Prescription for Change

Utah Leads the Way in Health Insurance Reform

Gaylen Webb

March 1, 2011

In 2014, when other states are still testing the health insurance exchange waters, Utah’s Health Exchange portal will be delivering the nation’s most comprehensive level of consumer choice to employees of large and small businesses across the State.

Should it come as a surprise that the most entrepreneurial state in the nation is also the thought leader in healthcare reform? Or that rarely a week goes by that the Governor’s Office of Economic Development (GOED) doesn’t receive a call from another state wanting to know more about the nuts and bolts of the Utah Health Exchange?

The effort to build the innovative Utah Health Exchange began under the direction of the Financial Stability Counsel, which was formed by the Salt Lake Chamber and United Way of Salt Lake and supported by former Governor Jon Huntsman, Jr. and the State legislature. Today Utah’s healthcare reform efforts continue under the visionary leadership of Governor Gary R. Herbert. “We wanted to help the segment of Utah’s population that wasn’t able to keep up with rising healthcare costs, so we set up a multi-headed think tank comprising leaders from government, business, education, healthcare and insurance,” says John T. Nielsen, health system reform advisor to Governor Herbert.  

The development of a health exchange became the primary focus of the think tank; however, Utah’s reform effort goes beyond just the creation of the Utah Health Exchange portal.

“Health and wellness leads to a productive workforce. If we don’t have a healthier population as the end result of the Utah Health Exchange and our health reform effort, then we have failed,” says Norm Thurston, health reform implementation coordinator for the State of Utah. “A healthier population is more productive, makes business more profitable and creates jobs. As a highly entrepreneurial state, we have a large number of small businesses. We need them to be successful. Helping them to afford quality benefits makes them more competitive and helps them attract top workers.”

A Fully Functional Health Exchange
Nielsen says in developing the Exchange, the initial intention was to replicate the health insurance reform effort that was taking place in Massachusetts at the time, “but that quickly proved untenable politically, and unaffordable. The Massachusetts model involved too much government interface, so we chose a totally unique approach—the defined contribution model—and now there is nothing else like it in the country.”

Today the Utah Health Exchange is a fully functional, market-driven portal that empowers small businesses across the State to manage their employee health benefits while providing employees an option-rich environment from which to select their healthcare coverage. A successful beta test in 2009 led to the opening of the Exchange to all small businesses in the fall of 2010. As of March, 69 businesses are enrolled in the Exchange and more are enrolling each month.

Nielsen says the defined contribution model is similar to the operation of a 401(k), in that the employers define how much money they will contribute toward each employee’s health insurance coverage. Individual employees are then responsible for how they “invest” in their healthcare coverage by selecting the insurance carrier and health plan best suited to their needs.

“The Exchange not only empowers employees as consumers of their health insurance, but it frees up employers so they can focus on running their businesses rather than administering health benefits,” he says.

Patty Conner, director of the office of consumer health services in GOED, says insurance brokers play an important role in the exchange by assisting employers with their applications and helping them ensure they qualify for participation in the program.

“We haven’t cut anyone out of the process from the broker community or insurance industry,” she adds.

In order to be eligible, 75 percent of the employees in an organization must participate. Each employee at the enrolling company completes a health evaluation, which is also standard protocol in the traditional market. The evaluations are then submitted to primary and secondary insurance companies for underwriting. Risk factors determined from the health of employees are used to establish the insurance rate for the group. Because the risk factor information is shared between the four participating insurance carriers, the duplication of effort among insurance carriers is reduced, which helps to lower administrative costs and thus helps reduce the cost for the employees.

“You still have the same protections you would have with a typical group insurance plan—no employees can be denied coverage for pre-existing conditions, and pricing is done at the group level, so the overall health of the organization factors heavily on the price of the health insurance for the group—but each individual employee has the freedom to select insurance from four companies and 140 different plans,” says Conner.

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