From 'Introduction to Covered California.  Participant Guide':  Covered California is our state’s new health insurance marketplace, the place to go for affordable health care coverage.Soon after the passage of the Affordable Care Act of 2010, the State of California became the first state in the nation to enact legislation to establish a health insurance marketplace. Although originally known as the California Health Benefit Exchange, the state adopted “Covered California” as the business name for California’s health insurance marketplace through which individuals and small businesses can access affordable health insurance plans.

Consumers can use Covered California to learn about and buy health insurance and to determine if they qualify for federal premium assistance that can lower the cost of insurance up to 90 percent. Covered California is a leader in ”active purchasing,” which means it negotiated the prices with health plans, ensuring that consumers get the best prices possible for quality health insurance. This is a tremendous benefit to consumers because it enables consumers to do apples-to-apples comparisons of a number of plans based on price, not services.  Continued.

Trish's Comment:  Let's assume that all healthcare.gov - and in California, also coveredca.gov - website issues have been solved, so people can easily compare insurance options and buy coverage.  Let's also fast-forward to a point in time when back-end systems are fully functional - reconciliations with insurers are done automatically, subsidy-eligibility is also automatically communicated to the insurance company and paid as appropriate...  That is, let's think about how ongoing operations would look like for a healthcare marketplace, the insurers providing services and the citizens / residents receiving those services.  And given my interest in payments, let's take the case of the California Marketplace (Covered California - coveredca.gov) and focus on how payments will flow across the ecosystem.What is the flow of funds between insurers and the marketplace? 

An insurer will need to pay the marketplace a fee each time a customer signs up for one of their plans.  This is how Covered California expects to be financially self-sustaining (i.e. not taxpayer-funded) by 2015.The marketplace - in fact, the government it represents - will have to pay the insurer the subsidies applicable to the customers that are eligible to receive them.  Also, at least in the case of Covered California Small Business Health Options Program (SHOP), each small business will pay fees to Covered California, which in turn will pass on the payment to the corresponding insurer.

These are all enterprise-level payments that, once all the back-end systems are in place, should happen safely and reliably.  What is the flow of funds between consumers / businesses and their insurer / marketplace?This is the part that I find most interesting.  Again, if we focus on Covered California:Small businesses need to pay their monthly fees to Covered California SHOP.  From what I can see, the only payment method is by mail.  Consumers need to pay their monthly fees to their insurance company.  Most of these companies - like Kaiser Permanente or Blue Shield of California - offer different payment options, including by phone, online and by mail.  I have not been able to find what are the specific options available under each of these modalities, but assuming the information available from the Illinois Marketplace is applicable across other states, most insurance companies will accept the following methods of payment (Source:  How to pay for health insurance premiums on  Get Covered Illinois, the Illinois Health Insurance Marketplace.  Factsheet, 10.01.2013):  Checking Account ETF (Average monthly cost: $0) - You must have a checking account to set up monthly automatic payments.  Checking Account Paper Check (Average monthly cost:  $0) - You must have a checking account and write / mail monthly checks.Money Orders (Average monthly cost:  $1.10) - Go to a USPS Post Office, bank, or credit union and complete a money order form.  You can pay for it with cash, traveler's checks or debit card.Cashier's Checks (Average monthly cost:  $7 - $10) - Go to a bank or credit union and purchase using cash or a debit card.Wire Transfer (Average monthly cost:  $8 - $12):  Go to a wire transfer location and purchase a wire transfer using cash, a credit or prepaid card.Credit or Debit Card (Average monthly cost:  $0) - Use your credit card's online bill payment feature or the health insurance website.

What jumped at me from these lists of options is the lack of fast, convenient and inexpensive methods of payment for businesses and unbanked / underbanked consumers.Why as a business dealing with Covered California can I only pay by sending a letter over regular or overnight mail with all the time and risk implications this entails?  Most businesses (if not all), will have bank accounts and probably also credit cards.  Why not allow for some of the other easy, convenient and safe methods of payment?Why as an underbanked or unbanked consumer - probably a very high percentage of the population targeted by marketplaces and those that can least afford additional charges - do I need to pay between $1.10 and $12 to make my monthly insurance payments (average cost for transactions that are not bank account or credit card based, based on the information from Get Covered Illinois)?  Why do I need to drive or walk to my nearest USPS Post Office, bank or credit union - often not all that convenient - to pay?Why not allow payment with reloadable - and therefore registered - prepaid cards?  Why not enable PayPal payments, where unbanked / underbanked can load money into their accounts through MoneyPaks?  Or even, why not enable PayNearMe, for those that want to transact with cash?Enabling alternative methods of payments that suit the unbanked / underbanked - such as relocable prepaid cards, PayPal or PayNearMe - should be simple and go a long way to promote a vibrant ecosystem.

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