing in the conversation to date is an accurate analysis of the choices that HealthSourceRI can make moving forward to increase its penetration of the market and decrease its startup costs – the keys to its future sustainability.

Many of the answers – accompanied by a detailed analysis – can be found in a briefing book presented by Ferguson to the board of HealthSourceRI as a parting gift, a public document that has yet to be shared with the public.

Eye-opening revelations
Before Ferguson left her job, she presented the board of directors of HealthSourceRI with a massive, 368-page briefing book.

The briefing book was presented in a public board meeting, and, as such, it is a public document by definition.

The most eye-opening revelation in the briefing book is this: HealthSourceRI was forced to spend about $10 million “to mask the defects” in the state’s new IT infrastructure. As a result, HealthSourceRI said it had been forced to operate “under a contingency plan” since March 2014.

• The briefing book documented the high cost of the failures and breakdowns of the state’s Unified Health Infrastructure Project, or UHIP, an integrated technology platform across the state’s health care and human services that cost about $200 million to build and implement, with Deloitte as the principal contractor, funded mostly by the federal government.

As a result of the glitches, HealthSourceRI had to spend about $10 million and divert staff to address the snafus, according to the briefing book.

“During the first open enrollment period and throughout the remainder of 2014, the UHIP system experienced many issues that have had a deeply negative impact on the consumer experience,” the section of the briefing book labeled “Contingency Memo” began.

The problems, the report continued, had been documented in many meetings, to no avail. “Inadvertent dis-enrollments are causing many Rhode Islanders who think they have health coverage and who are up-to-date in paying their premiums to find out that they aren’t covered when they go to the doctor’s office, hospital, or pharmacy,” the report said.

Billing and correcting premium remained a problem, as did the poor interface between UHIP and the insurance carrier systems.

Beginning in March of 2014, the report continued, “We began to divert resources at the HealthSourceRI and the Contact Center to mask these defects [emphasis added] and to address the needs of those consumers, carriers, brokers and small businesses facing significant problems.”

“We have been operating under a contingency plan for the past 10 months,” the report said. Up to 14 staff at HealthSource RI had been redirected to address UHIP defects, issues and workarounds. Of the 18 members of HealthSourceRI’s small business outreach team, some 6-8 members have been devoted solely to addressing UHIP system issues for small business customers.

Further, questions were raised about the UHIP’s system future stability, the inadequacy of testing time, and the ability of the system to operate successfully through open enrollment, the HealthSourceRI small business sales push, and Medicaid recertifications.

In total, the extra costs that were absorbed by HealthSourceRI as a result of UHIP’s glitches and snafus were calculated to be $9.7 million the last year, according to the briefing book.

These costs have not been made part of the public conversation.

Some defenders of the UHIP system have pushed back on the extent of the problems, according to sources, pointing the alleged relatively small number of enrollees that had been victimized by the glitches – some 2,398 persons, including 440 who were wrongly dis-enrolled in 2014.

However, the roughly 10 percent of enrollees affected by glitches – and a $10 million cost – is a major problem when the “sustainability” of the state-run exchange is being challenged by the R.I. General Assembly and the new Governor.

The problem, it seems, belongs to the R.I. Executive Office of Health and Human Services and the R.I. Department of Administration, and should not be placed at HealthSourceRI’s doorstep.

In terms of a path to sustainability for HealthSourceRI, correcting the IT glitches that cost $10 million is a great place to start, instead of “masking the defects” and sweeping them under the rug. Can the costs of fixing these glitches be charged to Deloitte?

Getting smarter about how to calculate risk
Judging from the volume and content of calls to the Contact Center and visits to the website, as detailed in the briefing book, as well as the positive response to efforts to establish consumer-friendly tools for the small business market, consumers in Rhode Island have welcomed the greater transparency in buying health insurance, something that had not existed before.

The way in which health insurers calculate risk is by creating algorithms that measure morbidity [illness] based upon existing claims data – using previous patterns to predict future trends, factoring in age.

But with the development of a new health insurance marketplace through HealthSourceRI, focused on enrolling many people who were uninsured, and for whom there was no history of claims data, the calculations of risk and morbidity were, in large part, guesses based on existing databases, looking back at existing claims data to predict the future.

Ferguson, in her unplanned exit interview with ConvergenceRI, said that moving forward, it would be important for HealthSourceRI to develop its own analytics capability to push back at the calculations by the health insurers, whom, she said, in their initial number-crunching, may have over-estimated the rates of morbidity for the newly insured population.

To accomplish this, HealthSourceRI has built a series of algorithms that measure consumer analytics for both the individual market and small business market, allowing the state-run exchange to have a better understanding of the dynamics in play for costs, morbidity and utilization.

As detailed in the briefing book, the analytics would enable HealthSourceRI to more accurately price products in the current situation, where there is no or limited medical experience.

It would enable HealthSourceRI to move beyond traditional “likely to buy” models. In terms of customer retention, it would allow HealthSourceRI to develop and deploy data-driven intervention strategies.

The analytics would also create a better understanding of the current and potential risks of the customers and can identify trends in developing behavior-changing interventions to modify risks.

The yet-to-be-released briefing book details all of this. The problem, however, is that investments in these critical analytic tools may now be targeted to fall victim to budget cutbacks under the guise of “sustainability,” according to sources.

Translated, the very analytic tools that could create greater sustainability for HealthSourceRI in the market are being targeted for a budget axe, in the name of sustainability.

Growing the small business market
The briefing book details plans for HealthSourceRI’s continued expansion of its SHOP program into the small business group market, targeted to begin in 2016, when the definition of a small business increases to 100 or fewer employees from 50 or fewer employees.

The briefing book documents the efforts to build the customer-engagement tools to work with small businesses – including the development of online tools and transparency of insurance premiums for an entire year.

These relationship-building tools are critical to success in the small business market, because, as the briefing book makes clear, they represent the population most at risk in terms of cost, morbidity and churn because of affordability. The risk of morbidity only drops once the company can achieve sustainable, affordable health insurance plan coverage, according to the briefing book’s analysis.

The projections for SHOP enrollment are that it will roughly double each year through 2018: 2,500 in 2014; 7,000 in 2015; 14,000 in 2016; 25,000 in 2017; and 35,000 in 2017.

By comparison, the individual market projections are 25,000 in 2014, 30,000 in 2015, 36,000 in 2016, 45,000 in 2017, and 50,000 in 2018.

The future of HealthSourceRI
In his recent presentation on Jan. 8 before the joint meeting of the R.I Senate Health and Human Services and Finance committees, Christopher F. Koller, the president of the Milbank Memorial Fund and the former R.I. Health Insurance Commissioner, provided a national perspective on how state-run exchanges were faring.

Koller, who previously had hired Wallack as a consultant at OHIC, said that the vision for HealthSourceRI was still valid. His presentation outlined some of the choices moving forward: handing back all operations to the feds, with risks around cost and the pending Supreme Court case; reduce the expenses by reducing HealthSourceRI’s functions; expand the number of people using the exchange, which brings with it a new set of costs; or expand the range of assessment to pay for the exchange, based on the argument that all employers – in the small group, large group and self-assured – “benefit significantly” from HealthSourceRI’s operations.

What wasn’t discussed was what is rumored to be the next move for HealthSourceRI: to move it under the aegis of the R.I. Executive Office of Health and Human Services, under the direction of the new nominated secretary of the agency, Elizabeth H. Roberts.