How are insurance companies preparing for health insurance exchanges?

• Author: Fera, Bill
• Position: HEALTH CARE

Government-sponsored health insurance exchanges, mandated by the Patient Protection and Affordable Care Act (PPACA), are just around the corner. With an implementation date of Jan. 1, 2014, exchanges could transform the individual and small-group health insurance market. Exchanges offer the potential to bring 25 million new consumers into the United States health care marketplace, which would represent a 10 percent increase.

In addition to that 25 million people will be an estimated five million people working for employers that will offer employee-choice plans in the marketplace.

For health care payers, these impressive numbers represent a significant market opportunity--but this opportunity will be accompanied by considerable challenges and risks. The implementation of exchanges is expected to result in intense competition among payers to serve the masses of new customers. To win in the exchange marketplace, payers will have to make major adjustments in the way they do business.

They will need to engage eligible consumers directly, creating an unfamiliar new mandate for organizations accustomed to working under a business-to-business model. This direct consumer-facing model will spotlight payers' ability to attract and retain new customers through a renewed emphasis on brand, customer service and customer experience.

The increased size of the individual market will drive the need for increased administrative efficiency to counter the dramatic increase in operational tasks and processes. Also, with this new population comes potential risk and the need to effectively manage health and wellness. Payers are facing new business risks and cost challenges, new compliance and reporting requirements and new ways of working with their provider network.

Bottom line, there is much work to be done to prepare for the new reality of health care. Because early entrants into the exchange marketplace will put themselves in a better position to capture a larger share of exchange members and gain competitive advantage, there's no better time than now for payers to start running in the race.

Three Critical Areas Payers Are Focused on Now

Payers need to focus now on three areas of their business: consumer engagement and enhanced customer service; operational readiness and administrative cost reduction; and delivery and management of care. By targeting these areas and developing strategies to address the many challenges presented by exchanges, payers can become...