Where To Focus: Health Exchanges Or The Individual Market?
Isn’t that the million-dollar question? Not a single day goes by that I don’t hear or read opinions about the strategies to implement state-based health benefit exchanges, various architectures that will be required and, for that matter, the probability that HBEs will come into existence at all. And don’t get me started on the volumes of patients expected to use HBEs. I’ve heard numbers ranging from 20 million to 150 million by 2016, and all those widely disparate estimates were supported by sound research and logic.
These are early days for health care reform in general and HBEs in particular. A lot of very good ideas are floating around, some of which will succeed and some that will fall by the wayside. There’s too much political uncertainty even for truly great ideas to have a 100 percent probability of success. So what is an organization to do? Can a commercial plan start strategizing their business around state-driven exchanges? Can a vendor start planning for a common platform that could be used by most, if not all, states to deliver the exchange services? Can a small employer expect to ally with similar-sized employers to enhance its leverage with large plans?
In my book, the answer is “not at this time” to all those questions. With so much uncertainty and so many variables to factor in, the smallest mistake could lead to disastrous consequences. But does that mean one should risk being left behind if everything that is being touted (errr, planned) comes to fruition? My response is “definitely not.”
Those are two seemingly contradictory statements. But to reconcile them, the answer, my dear Watson, is elementary. Plan for the concept behind the HBEs but do not tie your business to the materialization of HBEs. Huh? Sometimes I myself can’t understand what I’m saying. (Actually that happens quite a lot but thankfully this is not one of those times.)
The driving force behind the whole exchange concept is increased individualism in an industry that has traditionally gyrated to large groups. The advance in communication and knowledge tools (such as the Internet, smartphones, etc.) coupled with consumer frustration with the lack of transparency, spiraling costs and the perceived unfairness of it all, has already established a launching pad for a paradigm shift in the health care industry toward a viable individual insurance plan market. And there are plenty of precedents: How many auto insurance agent offices do you see around the corner these days? How many travel agents are still planning trips?
Bottom line is that the individual insurance market is here to stay. It is not a fad and I don’t think I’m the only one who thinks that way. Look at some of the largest commercial payers. They are bringing more individual products into their offering mix either through acquisition (UHG acquiring Golden Rules) or homegrown development. I’ve also started seeing a plethora of individual-market focused tools hitting the industry. Software vendors have very sharp noses and they usually smell the trends long before the insurance industry itself does.
So what does all have to do with planning for HBEs? It means you should plan for the far more definitive movement toward individual health insurance markets … and planning for HBEs will fall neatly in line.
To plan for individual markets, one has to have tools to support baseline functions such as comparison matrices between various offered products, real-time enrollment, transparent reporting, premium collection and management, among others. In addition, because of real-time competition, we’ll see the evolution of value-added tools such as recommendation engines based on clinical history in order to minimize adverse selections, and one-stop-shop for not only enrollment and claims reporting but also to manage tax-deferred accounts such as FSAs. In addition, analytical tools will have to produce much faster turnaround while generating a much more diversified view of the available information to be effective in fast-paced retail market.
On the functional side, health plans will have figure out new ways to market their products. Obviously one cannot hope to make deals with each individual on the golf course, the way one could do with the large employers carrying 100,000 members. The plans will also have to have much faster decision-making processes to handle an ever-vacillating target audience. The yearly or semi-yearly enrollment periods don’t work well in a “retail” market. Incentives and penalties will have to be more driven by monetary considerations rather than current strategies of non-monetary benefits such as disease management programs. Look at the auto insurance industry. They don’t coach people on safe-driving as an incentive. They simply give discounts if you don’t have accidents or get tickets, and they increase premiums if you do.
And if these changes in products, processes, and tools do take place, one is automatically going to be ready to play in the HBE space. There is not much special planning or strategy required, beyond an incremental effort to adhere to the basic charters of HBEs, such as meeting the national minimum benefits for all products.
So to me, the issue is not whether companies should plan for HBEs. The issue is whether they’re sold on the concept of the individual insurance market becoming a force. If so, then they have to adopt changes that by default will support the HBEs. That takes out the uncertainty surrounding the existence, shape, form and operational characteristics of the proposed health benefit exchanges.
At a recent, very well attended AHIP conference, experts opined that while we don’t know the volumes of patients that state HBEs will handle, it’s pretty safe to assume that a significant portion of the U.S. population will be either purchasing health care insurance from HBEs, or through some kind of a similar off-exchange model, by 2016. Plan on that.
Rajiv Sabharwal is the chief solution architect in the Healthcare and Life Sciences unit at Infosys Technologies LTD. He can be reached at Rajiv_Sabharwal01@infosys.com.