Healthcare Reform: Five Key Strategic Areas for Carriers

In a few short months, activities related to the establishment of the new healthcare exchanges will shift into high gear. In July, the administration will begin educating the uninsured on how they can select a carrier and enroll in this new health benefits program. Beginning in October, open enrollment will begin and set in motion the single largest entry of new enrollees into the health insurance market. The historic program goes live in January 2014 as tens of millions of people join the ranks of the insured.

As carriers engage in their final operational preparations for the launch of the new state exchanges and get ready to welcome their newest members, they may also want to focus on five key strategic areas to assure a successful transition into the new world of healthcare.

Operational and Regulatory Evolution

Exchange readiness is not a one-time event. It's a continual process. Open enrollment periods are critical, but they’re not fixed targets. Carriers should expect that compliance requirements, reporting requests, and operational rules will change repeatedly over the next five years as the exchanges are refined and the market stabilizes. The successful carrier will not focus on just ensuring one-time compliance at the beginning of the exchanges, but rather will look at their initiatives as building blocks in the construction of a flexible, reliable set of business processes that are capable of strategically adapting in an unpredictable regulatory environment.

Holistic Marketing Plan (On and Off Exchange)

The state exchanges are just one of many new "channels" that are opening up ways for carriers to get their products to market.  Consumers and small businesses require additional products and services that may not be addressed by the public exchange.  A holistic marketing plan will stabilize retention and potentially generate new revenue opportunities.  Carriers should not make the mistake of treating public exchanges as an emerging market; the public exchange is a new product distribution channel.  Complement this channel with other options such as a private exchange, alternative retail options, and partnerships with other non-traditional benefits companies.

Rethink the Product Development Process

From detailed benefit design to complete rates, more and more data is required early in the regulatory review cycle, and once plans are designed, they must be efficiently transmitted to all channels: internal sales systems, exchanges, external partners and brokers, and regulatory bodies. Carriers will need to embrace new ways of thinking about product development and plan design, and consider consolidating plan data into a single, centralized repository that gets created far upstream from the sales and claims systems.

Great Migration

The Affordable Care Act will require insurers to revisit and update their entire product portfolio. In addition to the new plans to be sold on exchanges, carriers will also need to re-examine existing plans for off-exchange business and large group plans. A thoughtful, methodical communication and migration strategy is essential to ensure maximum retention of existing business and full compliance across the whole product portfolio

Risk of Profitability

With millions of new enrollees entering the system and unknown transitions of current membership from group to individual, carriers must address the three R’s: Reinsurance, Risk Adjustment and Risk Corridors.  Studies and research have explored the impact of normalizing underwriting and pre-existing condition exclusions.  However, carriers should also carefully model the impacts of migrating enrollees from self-funded insurance products to commercial risk, fully insured products.  Published studies demonstrate that shifts to Medicaid and commercial risk from traditional administrative services only (ASO) arrangements could significantly influence carrier profitability.

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