Private health insurance exchanges are sprouting up and established ones want to grow, challenging state-based HIXs and expanding the retail insurance market.
Insurers, in ancipation of the expected shifts in the marketplace, are positioning themselves in a big way to take advantage of this trend. Last year, Health Care Service Corp., WellPoint Inc. and Blue Cross and Blue Shield of Michigan said they’d buy majority ownership of Bloom Health, which operates a private exchange that’s set to be available in every state by the end of the year.
The growth of private HIXs comes amid the rise of consumer-driven health plans — now the second most popular benefit option and offered by 58 percent of employers — and amid increasing interest in defined contribution plans, a main component of many private HIXs.
The defined contribution model should be increasingly attractive to companies in light of surging healthcare costs, said Tina Provencal, national corporate exchange solutions leader for Aon Hewitt. The global human resources consulting firm recently unveiled its corporate exchange, with 9 national and regional insurers offering five plans, ranging from the efficiency model, with high deductibles, to so-called Cadillac-like plans.
Aon Hewitt’s exchange is aiming mostly for large and medium-sized firms, Provencal said. The company made big news when Sears Holdings and Darden Restaurants signed up for the exchange.
Employers see the defined contribution model on an HIX as a solution to the perennial problem of rising healthcare costs, Provencal said, because they can keep the group insurance tax deduction and lets self-insured firms transfer risk to the carrier.
For employees and consumers, private HIXs are promoted as competitive markets that’ll bring down consumer costs, much as Amazon.com did for a host of a retail sectors.
Amazon’s disruption, of course, put some “Mom and Pop,” “brick and mortar” retailers out of business, and HIXs may be a factor in regional insurance market consolidation. But “there has to be something in it for carriers,” Provencal said. The private HIX brings opportunities for insurers to gain market share by signing on members from across companies, efficiencies in offering the same plans and also an attractive risk pool.
“The healthiest people are people who get up and go to work everyday,” Provencal said.
The HIX isn’t entirely a new idea or marketplace, but the technology needed to bring insurers into one web platform, connect with consumers and process the transactions may be among the largest hurdles, forcing insurers to chuck their old administrative systems and start anew.
In 1997, Stanford and Wharton graduate Vip Patel founded eHealthInsurance, after getting food poisoning in college and, being uninsured, going without treatment. “He didn’t know individuals could buy health insurance or even where to look,” said Bob Hurley, senior vice president of sales and operations for eHealth, eHealthInsurance’s parent company. After Patel recovered, “He learned there were lots of individual plans available,” Hurley said. “He was shocked to find out that it was actually affordable.”
That experience combined with the burgeoning online marketplace led to the founding of eHealthInsurance, which now carries 10,000 health insurance plans provided by nearly 180 carriers. It was an HIX “before people knew it was a cool thing to talk about,” Hurley said.
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Early on, Hurley said, applications for insurance had to be downloaded, printed and processed with insurers manually; people couldn’t sign transactions online until the ESIGNAct became law in 2000.
With the retail insurance market expanding, Hurley thinks insurers will face a large challenge in plugging into HIXs, public and private, using programming interfaces called APIs that connect different systems, receiving and passing data through different platforms.
“Some will do it well and some will struggle with that,” Hurley said. “If they try to build things themselves,” it might “bog down on them.” For its part, Hurley said, eHealthInsurance is aiming to evolve with consumer expectations of online retail. For insurers who sell there and in other HIXs, that may require increasingly complex IT systems.
Indeed, some insurers are getting rid of legacy administration, claims and sales systems in favor of more web-based and automated software. Blue Cross Blue Shield of Kansas City and Blue Cross Blue Shield of North Carolina have formed a shared services LLC, and others are turning to cloud-based administrative vendors.
The emergence of some 30 million newly insured Americans in 2014 is probably one incentive to revamp their systems for an HIX, with maybe 12 million people likely to buy through an exchange.
In Illinois, the fifth most populous state, Blue Cross Blue Shield of Illinois, Aetna and eventually othersplan to sell through the Chicago area-based Flexible Benefit Service Corp.'s recently unveiled HIX, InsureXSolutions. It sells individual and family plans to employees on employer defined-contribution plans and is being promoted by the Chicagoland Chamber of Commerce.
There are about 280,000 businesses in Illinois, Flexible Benefit’s president John DiVito said, and about 140,000 currently don’t offer any group insurance to their employees.
Even amid all the regulatory uncertainty, “the size of the market is vast” and it’s going to have “a wide array of distribution sources,” DiVito said.
And insurers operating their own HIX has precedent. Medica, a Minnesota-based insurer with about 30 percent of the state’s market share, rolled out its “My Plan” exchange last July, offering dozens of group-based defined contribution plans, including in ACOs, and now has about 50 employers and 16,000 members.
In a sign of times, about 90 percent of members have enrolled online, John Naylor, Medica's vice president and general manager of commercial sales said. “The market reception to this idea has been much stronger than we expected.”
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