There have been a lot of opinions expressed about how the payer’s margin will be squeezed in the reformed health insurance market. This discussion focuses its attention on dealing with the situation, i.e. preparing a business strategy for survival in the new Exchange market.
1. Get Smart About It: There is Life for Plans off the Exchange
Restrictions imposed by the ACA are here to stay but a smart payer can still dig out profits by reading between the lines. For instance, the Healthcare Law stipulates that health insurance products sold on and off the federal/state health care exchanges should put forth the same range of premiums, out-of-pocket expenses, etc. However, the ACA doesn’t stipulate that standalone products sold on the exchange need to be retailed in the same format in the non-exchange market.
Thus, payers can consider bundling the same health plan with add-ons that can engage more consumers off the state/federal health insurance exchange. For instance, a primary health insurance product can be bundled with features such as ancillary plan options, more provider network options or more freedom in scheduling appointments within the approved provider network. The idea is to equip the same plan with better, more attractive features to drive volumes in a different marketplace.
2. Don’t Take the High Road, Seek the Middle Path
The ACA emphasizes creating a more balanced risk portfolio. The idea is to dilute the preference for low-risk individuals that has traditionally been followed by insurers. Payers who undertake a greater volume of unfavorable risks are supposed to be compensated for the higher medical costs that a high-risk insured pool will incur. However, it will take time for the actual dynamics of this compensation system to be figured out by the state agencies. States that have defaulted to Federally Facilitated Exchanges (FFEs) might face greater delays in processing and release of such payments.
Thus, taking upon a very elaborate risk pool might not be the best option. On the other hand, not accommodating high-risk and medium-risk members means risking non-compliance with the ACA. The solution lies in taking the middle ground, i.e. moving away from the convention of operating with a very limited risk pool but not taking too many high-risk individuals. It makes sense to be patient and let the states develop an efficient compensation system before expanding the risk pool.
3. Get State Savvy & Partnership Ready
As more regulations are executed and insurers start operating on and off the exchanges, the real picture will emerge. Some of the states might surface as minimal profit zones and some might offer a great business proposition. At this moment, predicting is too difficult. Payers need to resign themselves to a simple fact—they have to wait out a small but challenging period after which they should be able to analyze which states offer the best business proposition for them.
However, it doesn’t make sense to be seated on the sidelines and allow other payers to figure out the game. This creates the risk of brand erosion and decline in customer recall and loyalty. It is better to tread slowly and not rush things during the early years of the exchange driven market. The better strategy is to carry on in regions where profits have traditionally surfaced and not to hop across state boundaries on mere speculation. Let the market take clearer shape and then figure out which regions offer the maximum scope for expanding your portfolio. This might also mean re-evaluating relationships with competitors already established in the neighboring states.
Besides these three strategies, what else would you recommend to an insurer apprehensive about the changing industry dynamics?