Design uncertainties around state health insurance exchanges: Implications for payers

Considering the cultural and demographic differences among various US states, the federal government has extended states with an option to design their local state health insurance exchanges based on their local residents insurance needs, health profiles and local insurance market designs. This 'flexibility' for states has however increased design and administrative complexities for insurers.

Most US states are still deliberating about whether they should set up a state exchange in the first place. While most are awaiting the Supreme Court verdict on the ACA constitutionality that can free states of their obligation to set up exchanges, other states such as Maryland, Oregon, Washington, California, Colorado are aggressively working towards setting up a functional health exchange model before the January 1, 2014 deadline. Even among the states actively working towards their health insurance exchanges, the level of health insurance exchange implementation readiness, vastly differs.

Payers and health carriers seems to be caught up in the uncertainties surrounded around these health insurance exchanges and how the payers should align their health products and business structures to quickly and effectively realign themselves with the different state health insurance exchanges. Payers operating in multiple US states face further design and administrative complexities as they need to create flexible systems that can easily be tweaked as per the exchange participation criteria for a particular state.

Before the health insurance exchanges become fully operational, health insurance payers would need to have their business models, market strategies, IT systems and technologies, operational designs etc., well in place in order to easily integrate with the exchanges and  fully capitalize on the exchanges' million strong client pool. With approaching deadlines and looming ambiguities on health insurance exchanges, the competition for insurers is likely to heighten that would in turn impact established cost estimates and market strategies for insurers.

To top it all, states have limited or no perception on how payers conduct their businesses. There is obvious variations in the modus-operandi  of US payers and states clearly are unaware of these parameters. One cause for worry is therefore that the states may design exchanges based on incorrect assumptions about payers' working models. As per a recent study by Accenture, out of 30 surveyed US states, 18 states consider that it is too early for states to talk to payers on structural and integration concerns, despite the looming January 1, 2013 deadline for submitting exchange model plans to the federal government for approval.

It is highly imperative that payers are engaged in active discussions during states exchange design and implementation plans as the payers form a necessary section of the health insurance exchange models. State exchange administrators need to adopt an active approach and hold engaging interactions with insurers right from the exchange development stage, in order to formulate a holistic and structurally sound health insurance exchange model – in line with the insurers operational models and structural differences.