NEW YORK – A report from the PricewaterhouseCoopers US Health Research Institute, finds that policies offered by state health insurance exchanges could be worth nearly $60 billion by 2014 – and grow to nearly $200 billion by 2019. Consumers, meanwhile, will enjoy "purchasing power that will make health insurers want to work harder to win their business and loyalty."
As insurers eye the new pools, the report finds, one of their chief concerns is the ability to integrate technology with the exchanges.
The Congressional Budget Office estimates that 12 million consumers will buy health insurance in the exchange market in 2014, rising to a population of nearly 28 million consumers by 2019. Despite concerns and unresolved legal and design questions, many insurers feel they cannot afford to opt out of health insurance exchanges. Those who participate, however, will face new business risks, stiff competition and millions of consumers newly armed with the power of choice, says PwC.
[See also: HHS unveils proposed health insurance exchange regs.]
Officials say the report, titled "Change the channel: Health insurance exchanges expand choice and competition," is PwC’s most extensive research to date on health insurance exchanges. It draws on insight from a nationwide survey, commissioned by PwC, of 1,000 consumers and 153 health insurance executives concerning their expectations around health insurance exchanges.
In addition, PwC conducted in-depth interviews with 35 health industry leaders, including those representing state insurance exchanges, health insurers, policy makers, consumer advocacy organizations and independent quality organizations.
While the nation waits for states to declare whether they will develop their own exchanges by the January 1, 2014, deadline, or have the federal government do it for them, health insurers are debating their own decisions on how and where to play in this market.
[See also: PwC report recommends payers provide incentives for healthcare IT.]
Those who participate will need to ramp up quickly and make significant changes to their businesses, says PwC officials – selling health insurance to individuals in a retail market and moving away from a reliance on risk selection to a focus on population risk management, since the law requires insurers to accept all eligible members regardless of their health.
PwC’s research found that:
- More than half (52 percent) of health insurance executives said their companies plan to compete in the individual or small group exchanges, and nearly one-third are considering it but are still undecided. Seventeen percent of insurers do not intend to participate.
- Of those insurance executives who said they plan to participate in exchanges, nearly two in five (37 percent) are not active in the individual market today and one in five (20 percent) does not offer small group policies.
- Insurers' number one concern insurers have is the impact of adverse selection on their business if they receive a disproportionate number of high-risk patients. The second biggest concern is the ability to integrate technology with the exchanges.
- On average, insurers expect it will take approximately 15 months to get their businesses ready for exchange certification by the federal government. Forty percent expect it to take 18 months, and 20 percent believe it will take two to two and a half years before they are ready.
“Health insurance exchanges will be one of the most market-changing aspects in the Patient Protection and Affordable Care Act,” said Jeff Gitlin, U.S. healthcare payer practice principal, PwC. “Insurers will need to shift from a wholesale approach to more of a retail way of interacting with consumers and compete in ways they never have before to earn consumers’ business and loyalty. As in all retail businesses, insurers will want to understand who these consumers are, what motivates them and how they behave.”
PwC’s report outlines the key considerations for insurers as they gear up for participation in health insurance exchanges, including the relevant impact of various exchange models on their business. Each state has flexibility in how to design and operate an exchange, which could mean dozens of variations in exchange models across the country. The differences could make some exchanges profitable for some insurers but not for others, say officials, and insurers will need to decide which ones they will enter.
