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Coming to a store near you: health insurance exchanges

The exchanges will favor individuals and small groups of consumers

In addition to milk, bread and aspirin, consumers may soon be purchasing their health insurance at a nearby store, according to industry experts.

That's because the federal government is mandating that by 2014 states set up public health insurance exchanges (HIX) to create more industry competition and consumer choice.

And to get ahead of the public exchanges, private insurers are looking to set up their own private ones -- in the form of in-store kiosks and online sites where consumers and businesses can compare plans based on price and coverage.

The Congressional Budget Office estimates that 12 million consumers will buy health insurance in the exchange market in 2014, with that figure rising to nearly 28 million people by 2019.

Every state must build and operate an HIX with multiple points of contact, including paper-based systems, phone lines and and online channels where any qualified individual can shop for and buy health insurance. People will also be able to use the exchanges to submit questions to insurers and find out whether they're eligible for tax credits for private insurance programs or qualify for public programs, such as the Children's Health Insurance Program (CHIP).

HIXes are one of the cornerstones of the Affordable Care Act (ACA), which became law a year ago. Some public HIXes are already online, such as Massachusetts' Health Connector . Other states are behind the curve and facing tough deadlines to enact HIXes. Health Connector uses a model where the state evaluates and selects insurers in a competitive bidding process.

According to PricewaterhouseCoopers International, most insurers in a recent survey indicated they will opt for a variation of an open-market model, such as the one used in Utah. There, any insurer can sell policies on the exchange as long as it meets certain minimum benefit requirements.

Retail and wholesale stores have already seen the value in offering healthcare technology. For example, Walmart and Sam's Club already offer bundled electronic medical records (EMR) systems to physicians through their online electronic cart. Now, some retailers may turn to in-store kiosks to offer customers their own version of HIXes.

"Thirty-six million individuals will purchase the mandated health insurance from sources other than the public HIX, and with health insurance already approaching a trillion-dollar-a-year industry, retailers like Wal-Mart stand to quickly become insurance powerhouses," said Scott Donahue, vice president of TripleTree, an independent investment bank and strategic advisory.

Private HIXes will likely offer a choice of approved health plans from different carriers, easy-to-use comparison tools that allow consumers to research the best policy for their needs, and enrollment assistance, according to TripleTree.

There will also likely be a method to recoup operational costs of the HIX through surcharges to make them self-sustaining, he said.

Chris Hoffmann, chief marketing officer at Triple Tree, said the idea behind HIX kiosks would be to locate them close to in-store pharmacies and combine the insurance services with pharmacy benefits. "For example, buy your healthcare through Walmart and get a discount on prescription drugs," he said. "Or, if you buy healthy foods and other healthy products at Walmart, you might qualify for discounts on healthcare premiums."

Retail stores will also have an advantage over public exchanges since they can direct consumers toward plans based on personal consumer information and purchasing data gleaned from frequent shopper cards, Hoffmann said.

Payroll services companies such as Ceridian, ADP and Aon have already announced their private exchange initiatives, and TripleTree expects retailers to soon follow suit.

"They're not insurers, they're just providing a vehicle to represent insurance products," Hoffman said. "United, Aetna, Cigna, WellPoint, and Humana are all going to have insurance products on the public exchanges. Those same products will be offered on Walgreen's exchange, for example."

According to a survey published by PricewaterhouseCoopers International (PwC) this month, 52% of health insurance executives said their companies plan to compete in individual or small group health insurance exchanges.

PwC's surveyed 1,000 consumers and 153 health insurance executives about their expectations for HIXes. In addition, PwC interviewed 35 health industry leaders, including those representing state insurance exchanges, insurers, policy makers, consumer advocates and independent quality organizations.

According to PwC's survey, insurers on average expect it will take about 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 up to two and a half years before they're ready.

Part of the problem is that legacy IT systems in place for the past 20 to 30 years will need to be replaced or updated, according to Marie Carr, a principal from PwC. "The biggest and most difficult hurdle relates to data," she said. "You have data that's been in multiple, different systems, and now when you start talking about exchanges, or anything consumer facing, you need the data to come together and be presented in a user-friendly way."

Also being affected are the internal data systems that manage things such as policy administration and claims processing, Carr said. For example, the way information is shared between policy administration and claims processing apps will have to change because "consumers will want to know about what's going on with their insurance in real time," Carr said.

Needless to say, when the majority of HIXes come online, it could re-shape the insurance business. Although insurance providers have traditionally targeted corporate health plans in the past, the future exchanges will favor consumers or small groups.

"The individual and small group, which have largely been untapped -- even avoided -- by some insurers in the past, are really going to be a prime market now," Carr said.

A PwC analysis projects that in 2014, 97% of HIX users are expected to be individuals who currently do not have health insurance coverage, and that policies purchased through the exchanges could be worth nearly $60 billion in revenue premiums, Between 2014 and 2019, that figure could grow to nearly $200 billion.

Lucas Mearian covers storage, disaster recovery and business continuity, financial services infrastructure and health care IT for Computerworld. Follow Lucas on Twitter at @lucasmearian or subscribe to Lucas's RSS feed . His e-mail address is [email protected] .

Read more about health care in Computerworld's Health Care Topic Center.


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