Health Insurance Exchanges in the Spotlight and Under Scrutiny

The health insurance exchanges set to launch on Oct. 1 may not be as robust as the typical Web-based consumer application. But they will improve over time, one expert familiar with the online insurance marketplaces says, and as they do they will begin to change the way many Americans buy health insurance.

Oct. 1 marks the first day that Americans are eligible to use state and federal health insurance exchanges to "shop" for a health plan. The exchanges, mandated in the Affordable Care Act, aim to help the nation's uninsured and underinsured find health plans and, in the process, reduce the overall cost of care for everyone.

States faced challenges implementing health insurance exchanges, as that process required updating legacy systems that support Medicare and other health assistance programs while also building new customer-facing applications that let citizens determine eligibility for and then compare prices of various health plans. (Under the Affordable Care Act, subsidized healthcare plans are available to those who qualify.)

The weeks leading to the launch of the health insurance exchanges have been wrought with news both good — the so-called federal Obamacare data hub for determining individual eligibility will be ready on Oct. 1 — and bad — many national insurers aren't participating, The Wall Street Journal reports, while some participants fear pricing glitches may be in place when the insurance marketplaces go online.

Given the scope of developing the exchanges, and placing them in the context of the large technology projects that they are, the process has actually come a long way since the beginning, says John Kelly, a principal business advisor at Edifecs, which builds software for healthcare providers and payers, including a health insurance exchange integration system.

'Soft Launch' Expected for Many Health Insurance Exchanges

Most states are opting for an Oct. 1 "soft launch" of their health insurance exchanges, Kelly says, with functionality to be added as the month progresses. This makes sense, as in many cases project requirements have been slow to arrive, leaving certain functionality undone and untested. Only a handful of states, for example, finished a project plan 12 to 18 months in advance of the Oct. 1 launch date, he notes.

Success on Oct. 1, then, means having a well-staffed phone bank and a plethora of Web servers, Kelly says. (The The Wall Street Journal also reports that some states are prepared to accept offline applications on Oct. 1 if the online marketplaces aren't working as hoped.)

Kelly likens those signing up on the first day to any other early adopters of technology. "People who jump in on day one know it will be a little rocky" and will therefore tolerate delays, he says. Given that people have until mid-December to apply for health coverage that goes into effect Jan. 1, 2014, and given that some states haven't advertised the insurance marketplaces much, if at all, Kelly doesn't necessarily expect a "huge rush" of applicants on the first day.

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This gives states some breathing room as they enter the continuous quality improvement phase of health insurance exchange development, Kelly says. Part of that will mean ironing out manual processes throughout the open enrollment period, which runs through March, and moving most of the so-called "shopping" experience from the front end to the back end. Over time, states won't need as many Web servers or call-center employees, either, he adds.

Insurance Exchange Opens Market to Smaller, Newer Payers

Kelly says states should be prepared to update, maintain and evolve the insurance marketplaces over time, noting that healthcare reform focused less on the actual development process and more on creating a sort of retail market for healthcare. Projections suggest that as many as 40 million workers will purchase insurance from exchanges by 2018 as employers look to shed the costly burden of providing healthcare to employees.

"It's a complete about-face on the part of conventional wisdom," Kelly says, and it explains why the insurance exchange have gone from being a "small thing" to a much larger project for the states building them. (The majority of states are either using the federal insurance exchange in lieu of developing their own or building one as part of a state-federal partnership.)

As the online insurance marketplaces gain traction and continue to attract applicants, they could change the overall market for insurance, Kelly says. As noted, large, national payers are increasingly avoiding the insurance exchanges. That, though, opens the markets up to smaller, more regional insurers — some of them startups and others nonprofits — who could foment "positive disruption" if they're able to gain renewals through the state insurance exchanges and continue to charge lower rates than larger insurers.

"Next year, it'll stop being about health insurance exchange and actually be about healthcare," Kelly says.

Brian Eastwood is a senior editor for CIO.com. He primarily covers healthcare IT. You can reach him on Twitter @Brian_Eastwood or via email. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.

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