Government // Leadership
News
7/19/2011
11:05 AM
Connect Directly
RSS
E-Mail
50%
50%

Health Insurers Embrace Exchanges, Need Analytics

A majority of insurers plan to join health insurance exchanges, says a PwC survey, but they're going to need to invest in analytics to better manage risk.

Healthcare IT Vendor Directory
Slideshow: Healthcare IT Vendor Directory
(click image for larger view and for slideshow)
By 2014, all states are expected to open health insurance exchanges as prescribed by the healthcare reform bill. And, according to research from PricewaterhouseCoopers' Health Research Institute, half of the health insurance companies in the country will welcome the opportunity.

PwC surveyed 153 insurance executives to learn how prepared they were for the coming exchanges. In addition to the 52% that were planning to participate, 31% were undecided while 17% flat-out said they would not participate in the exchanges. Expectations for profit are tempered, however; less than a third of executives polled expect net profit increases in either individual, small group, or Medicaid businesses from the exchanges.

But that doesn't mean it will be impossible to have a successful business model that incorporates the exchanges, according to Jeffrey Gitlin, principal for PwC. While the size of the exchange market will be about $60 billion in 2014, by 2019 that's expected to balloon to $200 billion. The insurers who are able to take the biggest pieces of that pie will be those who position themselves now to take advantage of the new distribution model.

"We're making a transition from that B-to-B type of relationship for purchasing healthcare to a consumer model," Gitlin said. "Payers are going to think differently about how they handle their business."

Not only will more people buy health insurance on an individual basis through the exchanges, but the policies those individuals will buy will have to meet certain federal mandates for coverage. For example, people cannot be denied for pre-existing conditions, and there are limits on how wide premium spreads can be.

This should spur some technology investment, as health insurers will need to build sophisticated data and risk management capabilities to better understand their customers and create appealing products both for them and the company, Gitlin said.

"Data analytics is going to be critical," he said. "Payers are going to be moving from this model of risk selection to risk management. Being able to mine customer data, getting as close to real time as possible, will be important."

Insurers, however, are still waiting to see how states choose to build their exchanges. There is a continuum between an open marketplace model, where any plans that meet the state and federal criteria can participate, and active purchaser, in which the exchange selects which plans can compete for members and establishes a bidding process. Carriers tend to prefer the open model--44% of those surveyed by PwC said so, with only 10% preferring an active purchaser role for exchanges. However, most (46%) are hopeful states will take a hybrid approach.

"States are going to have a tremendous amount of flexibility in terms of how they structure their programs," Gitlin said. "The most important decision up front is whether you're going to be an open access exchange or a purchaser. That decision sets the tone for all the next steps you're going to put in place.

"There's a host of cascading decisions that drive off those," Gitlin added. "How do you measure [plan] quality, and will the states start to come up with a standard way to measure quality? Now that it's a one-to-one relationship, you can ask people what they think."

Read the rest of this article on Insurance & Technology.

See the latest IT solutions at Interop New York. Learn to leverage business technology innovations--including cloud, virtualization, security, mobility, and data center advances--that cut costs, increase productivity, and drive business value. Save 25% on Flex and Conference Passes or get a Free Expo Pass with code CPFHNY25. It happens in New York City, Oct. 3-7, 2011. Register now.

Comment  | 
Print  | 
More Insights
2014 US Salary Survey: 10 Stats
2014 US Salary Survey: 10 Stats
InformationWeek surveyed 11,662 IT pros across 30 industries about their pay, benefits, job satisfaction, outsourcing, and more. Some of the results will surprise you.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest - July 22, 2014
Sophisticated attacks demand real-time risk management and continuous monitoring. Here's how federal agencies are meeting that challenge.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.