Interview: Why health insurance exchanges make sense

Dina Overland

America's health insurance landscape will look different two years from now with the mandated introduction of state-sponsored health insurance exchanges. To gain a deeper perspective of exchanges and how they will affect payers in the future, FierceHealthPayer turned to Ron Goldstein, president and chief executive officer of CHOICE Administrators, a developer and administrator of health insurance exchanges.

Ron Goldstein

FierceHealthPayer: What are the benefits of health insurance exchanges?
Ron Goldstein: Exchanges create an online, one-stop shopping mall where consumers, employers, brokers and others can easily view competing health plans side-by-side, comparing benefits, costs, provider networks and other features. This transparency and accessibility is designed to lead to more value-based purchasing as consumers are able to select the health plan, benefits structure and healthcare providers that best meet their needs and budget.

FHP: Based on your experience in running private exchanges, how will federal and state-run exchanges be set up?
RG: Some public exchanges (Massachusetts and Utah) are already up and running, while the country's most successful private exchange for small groups (CaliforniaChoice in California) has been growing market share for 15 years, currently providing coverage for 10,000 employers and 150,000 individuals. What is new is the mandate that will make exchanges more prevalent nationwide. But whether public or private, health insurance exchanges make sense and should be embraced by payers, hospitals, employers and consumers alike.

FHP: What opportunities do exchanges provide for payers?
RG: For payers, the creation of health insurance exchanges opens up new opportunities for increased membership and greater revenue potential in the individual and small group market (where exchanges will have their initial impact). Across the nation, 47 million Americans work at 5.9 million small businesses. These workers are almost three times as likely to be uninsured as those who work for large businesses. With the introduction of health insurance exchanges, employers who have not provided health insurance in the past may find themselves with the means to offer this benefit in a way that is fiscally sound. At the same time, individuals may find health insurance more affordable, thanks to the varied benefit levels (and price points) coupled with government subsidies. In short, exchanges provide another way to capture new business or to retain existing customers who may find exchanges an attractive alternative.

Health insurance exchanges will have a profound effect on how individuals and employers select and buy their healthcare. Experience in California, Massachusetts and Utah has shown that if properly marketed and managed, health insurance exchanges can provide considerable value to all participants in the healthcare process. Payers need to be prepared to play in this arena and to maximize the many benefits that health insurance exchanges bring.

FHP: What steps should payers take to prepare for operating within exchanges?
RG: To capitalize on this new market opportunity, here are five things payers can begin to do right now:
1. View health insurance exchanges as a natural complement to their current sales to employers. That's because, for many employers, exchanges provide a way to offer employee health insurance in a sensible and affordable way that not only provides choice to employees but provides the employers themselves ease of administration and a single point of contact.

2. Understand, and be prepared to speak intelligently about, the premium-assistance subsidies and tax credits that the federal government will be making available to individuals and small employers, respectively. The government is doing this in an attempt the make participation in an exchange as appealing as possible, which is one of the reasons why the Congressional Budget Office estimates that 8 million people will buy insurance through exchanges in 2014 with participation expected to triple by 2018.

3. Become fully informed on the Essential Health Benefits that all plans must offer if they are to participate in their state's health insurance exchange. Recently, the Department of Health & Human Services deferred to the individual states the authority to determine which benefits in at least 10 general categories of preventive, diagnostic and therapeutic services payers must cover. This decision recognizes the importance for newly mandated state health insurance exchanges to represent the unique demographic, business and cultural characteristics of each state.

4. Consider participation in a health insurance exchange as leverage in your discussions with provider partners. For hospitals, exchanges have the potential of attracting newly insured patients and that lessens the number of uninsured coming to the emergency department or being admitted to the hospital itself. Some of these "newly insured" will be new patients while others will be those who previously were in need of "charity care" and added to a hospital's proportion of bad debt. Either way, more paying patients are good for a hospital's bottom line and one of the best ways they can offset other budget shortfalls, such as reductions in Medicaid reimbursement.

5. Begin to educate all of your employees, particularly your member services department, on health insurance exchanges so that they can act as fully-informed ambassadors of your company when speaking with colleagues, family and friends.

This interview has been edited and condensed for clarity.