Although health insurance exchanges will usher in millions of new customers for insurers, they also will provide significant challenges as insurers try to compete among each other for dominance in this new market.
To prepare for these online marketplaces, then, insurers must be implementing organization-wide changes, including addressing potential adverse risk, ensuring adequate provider networks, improving customer service and employing new technologies.
FierceHealthPayer spoke with Bill Fera (pictured below), principal at Ernst & Young, to uncover specific strategies that payers can start putting into place now so they're best prepared to recruit and retain customers through the exchanges when they go live next year.
FierceHealthPayer: What are the three most important steps payers should be taking now to prepare for the exchanges?
Bill Fera: First and foremost, payers have to make sure their products comply with the regulatory and IT aspects of exchange participation. Then they really have to take a look at their operations and decide whether they're going to be able to support the move to a more individual or consumer-based market operationally.
And third, payers have to determine if they will have the capacity to succeed on the exchanges. Do they have their customer experience program in order? Are they going to be able to attract and retain customers? Can they manage risk through population management?
Those are the three things--prepare to engage, prepare to be able to scale to the individual market and prepare to be successful. And those are parallel efforts in terms of what payers should be doing.
FHP: How can payers differentiate themselves from their competition?
Fera: There are rules of engagement that tend to commoditize the products sold on exchanges through bronze, silver and gold plans that make it hard to differentiate yourself from your competitors. So you're only going to be able to differentiate in a couple of ways--customer experience and population health management. Can payers attract and retain members, and can they effectively manage members to be profitable?
For the ability to manage a population--have payers started to look at their network, do they have active partners out there and have they thought about accountable care, collaborative care type of constructs? Are they incentivizing those types of providers to attract them to their network? Now you're competing in a whole different kind of way if you can secure the right network.
On the backend, payers need to really look at their overall governance and approach, moving away from silo-based, business-to-business functions and get to true holistic-based approach to information. That means figuring out how they will partner with the provider network to gather new clinical information. We're seeing more and more with accountable care organizations a collaborative arrangement to take the health management population to the next level.
FHP: What role will branding play in payers trying to distinguish themselves in the exchange market?
Fera: It's going to be extremely important for payers to get the right brand out into the marketplace. Brand will be very paramount to establishing a first mover advantage. As we saw with the Medicare Advantage products, first movers have maintained, in most instances, the advantage that they started with. And it plays into the whole movement from business-to-business toward business-to-consumer, and that's why payers must assess how they've been branding.
FHP: What type of improvements do you think the customer service department needs? Is this about IT or also about the actual employees and how they handle members?
Fera: It requires a transformation. At the very least, payers should redesign and transform their customer service approach. People aren't just going to be calling about bills or explanation of benefits anymore. Now it's, 'I was talking to my health coach" or 'I have a question about my network and I read that this provider isn't highly rated.'
These are the kind of questions that are starting to come up. The payers that have introduced more concierge type of services are able to more rapidly engage and have the systems to support information sharing when members call. Really engaging customers with that personal touch is going to be a huge differentiator in this new marketplace.
FHP: You mentioned payers must consider whether their operations can support the move to a business-to-consumer market. What steps should they take to reach that goal?
Fera: I think they need an honest assessment of how the added stress and volume will affect their systems and whether their systems can handle it. That will help them recognize whether it's a hardware problem--needing a larger server, more memory, for example--or a software problem. And it could be both.
But I think the main thing is: Have you stress tested? Do you understand the volume that you're going to have, and do you have the right kinds, types and number of people to handle the volume that's going to be coming down?
FHP: Since there's going to be such an influx of new members, should payers expand their provider networks to ensure enough doctors to care for the new members?
Fera: Ironically, I think we may see a narrowing of networks. I think what's going to happen is that payers are going to have to be much more selective in the networks they choose. We don't want to have people flooding the market and accessing the system the way they do today, continuing in a volume-based type of mentality. Payers really are going to need to partner with providers and choose networks that are responsible in their approach to care.
So if you expand your network and it's all volume driven, you're just setting yourself up for failure and intensifying your risk. If you can be selective based on quality and appropriateness of care, you may end up narrowing your network. And that's what we see coming to market. So this is not care withholding, this is making sure people are getting the appropriate care and if they're not, then those providers are removed from the network.
FHP: Do you think the new members entering the health insurance system through exchanges will be receptive to these narrow networks?
Fera: I think we're going to see that the consumers coming into this market are much more cost conscious as they may be receiving a defined contribution rather than a defined benefit. These people are going to be acutely aware of costs, by and large, of not only what their plan is but also what their out-of-pocket potential is beyond that.
So we're going to see a much different type of buyer in the exchange market. And I think they'll be willing to make the tradeoff of a lower price point for a narrower network. And if they're not, then they can buy up into the silver and gold plans where you may not have as narrow a network.
Editor's Note: This interview has been edited and condensed for clarity.