The health benefits purchasing dynamic that has existed for decades in the United States, involving providers, payers, employers, and members, is likely to change dramatically with the emergence of Health Insurance Exchanges, mandated by the Patient Protection and Affordable Care Act (ACA). As a result, the American healthcare system will see a significant expansion of the power of individuals (rather than employers) to make health plan purchase decisions, in both State and Federal Exchanges. This approach promises to have far-reaching impact on the way coverage is marketed and administered, as well as an effect on healthcare analytics as administrative challenges are confronted.
The Exchange concept, which figures prominently into the ACA, was originally envisioned decades earlier. Thus, while final determination of the landscape and details are still changing, events currently unfolding are the result of long-established ideas.
Health Insurance Exchanges are designed to allow individuals within participating employer groups to select coverage from among participating payers, with coordinated billing and administration provided to the employer by the Exchange. Even though these individuals will still be employees, the Exchange concept will enable them to select the product of their choice. In theory, this process promises to provide increased choice to individuals and families, in a uniform competitive environment, while distributing risk between participating payers among a larger membership base.
Many private-market variations of this concept have been created over the years, and several State-sponsored Exchanges have started to emerge. While the ACA requires States either to establish their own Exchanges or utilize a Federally administered version, many States have delayed establishment of Exchanges.
As envisioned by the law, qualifying health plans (QHPs) offered in State and Federal Exchanges will feature mandated, tiered coverage percentage parameters (known by the names “platinum,” “gold,” “silver” and “bronze” plans), along with many benefit requirements including standardized out-of-pocket caps, as well as prohibitions on both pre-existing condition limitations and lifetime benefit maximums. Many individuals and small group members will be mandated to participate in Exchanges; self-funded plans, non-qualifying individuals and groups, as well as certain grandfathered plans will continue to provide/receive coverage outside the Exchange model. Using medical record and claims data to understand the risk distribution and utilization associated with these options will enable more successful delivery of the plans, and increased quality of care.
In the ACA’s rules, many key Exchange implementation deadlines are rapidly approaching. Currently, the initial open enrollment period is scheduled to begin as of October 1, 2013, with initial effective dates as of January 1, 2014. Exchanges will change the way health coverage is marketed, affecting employees, dependents and health care providers. Participants can expect to see a full range of products offered in the Exchanges, including a variety of organizational structures and network composition.
The complexity of products offered will often be overwhelming, and many participants will be completely unfamiliar with the process of choosing the plans. Thus, the ACA anticipates creation of a new functional role known as the “Navigator,” intended to provide insight and assistance to individuals in making coverage selections. While this type of role is likely to be administered in a manner similar to existing state-level control of agents/brokers, a Federal regulatory component (similar of CMS administration of Part-D and Medicare Advantage sales activities) is also anticipated, and while Navigators are expected to be prohibited from receiving sales compensation for their activities, a role is also anticipated in several Exchanges for agents/brokers, operating in a manner similar to the current model for Medicare products.
Importantly, as a result of these changes, both payers and provider organizations will be incented to “tell their stories” to these new types of consumers. Each of these types of stakeholders will be required to understand the issues involved from the perspective of the new purchasers (the individuals), including plan selection, preventive health, and access to care, and will be required to have a grasp of both claims and encounter data.
Data and analytics will also figure in to the way health plans are managed under the Exchange model. A wide range of administrative concerns, only some of which have already been anticipated, will require further regulation of plans offered in Exchanges, as well as data management by the plans themselves and other organizations. For example, participating payers are likely to anticipate uneven distribution of risk within an environment allowing individual plan selection. As a result, Exchange regulations include risk adjustment methodologies.
Exchange participation also promises to significantly affect the SG&A cost structure of participating payers. For example, much of the administrative function required to maintain health benefit plans will be repeated in the Exchanges, thereby creating duplicative costs that, if unchecked or unregulated, could cause payers to exceed minimum medical loss ratio thresholds established under the ACA. For this reason, use of medical record and claims data to understand and lower administrative costs will become increasingly important.
Finally, quality measures used to evaluate plan effectiveness and provider efficiency will become increasingly important as the underpinning for reimbursement methodologies in many instances.
Once primarily the domain of health insurance plans, the challenges of the Exchange model will cause data analytics to become increasingly important in understanding practice patterns, risk management at the individual and group levels, minimizing administrative costs, and encouraging the most efficient and effective types of care. Advanced methods will be required to sift through the mountains of information produced in the process. In short: The Exchange model means that health plans, health systems and every type of organization in between will need a better understanding of healthcare analytics and data management than ever before.