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impact of Affordable Care Act

 

Factoid
  • Over ten years of experience in healthcare BPO
  • 1200 employees, 150 years of management experience
  • 18 million healthcare transactions/year with financial accuracy of over 99% handling $83 billion
  • Happy client references with over 60% of the relationships over 5 years
  • HIPAA compliant - audited by clients
  • Stable and profitable organization
  • Offices in Cheyenne, WY; Chennai & Vellore – India

Impact on Payers

The healthcare payer landscape will witness a paradigm shift in the post- ACA environment. More people will be covered due to provisions relating to the individual mandate, Medicaid expansion, insurance exchanges, guaranteed issue and longer period of dependent coverage. ACA will bring in more benefits and coverage for the insured through minimum essential benefits, rate restrictions, preventive services coverage, exchange subsidies and ban of lifetime and annual limits.

While ACA will bring down costs for members and the government, some of its provisions such as Medicare advantage reform, MLR and Premium rate review will squeeze payer revenues. Further, any premium increase will result in challenges to the MLR provision as payers will be required to match the increased revenue with an increase in MLR pay out.The combination of the provisions will force payers to look for new avenues of staying competitive in this dynamic and highly competitive environment.

Challenges of ACA and their impact on payers

  • Reform Economics Open or Close
    • Consumerism – The industry is changing from a predominantly B2B to a hybrid model
    • Population health management – Convergence of health insurance and wellness
    • Cost and quality of care – Convergence of payers and providers
    • New players – Co-ops, ACO, CDHP and PDHP - development and scaling of new models

    Business Impact:

    • The industry is turning a corner and what is beyond the corner is not visible to anybody
    • Modularity , flexibility and nimbleness will be the new norm for healthcare organizations. The answer does not lie in what you know but in how fast you can respond to new knowledge
  • Growth ChallengesOpen or Close
    • Individual mandate: Of the 30 million newly-insured Americans under the ACA, 45% will gain coverage due to the individual mandate
    • Young and healthy in the workforce, previously insured through employers will seek to get coverage over the HIX
    • Exchange subsidies: Many individuals and small businesses buying exchange plans will receive subsidies or tax credits to help them afford coverage
    • Health insurance exchange: For the insurance industry, the new health insurance exchanges represent a major business opportunity through retailing
    • Medicaid expansion

    Business Impact:

    • Increased transactions across the board (Enrollment to fulfilment)
    • Increased competition, portability of coverage, higher marketing spend, higher retention spend, reduced revenue per member.. The risks of consumerism
    • Management focus on product development, risk management, exchange based sales and capability development. Consumer oriented delivery model
  • Increased Actuarial Risk Open or Close
    • Guaranteed issue, essential benefits, preventive services and rate restrictions: Insurance will have to give more for less
    • No lifetime/annual limits: Insurers are banned or restricted from imposing lifetime or annual coverage limits on essential benefits
    • Risk management: A shift from population based risk assessment to individual assessment. Dependence on risk score accuracy

    Business Impact:

    • Insurance companies financial performance can be affected by adverse selection and the death spiral
    • Risk Management: Increased risk, less predictability means improved risk prevention for high risk members and effective disease management, care intervention, patient analytics, life style and behaviour management
    • Insurance companies will have a larger member base that require complex back-end processes to manage their membership

  • Cost ContainmentOpen or Close
    • Cost of member acquisition through the HIX, one at a time, will prove to be expensive for insurances given the complexity of plans as opposed to other retail
    • Development of new narrow networks such as ACO, value based pricing and population management will have an impact on administrative costs and medical costs
    • MLR: Insurers must spend at least 80-85% of premiums on medical care or pay member rebates forcing down premiums

    Business Impact:

    • Increase in cost of providing health insurance coverage
    • Reduced net income per member
    • Day to day operations will take management focus away from core activities
    • Short-term increase in costs with unproven long term benefits
    • Aggressive cost cutting across the board
  • Impact on Revenues Open or Close
    • Rate restrictions & Premium rate review : Insurers can’t charge higher premiums based on gender or health status; other limitations also apply
    • MLR – Higher premiums would mean higher claims payout to avoid rebates. Fragile pricing situation
    • Medicare Advantage reform: Excessive payments to insurers via this program will be curbed, to lower government and consumer costs

    Business Impact:

    • Higher actuarial risk, higher costs with a ceiling on revenue and margins will put the financial viability of many payers at risk
    • Without exhausting all efforts at cost cutting, insurance revenue will be at further risk of paying MLR rebates or even staying viable

Do you have any of the following concerns?
You opted out of exchanges | Don't have plans to cover the new population | Worried about adverse selection | Paid rebates in 2013 | Invested from your cash reserves or external funding | Are not investing in narrow networks | Subsidized premiums on your individual and small group health plans through margins | Not started working on P4P with your providers | Lack management bandwidth.
If yes, please click here for a no obligation discussion on how Global can help you.

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