Healthcare exchanges will bring in both opportunities and challenges for Health Insurance companies. Plan building, pricing, customer education and brand recognition will play a top role in the coming years. Here are some of the notable highlights in regards to the Health Exchanges.
Readiness dates are closer than they appear
Even though the regulations come in on January 2014, the enrollment will have to start in 2013. This means that the health plans will have to have their exchange participation ready by October 2013. The readiness for the exchange is a large topic in itself. Connecting with the exchanges will require the ability to accept and create 834 and 999 responses, factor subsidies when processing plans and premiums and the ability to process the financial data coming in from the exchange.
Risk adjustment and cost
The ruling requires insurers to accept everyone without discriminating against chronic illnesses or preexisting conditions. Due to this, the underwriters will underwrite everyone as a whole and hence distribute risk and cost.
Government as an employer
Traditionally if you have healthcare coverage through your employer, your employer pays part of your monthly premium and the rest comes out of your paycheck. Similar to the employer based health coverage, the health exchange pays part of your premium through subsidy and you pay the rest. So the subsidize care turns the government’s role into more like that of an employer.
Subsidy based coverage & the penalty
To ensure that both the sick and healthy people get on board, the penalty and the subsidy system came into being. Come 2014, everyone will be required to get health insurance and depending on where one stands on the poverty index scale, the IRS will either pay a credit towards the monthly premium or will charge a penalty if an individual fails to get insured. How much money the IRS pays to the health plan for an individual depends on how large of a subsidy that person is eligible for.
Subsidies and the silver plans
Even though the subsidies are based on the poverty level, the second lowest cost of the silver plan in your region plays a major role. For example: your subsidy in Ohio will be different than the one you will get in Pennsylvania under the same exact income and poverty level if the silver plan rates are different in the two states.
A point to note is that even though your subsidy is based on the silver plans, you are not obligated to buy a silver plan. You can always use that subsidy against other plans such as a bronze one.
Small employers with 50 or less employees will not be required to provide health insurance to their employees, but will be eligible to get tax credits should they do so through federal exchange. The subsidy itself will not be significant enough to make any dent in their insurance costs which is why we will see the small business workers applying for tax credits and enrolling as individual subscribers.
Technology will not eliminate the human intervention
Whether health plans participate in ACA through federal, state or private exchanges, the technology will not eliminate the need of customer service to assist people with their enrollments. There will be lots of enrollees who never had insurance before or never had to deal with having to make a decision to choose between what benefit is right for them or having a full understanding of what is the difference between gold, silver, bronze or a platinum plan.
All health plans should be ready to offer some kind of education to its enrollees about the choices and their impacts.
Subsidies, taxes and income raises
Getting educated on how the personal taxes will be impacted by the subsidies and income changes will be another critical task for the enrollees. For example: An individual making a $20k annually getting a subsidy of $200 per month will actually end up owing the IRS money if that individual received a pay raise within that year and failed to report it right away.
The moment there is a change in the pay level, the IRS will need to be notified so that the subsidies can be recalculated.
There will be a large influx of customers that will be making purchase decisions based on brand recognition, brand alliances, provider network, hospital network, premium pricing, subsidy levels and the quality of the benefits being offered.