Lessons learned from the health insurance exchange debut

While the dust has somewhat settled from the nervous, chaotic launch of the public health insurance exchanges earlier this year, the second open enrollment period is approaching quickly. As the industry prepares for November 15, it's important to examine lessons learned, key trends and best practices to apply.

Preparation for year one was primarily about participation-not optimization-with the focus being on simple entry. Plans with the most foresight pursued solutions that provide flexibility for the future. Moving forward, flexibility remains critical and the focus will be on optimization as plans continue to roll with ongoing policy updates and market changes.

As we prepare for round two, here are our current observations and expectations:

Operational preparedness

Plans participating in the exchanges have approached the operational and technology investments necessary in one of three rough categories of operational preparedness:

• The “wait and sees”-This group of payers has made limited investments in solutions to adapt to the challenges the exchanges present, and they have taken a more manual approach to adjudication and billing. Basic EDI (electronic data interchange) is handled, however, thoughtful membership reconciliation and financial responsibility tracking is often deferred to manual adjustment and tracking processes, which is risky, particularly for larger memberships. Generally based on modest membership expectations, they have chosen to defer investment in automation and process development until the market is more clear.
   

• The “all ins”-This group has determined the exchange market is a critical one for growth or defense of the Medicaid, commercial individual, or small group business expected to embrace defined contribution. Due to the volume and importance of this business, this group has invested heavily in the systems, processes and automation necessary to be efficient and competitive immediately and in the long run. This group’s investment choices have enabled them to launch strategic marketing campaigns to gain more market share with greater effectiveness and efficiencies as well as price more aggressively. Of this group, the best positioned are the ones who have planned for and chosen partners and approaches that provide the flexibility and modularity to pivot as rules change and best practices emerge. 
   

• The “pragmatists”-This is probably the largest group of payers participating in exchanges. Realizing that the risk of unknown member volume is found in both too few and too many, they have hedged their investments and done just enough to span the twin constraints of return on investment and operational efficiency. For each payer, the mix of services, technology solutions and internal effort is unique; however, the common thread for this group is the appreciation that the ground is not yet stable, and any future investment will necessarily rate flexibility as one of the most important criteria.

Regardless of type, all payers participating in exchanges recognize that the cascading uncertainties of federal-level policy and funding; volume of membership; and state or federal exchange administration decision-making represent a foundation of sand upon which they must attempt to build a robust structure of new products and operational processes. While some may wish to wait for bedrock, the expectation is that competitive pressures will not accommodate such a surfeit of caution.

More chaos ahead

Some uncertainty will continue, but more importantly, plans will adjust to their revised forecasts of membership-both overall quantity and mix-and to significant challenges in the following areas:

• Enrollment- Payers will assess their prior open enrollment strategies and effectiveness. Simplifying and creating efficiencies in internal processes based on what is now known about federal and state exchange operations will be critical to retain membership, reduce operational cost and increase price competitiveness or margins. In addition, organizations will seek to maximize price competitiveness and therefore enrollment through reductions in total operating cost, especially in administration.
   

• Billing and reconciliation-Premiums are and will be billed in new ways, and will need to take into account the various subsidized programs such as Advance Payment Tax Credits (APTC) and Tribal Share Enhancements. Payers still must handle both paper and electronic premium payments, but there will also be more complicated commissions to calculate and reconcile with intermediaries, which will further add to the complexity and dynamic nature of payments. Notable is the wait for the APTC feed from the federal government and preparedness for that data and transaction processing. Additionally, the question of when the first 820 will arrive from the federal government remains unanswered as does clarification about the reconciliation process to ensure accuracy of exchange premiums and federal subsidies.
   

• Claims processing-As the expectations for claims processing, notably cost share and other provisions, have become more clear, those who have employed workarounds will seek to improve basic measures such as auto-adjudication and unit cost. Due to the shifting expectations and guidance, many plans employed workarounds for year one, but the tight margins in this line of business will necessitate identifying solutions that can optimize efficiency and flexibility to adapt to market changes such as the pressure to provide unique benefits and better provider networks and contracting configurations to attract and retain members.
   

• Compliance-This is already as much an art as it is a science, and the increasing involvement of state regulators and politicians means compliance will likely remain a moving target. Understanding how to work with and meet the demands of the government will likely necessitate at least partial reliance on expertise found outside health plans and perhaps in information systems. 

Adaptability and flexibility

Adaptability and flexibility is and will continue to be the key to both survival and success. Payers that have the agility to optimize for ongoing waves of change to the rules, technical requirements and regulatory standards related to the exchanges will reap the benefits and competitive advantages of restraining administrative overhead costs.

This in turn will allow for more aggressive pricing, better customer service and ultimately increased market share as more of the population moves towards the exchange world. The coming years will be a watershed for the health insurance industry, and as it all shakes out, many of the organizations leading thoughtful investments today may find themselves celebrating the decisions made over the coming months and years.

Brian Kim is senior vice president of account management at ikaSystems.

Sidharth Bathia is HIX business analyst manager at ikaSystems.

Paul Wann is senior director and solution arrchitect at ikaSystems.