Take steps to prepare for insurance exchanges

March 1, 2010

Insurance exchanges will not exist in a vacuum; they will touch every part of the healthcare system and require substantial changes to the way payers do business.

Health insurance exchanges, not unlike the ones already operating in Massachusetts and Utah, are expected to play an increasing role in individual and micro-group insurance distribution. These exchanges will not exist in a vacuum; they will touch every part of the healthcare system and require substantial changes to the way payers do business.

Begin taking specific steps today ("no regret investments") to prepare for the risks and opportunities exchanges will create. These investments will enable payers to improve customer service, enhance decision-making and reduce administrative and care costs, no matter the result of reform legislation over the next few years. The three areas of focus are:

1. Sales and service transaction efficiency. With potentially tens of millions of Americans accessing insurance through exchanges, health plans will need to operate more quickly and efficiently to service this fast-paced and high-volume market segment.

3. Constituent engagement. In this new retail marketplace, competition will be fierce. Payers must differentiate themselves through systems and business processes that better engage and retain brokers, federal and state governments.

Begin with seven "no regret" investments now. These are not "no risk" investments; however, without these investments, payers may find themselves unable to compete for and profit from the expanding and sizable individual and micro-group market.

Sales and Service Transaction Efficiency

With the large influx of new individual and micro-group customers accessing insurance through health insurance exchanges, payers must focus on transactional efficiency if they are to remain profitable and competitive. Importantly, various reform proposals include taxing health plans and setting minimum medical expense ratios; therefore, plans must reduce administrative costs.

1. Quote-to-card process. Payers should create a single, integrated system that can automatically carry the customer from enrollment at the exchange, to ID card generation, and to post-sale service. Because customers likely will expect instantaneous answers when using the Web-based exchange, the old way of doing business-including full medical underwriting and lengthy case installation windows-will not provide competitive advantages or profitable outcomes. Payers should invest in multi-payer architectures that integrate case installation and policy administration.

2. Eligibility determination. To ensure proper pairing of the low-income consumer and a subsidized insurance plan, payers will need to develop multi-directional eligibility determination utilizing the exchange. Payers must ensure that the information they receive is accurate and they will need to get clarification quickly and efficiently. For example, payers should develop interfaces with payroll companies to provide for real-time wage and tax determinations.

3. Care management integration. Given that most reform efforts call for all risk to be treated equally and requires guaranteed issue for pre-existing conditions, payers must leverage key enrollment cycle data (e.g., health risk assessments) earlier and more effectively. Members who are predisposed to certain conditions or who have pre-existing chronic diseases must be routed immediately to appropriate care management programs. Payers are advised to develop processes that enable them to immediately recognize high-risk enrollees and divert them to appropriate care management programs.