Health reform: Steps health insurers can take now

A common refrain heard at last week's conference held by America's Health Insurance Plans was, "What about the details?" says Jordan Battani, principal in Emerging Practices in the Healthcare Group at Falls Church, Va.-based Computer Sciences Corp. (CSC). "The fact is that the broad bones of health reform are spelled out, but the details are being delivered from the regulators on an almost hour-by-hour basis," says Battani. So critical information required to do "absolute, detailed, desk-level planning" is still missing, and that lack of details is one of the major challenges faced by health insurers, she advises. Battani suggests health plans take the following steps to set the stage for a smooth transition to the new realities of the health insurance market:

Step 1: Seek operational efficiencies and administrative overhead cost reductions.

"Health plans have got to absolutely focus on their administrative costs and their operational efficiencies internally so that their own cost structures are tightly managed as possible. That's not new," notes Battani. What is new is the need to monitor payment innovations for opportunities to control medical costs. The Centers for Medicare and Medicaid Services (CMS) is rolling out several new payment mechanisms for the Medicare program as a result of the Patient Protection and Affordable Care Act (PPACA). Health insurers should monitor these mechanisms "very carefully" to determine if they can be adopted in commercial lines of business, says Battani.

Step 2: Look for even more efficiencies in Medicare Advantage businesses.

"Medicare Advantage plans will continue to evaluate very carefully their participation in those markets," says Battani. "Any plan that is in that business has very significant work to do to try to maintain profitability and service levels under what will be in very short order a new financial landscape in terms of how much reimbursement they are receiving from CMS for Medicare Advantage members. However, for plans that can operate efficiently, there is probably growth opportunity because there are current Medicare advantage players who are going to exit from the market."

Step 3: Prepare for significant growth in the Medicaid managed care sector.

"There will be many opportunities if you are in the Medicaid managed care business," says Battani. Eight to 10 million people could obtain Medicaid coverage by 2014, so "one way or another, there will be a huge expansion of Medicaid programs at the state level over the next three to five years." However, "cost structures will continue to be pressured, and Medicaid plans will need to be innovative about both their own internal costs and how they engage with the provider community," she says.

Step 4: Decide how to deal with a heavy influx of new members.

With the expansion of Medicaid and the individual and small-group markets, "the estimates are that there will be 18 million new people who have coverage as of Jan. 1, 2014," says Battani. Assuming that the actual number comes anywhere close to that, health plans will be faced with many new members who probably don't know very much about how health insurance works. "That will put a tremendous strain and pressure on existing customer service and customer support methods and modalities," she says. Plans should take a hard look at self-service options and technologies so that they will be available "to the relatively unsophisticated consumers who are coming online as health plan members for the first time," she recommends.

Step 5: Pay attention to provider networks.

In addition to looking at opportunities for reducing medical costs at the point-of-care level, health plans also will need to prepare to support their provider networks, says Battani. Healthcare providers likely will be "overwhelmed" by the increase in patients. "It's going to be a particular challenge to figure out how to direct all of those new healthcare customers to the right level of care and the most effective and cost-efficient level of care." - Caralyn