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Health Insurance Exchanges

Next steps for HIX

By Brian Patt and Triveni Harsh Mohta

insurance exchanges (HIX) represent a significant step facilitating the change. With about 45 million uninsured and 50 million underinsured, lack of choice, transparency and rising costs were reasons for the Patient Protection & Accountable Care Act (PPACA or ACA) to mandate the establishment of state exchanges. The ACA mandates that every individual be insured by 2014, thus driving insur- ance exchanges.


The recent Supreme Court ruling addressed several critical points. It is too early to know the complete reaction in the private and public insurance markets to the rulings; however, the following are likely: • CMS schedule for deployment of public exchanges will move forward for states.

• Most states are unlikely to be able to deploy and reach full operational readiness within CMS timelines – many states would either subscribe to the federal exchange or look to a private exchange or co-op.

• Aspects of ACA still face uncertainty from upcoming elections and legislative actions, but exchanges are here to stay. The U.S. healthcare model, pre-ACA, wasn’t sustainable. While some ACA provisions may be con- sidered overreaching or unfunded, exchanges provide the individual market-facing mechanism that enables transparency and cost take-out by backing individual responsibility for cost management. ACA presents health plans with a “participate vs. build” option with respect to exchanges: participate in the public exchange within state guidelines or build a private exchange that is closed (single payer), brokered (multiple payers through broker associations) or open (multiple competi- tive payers). We focus here on private exchanges and how commercial payers should prepare for these now, because

12 November 2012

s health insurance undergoes a major transi- tion from an employer-driven model (group market) to a direct model involving employers and consumers (individual market), health

the mandate increases competition among health plans but also offers them a unique op-

Brian Patt

Triveni Harsh Mohta

Private exchanges are likely to proliferate, but health plans need to differentiate from the private insurance market and public exchanges through clear strategies for innovative deployment.

Brian Patt is head of exchanges and global alliance director, Infosys Public Services. Triveni Harsh Mohta is senior project manager of healthcare solutions, Infosys Public Services. For more on Infosys:

portunity to set up private exchanges in parallel to ex- pand member base, offer a collaborative environment and greater flexibility to employers, and simplify the process of purchasing insurance. Co-existence of private exchanges alongside public exchanges will create a competitive, healthy and effective health insurance system by achieving key goals of healthcare reform: • Extend coverage to more consumers. • Promote a stable insurance market. • Maintain the right equilibrium of insurance pools be- tween insurance markets.

• Allow consumers access to the most cost-effective op- tions that meet their individual needs.

• Provide payers with significant assistance in regulatory compliance, such as reaching medical loss ratio (MLR) targets. Four key factors are driving health plans to establish private exchanges: • Market: Competition among health plans with the man- date of exchange setup. Attraction of covering millions of uninsured individuals and targeting mid-size and large employers that do not benefit from public exchanges.

• Costs: As rising costs pose a hurdle for insuring every employee and individual, there is a need for affordable insurance for plan sponsors as well as enrollees and to move toward a defined contribution model from a defined benefit model. Exchanges offer transparency and choice to promote this. • Consumerism: Consumer focus will be inherent in all platforms. Support via call center, chat, mobile, social


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