Written by: John Lynn
The following is an interview about Health Insurance Exchanges with John Kelly, Principal Business Advisor, Edifecs.
1. Where are we at with Health Insurance Exchanges (HIX)? What are the timelines for their implementation?
The Patient Protection and Affordable Care Act (ACA) mandates creation of a retail market for health insurance, where individuals can shop, compare and buy healthcare coverage much the same way as they would a car. The goal is to provide greater access to healthcare coverage and eventually lower costs. While the ACA initiated the health insurance exchanges (HIXs) as the first step in creating a new retail market for healthcare, it specifically did not stipulate the Federal and State exchanges as the stated goal of the legislation. The stated goal was to reform the way Americans purchased their healthcare. Before the October 1st deadline has even arrived, the HIX model is already evolving beyond the federally funded exchanges. Private exchanges are already up and running and private websites (eHealth Insurance, et al.) have begun to integrate with public infrastructure. Much of the country has focused on the open enrollment date, but the real challenges come afterward, as the industry deals with the operational realities of participating on HIXs over the long term.
The public exchanges are due to launch next week, and open enrollment runs through March 31, 2014. Starting January 1, 2014 all health plans purchased through the insurance exchanges will go into effect, meaning those who bought their health insurance on an exchange will be covered.
2. This is implemented on a state-by-state basis, right? Are all 50 states ready?
There are numerous exchanges. Each state had the option to establish its own state-operated HIX or participate in the Federally Facilitated Marketplace (FFM). Thirty-three states chose the FFM, 15 states plus the District of Columbia are running their own marketplaces, and two states are partnering with the federal government to run their exchange.
In addition to the state-run marketplaces, another major component is the Data Services Hub, which is a tool developed by The Centers for Medicare & Medicaid Services (CMS) to interact with all 51 exchanges, verify applicant information and determine eligibility for enrollment in select health plans and subsidy programs.
Some states are more prepared than others, having made investments in customer service hotlines, technology testing, and consumer education campaigns. Generally, these states made early decisions to participate, so their implementations are more mature, though I doubt any would say they are all set to go. As enrollment gets underway, all of the exchanges will engage in constant improvements (much like any large technology project) to iron out bugs and improve functionality. For the states that didn’t make those investments, it will be a more difficult process.
3. What do health insurance exchanges mean for the health plans? What’s their reaction to the health insurance exchanges?
HIXs are creating a disruptive force for insurers and purchasers, a force that will change the way they conduct business. For insurers, it will change everything from attracting consumers to their end-to-end administrative processes (member enrollment, system integration, payment transactions, etc.).
It hasn’t been easy, particularly because of the compressed timeline between the federal government releasing detailed guidelines and the go-live date of October 1, 2013. Insurers are trying to balance caution with the prospect of 30 million enrollees and $200 billion in revenue within the next decade.
Many health insurers have realized they already participate in Medicare and Medicaid, a form of retail healthcare purchasing, so why not exploit the opportunity of these new exchanges? The reward potential is compelling, especially for regional plans that can now compete with national plans for employers who may choose to migrate to “defined contribution” plans. This is likely to be the largest open enrollment period in history nationwide. While it is not an ideal situation to increase enrollment under such a tight timeline, many realize the potential opportunities and are committed to making it work.
Perhaps the biggest change for plans is that they will have to learn to compete for members and customers, rather than employer groups and brokers. The shift away from competing for members began in the early 1990’s with “sole source” health plan marketing. Plans will need to re-learn some old skills. Plans will need to compete much more consciously on value as opposed to just cost. This was the primary and clear intent of the ACA.
4. What do the health insurance exchanges mean for an employer?
Up until recently, the consensus in the industry was that most employers would stick with the conventional employer-sponsored benefits system, rather than switch to a defined contribution plan. But as this recent Wall Street Journal article explains, many employers are now moving toward providing employees a sum of money to go buy their own coverage. This trend indicates that many companies are looking at HIXs as a way to control the increase in their healthcare benefit costs, while perhaps more importantly, providing their employees with greater choice. This is a huge sea change. While employers have known they need to continue offering healthcare coverage to attract the most talented workforce, they have been struggling with the spiraling costs. Many now see HIXs as an ideal solution.
5. What do the health insurance exchanges mean for patients?
These exchanges are part of a greater trend toward patients playing a larger, more active role in their own healthcare. For selecting a healthcare plan, HIXs are shifting decision-making from employers to their employees; in essence returning healthcare to a direct-to-consumer sales model that will redefine consumer expectations, customer service and healthcare consumer marketing. The overall success of this shift will be based upon the ability of consumers to be better purchasers. There is certainly more risk and effort involved, but the upside is a significant increase in choice and a strong incentive for the plans to compete aggressively on value for dollar.
6. What broader goals do you see the health insurance exchanges bringing to healthcare?
As I mentioned above, one mandate in the ACA is to establish a retail marketplace for healthcare as a means to improving access to healthcare and inevitably lowering costs. HIXs are the current manifestation of that goal, and it’s a positive disruption in the market. As we’ve seen with other such market force change, we may be able to predict the disruption, but we can only guess at the form it will take after the first wave of innovation and market reaction.
7. What are the biggest challenges for health insurance exchanges?
There are a lot of moving pieces, and as with any large technology project, there are always going to be bugs to be fixed and improvements to be made. There is no reason to believe each state’s marketplace won’t go live on October 1 or soon after; however, many won’t be perfect. This launch is similar to the “soft launch” of a retail store opening, and it may take a few months to get everything working. It will probably take a couple of open enrollment cycles to achieve a steady state. The long-term challenge is the same as any insurance product; will the actuarial base support the financial health of the system over time? As this is a market rooted in Federal Law, similar to the experience seen in the Commonwealth of Massachusetts Connector (“Romney Care”), I suspect the system will demonstrate remarkable inertia and will roll slowly toward equilibrium.
These Exchanges have no choice but to continuously improve. By March 2014, I expect the industry will be thinking, “It could have been a lot worse, but we made it,” and they’ll be moving forward to make the next open enrollment much smoother.