While the U.S. government has shared some insights on the purpose that SHOP exchanges will serve, there is very little information available on how these exchanges need to be designed and key factors that need to be considered while setting up these online insurance marketplaces.
There are some vital issues that need to be considered prior to setting up SHOP exchanges.
Will the exchange be an active or passive plan buyer?
How an exchange selects its participating health carriers and plans, determines whether an exchange is an active or a passive purchaser. In active mode, the states retain the power to negotiate with participating insurers on the best premium rates and all-inclusive packages.
Exchanges that operate in passive mode, act more as a centralized storehouse of information on health plans. All plans, from any insurer which qualifies the exchange standards, are permitted to participate in the exchange.
A report published by Rutgers Center for State Health Policy suggested that active exchanges could offer better value plans to consumers. Nevertheless, for an active exchange to launch successfully, a lot of factors need to be considered. The state exchanges will require substantial number of both participating plans and enrollees to drive competitiveness among the plans and ensure attractive packages and rates.
What role will brokers play?
A large majority of small businesses prefer purchasing their health insurances through a broker. If an exchange decides to avail of brokers’ services, it would be imperative to clearly define their roles and responsibilities.
Most small businesses employ the services of a brokerage firm or an individual broker because of the intricacies involved in purchasing health and other auxiliary insurance. Brokers can prove to be a valuable asset to the exchanges both with their large client pool and the influence the brokers usually have on small businesses’ insurance buying decisions.
Which exchange structure will be an optimum fit for a state’s needs?
How an exchange is designed impacts its risk quotient. Actuarial analysis and projections may help in presenting a better picture of the design best suited for state residents. A careful analysis of parameters such as state demographics, administrative expenses, projected enrollee figures, risk analysis, bearings on outside market etc. will help in designing robust exchanges.
Usually an exchange standardizes the premium rates based on the risk assessment of participating pool. A balanced number of high-risk and low-risk individuals can help spread the risk across the entire pool, thus making the plans affordable to all.
Will the employers or the employees pick their plans?
Small employers traditionally pick up health plans for their employees, while large employers usually offer their employees’ an option to pick their own plans. Small business exchanges may either allow employers to pick a single plan for their employees or encourage the employees to select their own plans.
Should an exchange offer ancillary services to small businesses?
Over time, if the need presents itself, these exchanges can also provide services which can help in reducing the administrative burdens of small businesses. Facilities such as call centers, simpler payment processes etc. can also help ease out a lot of administrative burdens for small businesses.
Designing an insurance exchange is a matter of careful study and market analysis. Careful deliberation on the design principles, structural aspects, market studies etc. may aid the states in evading several insurance exchange establishment issues.
Our next blog in the SHOP exchange series will elaborate on common challenges and issues faced by U.S. states that are in the process of setting up their state SHOP exchanges. Stay connected!