Four Ways Payers Can Optimize Exchange Plans And Operations Portfolios in 2014

By Bryant Hutson

 

On January 1, millions of Americans received new health coverage when the health plans sold on the exchanges mandated by the Affordable Care Act became effective.  As health insurers prepared for this historic date, regulatory compliance has served as a major theme in formulating corporate strategy and building operations for health plans over the past few years. 

Because payer organizations were preoccupied with digesting multiple rounds of regulatory releases and interpretations to prepare for 2014, they were understandably focused on meeting minimum compliance thresholds as they designed, priced, and filed new exchange plans.  At the same time, they stretched their resources to prepare back office operations for new capabilities and processes.  Unfortunately for many payers, ever-changing requirements meant 2013 was a year when workarounds became commonplace as process discipline took a back seat to regulatory compliance.

In 2014, the strategic and operational focus for payers will begin to shift dramatically.  High performing organizations will move beyond compliance and will redirect their strategic focus to evaluating the new membership and competitive landscape.  At the same time, payers’ operational focus will move to improving newly created IT capabilities necessary to support post-reform plan design and management, automating manual processes used to quickly achieve exchange compliance as new products are developed, and validating quality of exchange contracts and products quickly filed and built in the months before the exchanges opened.  The Affordable Care Act’s medical cost ratio mandates have increased pressures to reduce administrative costs.  Payers can begin to realize cost savings by focusing on four key areas to quickly identify and improve exchange plans and operations in 2014. 

Employ Early Exchange Enrollment Analytics to Improve 2015 Plans and Identify High-Risk Members

Although health insurers have received some high-level demographic data from exchange enrollments in the fourth quarter of 2013, the most valuable medical and pharmacy claims data will begin to arrive in January 2014.  Only when they receive these claims data will insurers truly understand whether they have enrolled high-risk or healthy individuals.  Insurers will see pharmacy claims for patients with chronic conditions very early in January as well.  Claims received in January will help to show the mix of disease states of high-risk members and demonstrate the level of pent up demand from previously un- or under-insured members.  Medical management teams can use early claims data to rapidly identify candidates for engagement programs and focus on cost-effective delivery of care.  And most importantly, early analytics will help actuaries digest claims histories as they begin setting appropriate rates for the 2015 plan year.

Find a Permanent Home for Exchange Operations in Your Organization

Many health insurers have treated their health reform and exchange programs as one-off corporate initiatives or special projects.  The uncertainty surrounding health reform leading up to the Supreme Court’s recent decision further separated these initiatives from traditional operational areas.  Now that the Affordable Care Act is the law of the land, health insurers can begin integrating these exchange operations into traditional functional areas such as marketing, contracting, compliance, claims, and customer service to recognize operational economies of scale.  Insurers can use this time of organizational redesign to not only fold in exchange operations but also build a business case for process improvement opportunities as enrollment, customer service, and claims volumes increase.

Automate Business Processes and Improve IT Capabilities Developed for Exchange Compliance

With significantly compressed requirement definition and application development timelines, many payers chose to only develop or remediate the bare minimum functionality necessary to build, price, file, and sell new products on and off the exchanges for 2014.  Furthermore, the ever-changing nature of federal plan filing templates in 2013 meant that most filing activities across carriers were completed manually.  While this extraordinary effort worked in 2013, carriers cannot rely on the error-prone nature of manual filing in future years.  Health insurers can use 2014 to further refine and build out functionality for plan management as the number of regulatory releases slows and eventually stabilizes.  However, IT capabilities used for product development and plan management should allow for future flexibility as regulatory changes will continue to occur through 2020.

Ensure Quality in Exchange Plan and Benefit Administration

In 2013, insurers across the country raced to create, build, and educate staff on brand new exchange plan designs.  For almost all insurers, these newly designed plans look very different than traditional medical products.  For example, new exchange medical plans contain ancillary benefits like pediatric dental and vision, adjudicate with cost sharing reductions for essential health benefits under the Affordable Care Act, and cap members’ maximum out of pocket costs.  The complexity of these new products and the rapid pace at which they were built present a prime business case for contract audits and claims payment accuracy review.  High performing organizations will constantly review claims paid in 2014 to ensure the application of sound payment rules and correct core payment system logic quickly as errors and defects are found.  Health insurers can also increase employee knowledge of new plans by continuing to educate customer service and claims administration staff of plan and benefit changes throughout 2014, and ensuring all policies and procedures have been updated to reflect those changes as well. 

 

Bryant Hutson is a Senior Associate based in Optimity Advisors’ Washington, DC office.  He is an expert on the Affordable Care Act and has served leading health care organizations as they develop strategy, design products, manage plans, train employees, and optimize analytics for succeeding in a post-reform environment.