executives Using health insurance exchanges to gain competitive advantage

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1 Health Care Of special interest to Health care executives 5Insights for executives Getting fit for the new health care environment Using health insurance exchanges to gain competitive advantage Many states have begun to develop the health insurance exchanges mandated by the Patient Protection and Affordable Care Act (PPACA). In doing so, they have been guided by the detailed regulations developed by the Department of Health and Human Services (HHS). Beginning with an open enrollment period in October 2013 and with an implementation date set for January 1, 2014 government-sponsored health insurance exchanges will introduce a new way of comparing and purchasing health insurance coverage for individuals and small businesses. The intent of these exchanges is to expand coverage and increase affordability. States have the option to operate separate individual and small-group exchanges for employers or combine into one exchange. States also have the option to set the size of the smallgroup market to 50 or fewer employees or 100 or fewer employees. By 2016, the size of the small-group market must be set up to 100 employees. Beginning in 2017, states may allow exchanges to offer options to employers with larger groups of employees. The introduction of government-sponsored health insurance exchanges and the resulting consumer-oriented marketplace may transform the individual and smallgroup market. With the potential to introduce tens of millions of new customers in the years to come, payers need to consider now the capabilities required to qualify for participation and compete effectively.

2 What s the issue? The implementation of government-sponsored health insurance exchanges is expected to result in: Intense competition to serve millions of new customers The need for payers to engage eligible consumers directly Competitive focus on administrative efficiency and population management Increased business risks and cost challenges New compliance and reporting requirements Capacity demands on the primary care network The complexity of this new landscape will present health plans with a considerable set of challenges. They must consider medical management and network management strategies to manage the new population effectively and enhancements to their enablement technologies and business intelligence platforms to operate efficiently. Health insurance exchanges will generate intense competition, cost challenges and capacity demands. Government-sponsored health insurance exchanges: timeline to implementation States apply for federal grants for development of exchanges. State legislatures convene and adopt bills to authorize creation of an exchange. States perform technology assessments States engage stakeholders and develop health insurance exchange strategic plans. States plan for health insurance exchange implementation. States select vendors for IT/website infrastructure, decision-support tools, outreach, marketing and advertising programs, customer support, navigator programs, and financial and subsidy reconciliation systems. 2 5 Insights for executives [Health Care]

3 Why now? Health insurance exchanges offer the potential for 25 million new members in the marketplace a possible 10% increase in the US. Added to that will be an estimated, additional 5 million people whose employers offer employeechoice plans in the marketplace. These numbers represent a significant market opportunity for payers in which timing is critical. Early entrants have a greater opportunity to capture a larger share of exchange members and gain competitive advantage. Effective planning and efficient execution are necessary to participate on the exchange, and this will require enhancing Integrate your health plan s operations into the exchange platforms Prepare enrollment, billing, and customer service processes and systems to handle the influx of new members Reinforce your business intelligence platforms Enhance care delivery and provider collaboration Evaluate and tighten risk, reporting and compliance capabilities The time to get started is now. Early entrants have a greater opportunity to capture market share and gain competitive advantage. States develop Qualified Health Plan (QHP) requirements and exchange participation rules and define open enrollment periods. QHPs are selected and implemented on exchange. Full systems testing (all IT processes) begins. Health insurance exchange becomes fully operational for individuals and small groups States establish health insurance exchanges and develop formal plans of operation. Exchange marketing and outreach campaigns begin. The open enrollment period begins Q4. States seek and receive final approval from HHS for implementation of its health benefit exchange or default to federally facilitated exchange. 5 Insights for executives [Health Care] 3

4 How does it affect you? Health insurance exchanges offer payers opportunities for growth. However, payers will have to engage consumers directly, manage capacity, operate more efficiently and address potential adverse risk. Here are some questions to consider: What approaches will you use to engage consumers directly? Can IT systems and operational processes integrate with the health insurance exchanges? Can existing operating platforms scale to new membership while maintaining quality? As a qualified health plan, are you positioned to comply with all requirements? Does the partner provider network have the capacity to handle the demand for primary care services? How can health plans manage the population effectively? Health plan: path to exchange readiness May 2012 Define enterprise health insurance exchange strategic plan and road map Perform market and provider network evaluation Assess internal operational and technology capabilities and gaps including enrollment, billing, revenue reconciliation, ID cards, customer service, consumer engagement and medical management programs Estimate potential growth and profitability Prototype and develop exchange products Monitor federal and state legislation and exchange planning activities Engage with state regulators Establish program risk management plan July 2012 Define consumer engagement and member adverse risk management plans Define marketing, provider contracting and medical management initiatives Develop detailed operational and technology implementation plans and projects aligned to state health insurance exchange timelines Monitor federal and state exchange implementation activities and qualified health plan requirements Initiate product filing actions with states By December 31, 2012 Manage exchange readiness activities Manage program risks and change Monitor and align implementation timelines and testing plans with federal and state health insurance exchange implementation activities Gain approval for new exchange products filed with states Implement new or updated medical management initiatives By July 1, 2013 Perform operational readiness testing and pre-production planning activities with federal and state agencies By October 1, 2013 Begin accepting new enrollment effective January 1, Insights for executives [Health Care]

5 What s the fix? Once you ve established an overall game plan for entering the health insurance exchange arena, you will need to address three questions that focus on optimizing competitive advantage in the transforming marketplace: 1. Can you acquire and retain customers? The new exchange marketplace will require you to think differently to communicate brand and value directly to consumers. You will need to: Shift sales and customer channels from B2B to a B2C model Provide a seamless experience from product selection to enrollment to delivery of services and care Align loyalty, satisfaction and metrics to drive member behavior, maximize retention and minimize risk Assess and enhance privacy and security strategy and management to meet exchange capabilities 2. Are you ready to operate? To enable efficient and cost-effective operation within exchanges, your technology and processes will need to reflect: Scalable and compliant batch-enrollment processing Enhanced billing and revenue reconciliation processes Effective management of new regulatory requirements, risks and controls Targeted data-reporting capabilities to promote adherence to new requirements Maturity of business intelligence capabilities to measure performance and outcomes 3. Can you manage and deliver care? Population health will be more important than ever in managing the care delivery of exchange members. As you develop additional processes, controls and reports to effectively manage care and cost outcomes, you will need to: Evaluate the demand capacity of your primary care network Identify new high-risk exchange enrollees to manage quality and cost from the onset Improve medical management capabilities Partner with accountable providers to effectively manage the exchange population 5 Insights for executives [Health Care] 5

6 What s the bottom line? Whether federal, state-based or privately operated, health insurance exchanges are on their way. Payers that choose to be leaders open themselves up to a world of opportunity in the form of increased membership, market share and growth. 6 5 Insights for executives [Health Care] Medicare and Medicaid managed-care programs will continue to grow. And large employers are demanding more for less. Any investment you make in improving your organization s capabilities to compete in the evolving individual and small-group markets will also boost the value you can deliver to clients in existing markets.

7 Want to learn more? The answers in this issue are supplied by: Bill Fera Principal Advisory Services Ernst & Young LLP Thomas D. Morales Manager Advisory Services Ernst & Young LLP For related thought leadership, visit 5 Insights for executives [Health Care] 7

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