Following President Trump's executive order to reduce economic and regulatory burdens set forth by the Patient Protection and Affordable Care Act (PPACA), it's natural for healthcare executives to grow concerned or anxious regarding the future of the industry.
Your daily meetings may have become interjected by conversations on what is likely to occur, the replacement plan the new Administration is likely to adopt, or how your organization can best take advantage of its knowledge to stay ahead of what's to come.
The creation of the health law established state flexibility in forming a health insurance marketplace, utilizing one of several options. For the 2017 benefit year, there are 12 state-based marketplaces, 5 marketplaces that are utilizing the state-based marketplace-federal platform, and 6 state partnership marketplaces. The remaining 28 states have elected to utilize the federal platform (healthcare.gov).
Whether you operate in a state-run marketplace or the federally-facilitated marketplace, the reality is that we can never know for certain what this year has in store. Through experience and a diligent following of current events, we can make educated estimations.
Although Republicans are eager to repeal and replace the Affordable Care Act (ACA), the actual repeal of the law will not take effect for a few years, according to members of President Trump's team. With inauguration day now behind us, a discussion on the future of the state-based health insurance marketplaces (SBMs) has been long overdue. Some recent proposals may allow for the ACA to remain in place within states that want it; this could potentially open the door, at least for the large markets such as New York and California, for SBMs to outlast the Trump presidency. To understand the value proposition that SBMs provide to health insurance carriers, their members, and other stakeholders, it's important that we assess their five core functions.
Managing relationships with state carriers. Like the Centers for Medicare and Medicaid Services, SBMs work continuously to manage their relationships with participating insurers. Weekly issuer training calls and webinars, supplemented by 1:1 working sessions with carriers, has proven to be an effective method of communicating regulatory changes, approaching deadlines, as well information imperative to insurers' exchange business. Another thing to consider is that SBMs will usually have a clear point of contact as opposed to the generic contacts that CMS provides for carriers to submit requests or questions. In our experience, the twelve state based marketplaces, including Washington's Healthplanfinder (WAHBE) or New York State of Health (NYSOH), can often provide additional and individualized attention amongst their participating issuers and marketplace consumers.
Customized marketplace design. SBMs must manage relationships in their state in a similar fashion to what CMS must do at an interstate level. However, the truth is that SBEs ultimately own much at the state level of what CMS does at the federal level. This includes establishing shopping and account management portals, designing and implementing technical interfaces, such as EDI, SFTP, and data encryption, and integrating with CMS to determine tax subsidies. One of the major challenges on this front, especially for a vendor who operates in X states, is how to accommodate the sometimes vast difference between each SBE and the FFM. For instance, NYSOH, WAHBE and the FFM have distinct reconciliation processes that are far different than FFM. This becomes a major headache for carriers who operate in multiple states that are forced to follow completely different processes for each of their entities.
Working with State DOI for Carrier Compliance. To be included in a state or federal exchange, carriers will be required to receive State Department of Insurance approval, in addition to the approval required by CMS. It is when carriers operate within a SBM, however, where the state government plays a significantly bigger role in formulating plan designs. In California and Massachusetts for instance, the state governments will assign each carrier to a region. This is yet another example of how SBMs can take a more localized approach to plan development and approval. When it comes to subsequent audits, it is important to note that this responsibility falls on the SBM, as opposed to states that do not have their own marketplace where CMS takes on this role.
Self-funding. Most state-run marketplaces are funded through user fees, such as per member per month. When enrollment is low, these fees are often not enough to keep the exchange sustainable. Many of us can think back to cases such as Cover Oregon. Here we saw a marketplace that was granted 300 million dollars, spent 240 million dollars for a third-party to build their exchange, but then ultimately failed due to technological issues with the entire end-to-end process. Having gone through this much money already, there was not enough left over to fix the issue. Many states continue to rely considerably on assistance from the federal government to keep their exchanges fully operating. The repeal of the ACA could have the potential to spell the end for many of these exchanges. Massachusetts may be in a uniquely safe position on this front, as their state exchange had already successfully operated before the federal ACA was even conceived. But in Colorado for instance, the state legislature is already working on repealing the exchange altogether. However, data from confidence in the ability to be self-sustaining has greatly increased in states like Vermont, revealing that these exchanges are much more capable of sustaining themselves. With increased sophistication of marketing campaigns and learning from mistakes of the past, SBEs have shown an ability to operate on a more efficient basis while seeing increasing enrollment numbers year-over-year. HealthSource RI provides an example, where in 2016 it attracted 4,462 new customers, despite significantly reduced marketing budgets. Even Colorado, mentioned previously, has a relatively optimistic outlook with enrollment numbers that have increased by 15 percent ahead of the previous year.
Marketing. One overlooked, yet vitally important function of a state-based marketplace is its marketing campaign. Because most marketplaces earn their revenue through a per member per month basis, states that don't meet their enrollment goals run the risk of creating budget deficits. While CMS faces the challenge of marketing healthcare enrollment nationally, SBMs can play a major role in advertising within their state. The traditional model has involved generalized methods of spreading a message: billboards, TV ads, radio ads, etc. that simply advertise the enrollment period and where to sign up. This is a large reason why we have seen significant expenditures dedicated to marketing in initial years that have been cut back in subsequent years. For instance, Covered California had a massive initial marketing push valued at $250 million dollars in the first two years, a budget priority that has been reduced in subsequent years.
We have observed a heightened emphasis on data analytics as healthcare becomes more consumerized. Like how banking and airline industries utilize consumer data to finely tune their marketing campaigns, the healthcare industry is now catching up. With modern data analytics solutions, health insurance exchanges and insurers alike are recognizing the needs of their consumers by demographics, location, and other key performance indicators (KPIs).
Each year it's easy to see the value that they can provide to carriers and consumers. Although the future of these exchanges isn't clear, learning from these traits can help all SBMs become more successful in 2017.
Robert Miller serves as Softheon's Managing Director, specializing in Healthcare Reform. His expertise has been applied in developing solutions for Softheon's individual clients, while assuring that the same Best Business Practice solutions can also be used across the Softheon client spectrum.
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