Technology A Major Concern For Health Insurance ExchangesTechnology A Major Concern For Health Insurance Exchanges

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A study from PricewaterhouseCoopers (PwC) estimates that health insurance exchanges will generate nearly $60 billion in premium dollars in 2014. By 2019, as more consumers and small businesses join the exchanges, the exchange market is expected to more than triple to nearly $200 billion.

The new estimates were revealed this week in a report, "Change the Channel: Health Insurance Exchanges Expand Choice and Competition," which relied on two nationwide surveys, commissioned by PwC, of 1,000 consumers and 153 health insurance executives about their expectations around health insurance exchanges.

Under the Patient Protection and Affordable Care Act, states are required to establish fully operational health insurance exchanges by January 2014. The exchanges are online marketplaces that seek to inject competition into the health insurance marketplace by making it easier for individuals and small businesses to compare health plans' price and coverage options. Additionally, consumers can get answers to questions, find out if they are eligible for tax credits for private insurance or health programs like the Children's Health Insurance Program (CHIP), and enroll in a health plan that meets their needs.

Just this week, the Obama administration issued two notices of proposed rulemaking that further clarify how these exchanges will operate and gives states greater flexibility as they design exchanges that best fit the needs of their residents and respond to local market conditions.

The online exchanges will require a technology infrastructure that supports websites where health insurance data and state and federal government information will be posted. These exchanges will also accommodate the millions of online users who will log onto the system to look for health insurance coverage. According to PwC, in 2014 an estimated 12 million consumers will choose health insurers in a new, tightly regulated marketplace, and by 2019, an estimated 28 million Americans will buy health insurance through this new online channel.

The consensus is that much work needs to be done to ensure that consumers can start using the exchanges on Jan. 1, 2014. The government has said consumers could start enrolling in the second half of 2013 for coverage that begins in 2014. Insurers said the most critical tasks that lie ahead are market analysis, strategy completion, product development (including regulatory approval), and technology integration with the exchanges.

The PwC survey also found that technology integration, such as payment or enrollment transactions, is a top concern for insurers. The report states that the top two reasons some insurers don't plan to participate in health insurance exchanges are problems integrating technology (e.g., payment transactions) with the exchanges (34%) and concerns about the ability to charge enough to make a profit (23%).

Health IT Boosts Patient Care, Safety

Another concern raised in the report is that currently many consumers don't know what a health insurance exchange is. In PwC's consumer survey, 56% of consumers didn't know the definition of a health insurance exchange.

"One of the first hires the exchanges should make is a communications director because consumer education is key and needs to start early," Andrea Routh, executive director of consumer advocacy group Missouri Health Advocacy Alliance, said in a statement. According to Routh, "Organizations such as consumer advocacy, business groups, and government agencies are starting to educate the public about the exchanges. As the states make decisions and establish the exchanges, they will improve the communication by partnering with these organizations to get the word out."

The report noted that such channels as social media and mobile applications could play big roles in influencing the sales process. Connecting with populations that rely on those technologies for their social interactions could create more engagement opportunities.

Other key findings in the report are:

-- More than half (52%) 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.

-- The number one concern insurers have is the impact of adverse selection on their business if they receive a disproportionate number of high-risk patients (46%). The second biggest concern is the ability to integrate technology with the exchanges (40%). The third biggest concern is the ability to charge enough to make a profit (37%). Insurers are least concerned about understanding the behavior and buying preferences of newly eligible consumers (25%).

-- 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% believe it will take two to two-and-a-half years before they are ready.

Of those consumers surveyed for the report, PwC found:

-- Consumers have very little experience buying insurance online. Only 2% of consumers surveyed have purchased long-term care insurance online and 5% have purchased medical/health insurance online.

-- Nearly half of consumers surveyed want to talk with a customer service representative and 32% to an insurance broker before purchasing health insurance over the Internet.

-- When exchanges open up to consumers in 2014, nearly all participants (97%) are expected to be individuals who currently do not have health insurance coverage, according to PwC's analysis of Congressional Budget Office (CBO) projections. In 2019, the states of California, Texas, Georgia, and Florida will have the highest projected enrollment in the individual exchanges, with 8-10% percent of each state's population participating.

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