Preparing for Health Insurance Exchanges
Mapping a path through uncertaintyDOWNLOAD
A multi-state health plan hired Deloitte to evaluate its operational and technical readiness to compete in 2014 on Health Insurance Exchanges (HIX), as legislated by the Affordable Care Act (ACA). A Deloitte and client project team identified the organization’s existing gaps and delineated a set of initiatives to help the organization achieve exchange readiness for open enrollment on October 1, 2013.
To accelerate the assessment phase, the project team used the Deloitte HIX Readiness Assessment Tool, which has translated ACA mandates for state exchanges and subsequent proposed regulations into functional requirements that each health plan must meet. The tool helped to identify capability and resource gaps, and associated costing projections for achieving HIX readiness in this accelerated, six-week engagement.
Based on Deloitte’s work, this client was able to mobilize leadership teams to begin executing against the roadmap, as well as support the business case to secure necessary investment funding. At the end of the engagement, Deloitte presented our client with an executable roadmap comprised of critical.
One of the ACA’s central features, HIX, are expected to be operational in all states for an open enrollment season starting October 1, 2013. The launch of HIX is predicted to have an impact two to three times greater than that of the initial years of Medicare Advantage; HIX may likely transform the health insurance marketplace, particularly the individual and small group segments. Health plans are grappling with how to redefine their business models to compete both inside and outside the exchange market.
The advent of HIX introduces considerable complexity into health plan operations across the value chain and is further complicated by individual state-level requirements. For example, the state exchanges will have significant oversight and ownership of identified individual and smallgroup processes historically owned by health plans.
In addition, state and federal regulators are expected to require greater transparency, which is likely to result in increased complexity and investments to meet compliance and disclosure/reporting mandates. Also, traditional reliance on captive employer relationships will no longer suffice; health plans will need to develop more advanced retail capabilities to compete. Lastly, plans will need to develop innovative strategies to control risk and adverse selection.
In addition to these direct challenges, health plans should be prepared for an increase in the number of members with complex and often chronic physical and behavioral conditions. These individuals will be largely insured through the exchanges and will require plans to develop more sophisticated population care management capabilities.
Further compounding these challenges is the fact that timelines are tight and the regulation’s details are not yet clear. Health plans should assume that for exchanges to “go-live” in 2014, open enrollment must begin in October 2013, and exchange partner testing for some states could begin as early as the first quarter of 2013, even though additional federal and state regulations and state exchange design features may not be finalized until late 2012.
Deloitte often helps our clients with three aspects of readiness for exchanges:
However, in this case, our client had already completed the required Strategic and Market Readiness components and engaged us to focus on Operational & Technical Readiness, incorporating its progress to date.
Deloitte deployed a senior team with deep industry, technology, and health reform knowledge and experience. To complement this dedicated team, we leveraged subject matter specialists in actuarial modeling, business transformation, and health plan go-to-market functions to provide specific insights throughout the engagement. We further augmented the team with professionals from Deloitte’s state and federal practices with experience in current government programs, as numerous HIX regulations are modeled after aspects of existing Medicare and Medicaid programs.
The project consisted of four deliverables:
We kicked-off the project with an education session to introduce stakeholders to exchange regulatory and functional requirements and outline high-level activities that health plans are likely to undertake to be “exchange-ready.” During the session, we also educated the organization on how exchanges might impact current business processes, potential market opportunities, and customer engagement, and reviewed associated next steps.
The team then conducted a readiness assessment to identify gaps for 2014 exchange readiness. The team interviewed specific business and technology leaders in the following functional areas in the health plan’s individual and small group lines of business:
The impact assessment enabled us to see which areas of the value chain had the largest gaps between the current and the “exchange-ready” states. In collaboration with the client, we categorized anticipated impacts to value chain components as either operational or technology-related. We then calculated an impact score using a cost scale for each functional area to assess operational and technical readiness separately. Finally, we quantified resource requirements to achieve readiness and identified areas where future run rate staffing was likely to change.
The project concluded with development of a detailed implementation roadmap. The team worked with the client to review and size functional impacts, identify initiatives, and develop a draft roadmap based on a detailed review of HIX requirements across the client’s value chain. We accounted for critical activities, timelines, and costs based upon anticipated regulatory timelines and dependencies inherent to the client’s operations.
Additionally, we identified future-state operating models and organizational considerations. Finally, we reviewed these recommendations in a workshop with client leadership across the impacted business segments. One of our implementation recommendations was to develop individual internal ownership based upon core capability requirements across the organization and each target market. For example, one individual was assigned to focus on required billing and enrollment capabilities and was, therefore, responsible for regulatory developments pertaining to billing on both the Individual and small-group exchanges. This ownership approach can reduce redundancies in different segments and promote development of deep internal knowledge in a fast-moving environment.
A second recommendation was to leverage internal capabilities within the company’s government business lines. Participating in exchanges is expected to have many similarities with current requirements for Medicare and Medicaid lines of business. The implementation roadmap helped our client identify internal expertise and prescribed methodologies to deploy know-how across business lines.
The assessment identified several significant risks that required prompt mitigation to assist the client in achieving HIX readiness and its long-term strategic objectives. During this project, the team developed 14 initiatives to help the client address operational and technology-related HIX requirements; each initiative addressed a series of gaps in current capabilities, contained recommendations on timing required to close identified gaps, and provided estimates for associated high-level costs.
Because Deloitte gained solid understanding not only of the client’s operations, but also its strategic goals through the readiness assessment, we were able to recommend a structured and tailored approach to obtain the required capabilities. The client took prompt action upon completion of the project to improve its tactical readiness efforts to prepare for the October 1, 2013 open enrollment season.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.