Top 5 Health Plan Developments of 2014

Payers are a crucial cast member in the healthcare industry's reform drama. This year, health plans have played a center-stage role.

As the curtain falls on 2014, it is a good time to turn the spotlight on the top health plan developments of the year.

1. Exchange express gets rolling

The launch of the Patient Protection and Affordable Care Act-spawned public health insurance exchanges and growth of private exchanges were the marquee health plan developments of the year.

Despite a slew of glitches in the rollout of the public exchanges, including the nearly disastrous debut of the federal government's exchange website, HealthCare.gov, about 8 million individuals signed up for health insurance through the new exchanges.

When combined with Medicaid expansion efforts in half the states, the public exchanges have helped to significantly reduce the nation's uninsured rates, according to the Robert Wood Johnson Foundation. "The number of uninsured nonelderly adults fell by an estimated 10.6 million between September 2013 and September 2014 as the uninsurance rate fell from 17.7 percent to 12.4 percent—a drop of 30.1 percent," RWJF reported earlier this month.

Employer-sponsored insurance still dominates the market, with about 165 million covered lives, but public and private exchanges are having an impact that reaches beyond increasing access to healthcare services. Katherine Hempstead, team leader and senior program manager at RWJF, told me this week that exchanges are prompting revolutionary payer change: "As exchanges increase in popularity, it becomes evident that health insurance in its current form was not ideally designed to be sold directly to consumers. A lot of progress is being made to develop tools that better support consumer choice, but we might also anticipate a movement toward simpler plan design."

One of the surest signs that exchanges are moving into the health insurance express lane is HIX investment among carriers. While many insurers sat out the first year of the public exchanges, the number of carriers participating in 2015 has increased 25%, the Department of Health and Human Services reported in September.

Health plan and large employer investment in private exchanges is also on the rise.

In June, Accenture revised the consultancy's estimate of 2014 private exchange enrollment from 1 million lives to 3 million. And established health insurance organizations such as Blue Shield Blue Cross carriers are jumping on the private exchange bandwagon. In September, Philadelphia-based Independence Blue Cross launched a private exchange targeted at mid- and large-sized employers. In July, Blue Cross Blue Shield of Massachusetts introduced the Bay State's first online private exchange, My Blue Choices.

Depending on the outcome of a case before the Supreme Court, King v. Burwell, the public exchanges also could be a health plan hotspot next year, according to Paul Clark, a legal analyst at Wolters Kluwer Law & Business.

"In 2014, the issue of whether the PPACA allows subsidies to individuals if they purchase health insurance on a federal exchange percolated through several federal courts. The U.S. Supreme Court agreed to hear this case in November, with oral arguments likely in March and a decision issued at the end of the court's term in June or July. What's at stake is health insurance coverage for about 4 million people in the 36 states that don't operate their own insurance exchange," Clark told me this week.

2. Market forces unleashed

Insurance exchanges, price transparency laws, and the rising influence of consumers brought an unprecedented level of market pressure to bear on the health plan sector this year.

Suzanne Delbanco, executive director of the nonprofit advocacy group Catalyst for Payment Reform, says market forces are beginning to transform the entire healthcare industry. "We have more insight than ever before into the bum deal we often get in healthcare. Quality, safety, and prices vary tremendously and have little correlation to each other. The more we can reveal this, the more we'll understand about how to bring things in line, where competition is on value, not just a reflection of market power," she told me this week. "We are getting closer every day."

Efforts to introduce price transparency in healthcare took a leap forward this fall in Massachusetts, where providers and payers are now required to provide real-time healthcare service pricing information.

Hempstead told me that increased cost sharing is combining with price transparency regulation to boost consumers' influence in the healthcare industry: "Consumer interest in price transparency will be sure to increase as high deductibles and co-insurance figure more largely in plan design."

3. Innovation leaves few stones unturned

This year, upgrading information technology capabilities became an existential endeavor for insurance carriers nationwide, with necessity serving as the mother of invention.

Whether your organization is selling health insurance policies on exchanges, seeking to improve customer experience, or boosting cooperation with providers, healthcare IT looms large.

The exchanges have been an incubator for technological innovation, with healthcare IT capabilities serving as a key factor for competitiveness and customer experience. Health plans with antiquated administrative processes—particularly those dependent on paper-driven documentation—have been at a competitive disadvantage on the exchanges. From the customer experience perspective, healthcare IT capabilities are critically important for health plans to engage their new HIX beneficiaries.

Payment reform also drove innovation this year, Delbanco told me: "CPR's 2014 National Scorecard on Payment Reform showed that about 40% of commercial health plan payments are now value-oriented. This is dramatic progress—our 2013 Scorecard showed just 11%. Clearly, the era of payment reform is here and there is a flurry of experimentation. But next, we need to determine which of these new methods of paying for care actually improves quality and make care more affordable."

4. Narrow networks take hold

In a back-to-the-future development for health plans, narrow provider networks similar to those deployed by health maintenance organizations a generation ago emerged as a crucially important benefit design tool this year.

In contrast to the HMO backlash of the 1990s, the current narrow networks sequel appears to be receiving a warmer welcome from regulators and consumers.

From the regulatory perspective, health plans have relatively few implements left in their tool box to control costs. The PPACA banned one of the most effective cost-containment tools available to insurance carriers: denying eligibility for coverage due to pre-existing conditions. The fallout from eliminating pre-existing condition eligibility denials became evident this year, with health plans and large employers from coast to coast developing narrow networks.

From the consumer perspective, increased cost sharing in health insurance has made narrow networks more palatable. With consumers facing deductibles that can pull thousands of dollars out of their wallets annually, the cost savings associated with narrow networks is a powerful draw for potential enrollees. This market dynamic has been conspicuous in the public exchanges, where low- to moderate-income beneficiaries have shown a high degree of price sensitivity and health plans have responded by establishing narrow networks in most states.

5. Accountable care deals cut

Medicare has led the accountable care charge with the Medicare Shared Savings Program and the more ambitious Pioneer ACO initiative, but health plans have also invested heavily in accountable care pacts with providers this year.

Hartford, CT-based Aetna Inc. has been one of the most active health plans in the accountable care space, cutting ACO deals with dozens of provider organizations in several states. As of October, Aetna had established 51 accountable care collaborations nationwide.