Insurers Enter HIXs Despite Gaping Uncertainty

Most health insurers say they will take part in health insurance exchanges despite concerns about how the programs will function, technical barriers, and the health status of participants. Meanwhile, a federal study finds that premiums will cost less than originally expected and selection will be broad.

Nearly 70% of health insurance executives responding in a study released today say they will take part in health insurance exchanges despite widespread concerns about how the programs will function, stubborn technical barriers, and the health status of the people they will be covering.

The PwC study, titled Health Exchanges: Open for Business [PDF], found that the access to potentially millions of new customers on the individual market and a fear of being left behind if these exchanges succeed are overcoming the reservations that many health insurance executives have expressed.

The six-month enrollment period for the exchanges—a key component of the Patient Protection and Affordable Care Act—starts on Oct. 1, and coverage begins on Jan. 1, 2014.

"With open enrollment about to begin, large national insurers and new players, some from other industries, are jockeying for position in the new exchange market," Ceci Connolly, managing director of PwC's Health Research Institute, said in prepared remarks. "Investment in retention programs will be crucial to securing the loyalty of a new crop of technologically savvy buyers. Companies should think beyond initial implementation challenges and focus on building a meaningful customer experience, with an eye on cost reduction and personalized communication."

HRI surveyed more than 100 insurance executives about the exchanges and found that:

• 69% plan to offer coverage on the exchanges, suggesting the rising significance of this new business opportunity
• 10 of 18 national health insurer executives said they won't offer exchange coverage in all the states where they now have business, and 50% expected to enter additional states after 2014
• 63% said technology integration and 61% said coordination of subsidies were major barriers to implementation
• 34% of insurers said understanding newly eligible customers was a major barrier to implementation, suggesting they may not thoroughly understand the challenges associated with attracting and maintaining this new group of buyers armed with the ability to choose—a major shift from the wholesale approach many insurers are used to
• 91% expect that premium costs, followed by total out-of-pocket costs, will be what consumers care about most
• Industry and consumer experts expect that personalized communication, tangible rewards, health management programs, and brand recognition will be factors in consumer choices

Robert Zirkelbach, spokesman for America's Health Insurance Plans, says health plans are entering the exchanges despites significant unknowns: mainly the prohibition against denying coverage to people with pre-existing conditions, and whether young and healthy people will sign up.

"Adverse selection is a huge issue," Zirkelbach told HealthLeaders Media. "The broad agreement is that for the new exchanges to work there needs to be broad participation among young healthy people to offset the cost of those who are older and have high healthcare costs. That is why our industry has been so focused on the issue of affordability. If it is not affordable and young healthy people decide not to purchase, these exchanges won't work."

Zirkelbach says the uncertainty will be mitigated somewhat by federal backstops such as a three-year reinsurance program that is designed to temporarily offset highest-cost enrollees and provide some stability for the plans in the start-up phase.

While there are bound to be glitches when the enrollment period begins, Zirkelbach says many of the plans that will participate in the exchanges have gained relevant experience with the launch of the Medicare Part B program.

"Obviously the exchanges are larger, but when the Medicare Part B program was implemented there were problems, and it was our members who stepped up and helped fix problems while at the same time helping seniors navigate the system to find the right kind of drug coverage," he says. "That is the role we are going to play in the open enrollment for new exchanges."

Also today, the Department of Health and Human Services released a report finding that consumers in most states will be able to choose from an average of 53 health plans in the exchanges, and that most will have a choice of at least two different insurers or more. Premiums nationwide will be around 16% lower than originally expected—with 95% of the eligible uninsured living in states with lower-than-expected premiums—even before taking into account financial assistance.

"We are excited to see that rates in the marketplace are even lower than originally projected," HHS Secretary Kathleen Sebelius said during a media call on Tuesday afternoon. "In the past, consumers were too often denied or priced out of quality health insurance options, but thanks to the Affordable Care Act, consumers will be able to choose from a number of new coverage options at a price that is affordable."

HHS says its report shows that people living in the 36 states where HHS will fully or partly run the health insurance Marketplace—which is HHS's term for the federally operated exchanges—will have an average of 53 qualified health plan choices. Plans in the Marketplace will be categorized as gold, silver, or bronze, depending on the share of costs covered. Young adults will also have the option of purchasing a "catastrophic" plan, increasing their number of choices to 57 on average. About 95% of consumers will have a choice of two or more health insurance issuers, often many more. About one in four of these insurance companies is offering health plans in the individual market for the first time in 2014.

The average premium nationally for the second-lowest cost silver plan will be $328 before tax credits, or 16% below projections based on Congressional Budget Office estimates. About 95% of uninsured people eligible for the Marketplace live in states where their average premiums are lower than projections. And states with the lowest premiums have more than twice the number of insurance companies offering plans than states with the highest premiums, HHS says.