This is the first part of a discussion about how healthcare leaders should perceive the emerging exchange marketplace and get ready to ensure survival and profitability in this fast-changing domain.
Healthcare reforms can prove intimidating to people who get overwhelmed by its vastness. Yes, health reforms are complex, intertwined with a never-ending series of updates and releases. While healthcare executives can get overwhelmed with compliance issues, they need to address the equally critical aspect of survival in a revisionist market. For developing an effective business strategy in this marketplace, the following should be considered:
More Competition & Opportunities
Exchanges signify health insurance is entering a more competitive, robust retail platform driven by the entry of millions of uninsured people. The buying preferences of this new consumer niche are largely unknown and many are expected to be first-time health insurance shoppers. Capturing this relatively new audience represents a new array of challenges, particularly with community outreach, marketing and education on metal status and applicable subsidies.
Acquisition Might Be the Path to the Future
Health plans are continuing to figure out their role in this new delivery mechanism. The market has seen a lot of acquisitions and it is expected that this trend will continue. According to PWC partner, Steve Elek, the acquisitions have focused on three areas:
• Horizontal integration: acquisitions that include other health insurance companies. Enticed by the growth in the baby boomer population and other factors, commercial carriers are becoming more interested in Medicare Advantage companies.
• Vertical integration: acquisitions that include hospitals, physician groups, and urgent care and outpatient surgery centers. This type of acquisition allows health plans to control the patient care cost centers. This type of acquisition will grow as health plans become more proactive in the delivery of member care.
• International opportunities: acquisitions include healthcare systems and insurers located outside the United States.
Payers have to deal with fixed actuarial values and benefits, as defined by the healthcare law. This is likely to make some of the health insurance products seem very similar, diluting their customer engagement capabilities. In the Exchange marketplace, stringent premium caps are set to challenge the profit margins for payers. Medical Loss Ratio (MLR) represents a direct threat to a health plan’s profitability. Payers risk premium rebates, erosion of consumer interest and regulatory challenges if they price too high. If they price too low, minimization of profitability works against them. More restrictions come in the form of limited pricing flexibility. Payers will be obligated to provide an explanation to state authorities every time they seek a substantial hike in premiums where the smallest of hikes might lead to poor ratings.