During an informative webinar, Benefitfocus private exchange experts and a Forrester Analyst discussed the value of private exchange technology for employers and insurance carriers and the changing dynamics of the benefits landscape that requires a solution to provide benefits for an employer’s whole workforce. Enterprise Product Manager, Tom Dugan answers a few audience questions.
As the dust continues to settle from the first year of public exchanges, how are health plans changing their approach to product management and development across both public and private marketplaces?
Health plans are faced with a disruption of their distribution channel unlike anything they’ve ever seen. ACA regulations that limit available rating variables, public marketplaces and a sprawl that is occurring on the private exchange side are all forcing health plans to evolve how they develop and position products. There is a great deal of discussion and evaluation of plans regarding the need to shift to a true omni-channel strategy with a cohesive product set that pairs the right product with the right marketplace while also ensuring appropriate risk exposure.
Product development can no longer be an exercise solely in risk evaluation. To a consumer, ‘product’ is much broader than just a set of cost-shares; it includes the claims experience, ability to access care, support with health questions, navigation of the healthcare system, brand perception and price.
While product strategy evolution conversations are occurring within health plans, it’s also important to recognize that this is a marathon and not a sprint. The market is not expected to stabilize in the first few years. This is why the 3Rs were included in the ACA. As the 3R programs come to an end and utilization becomes clearer we may begin to see some innovative approaches to strategic product management implemented on a larger scale. To do that will take a different approach and the carriers who are positioning themselves now will be in the best place to capitalize when clarity begins to emerge.
Consumerism has been a growing focus for health plans in the last few years. As the ACA and larger market trends accelerate this shift how are you seeing health plans respond with their technology and private exchange strategies?
The consumerism trend has been growing for a little over a decade, however ACA regulations and market dynamics emerging as a result of the ACA have begun to accelerate the pace of change. Health plans are recognizing that emerging distribution channels will require them to compete at the consumer level, and consumers have some fairly high expectations about engagement. However, only 21% of companies are actually meeting expectations of tailored experiences, highlighting a very large gap.
The existing gap and willingness of consumers to change highlights a large opportunity for those who can capitalize with the right engagement tactics. There are two key principles that will become critical to success for private exchange engagement: system level design and choice architecture.
System level design can also be stated as taking hold of the total customer experience through the full benefits life cycle. Engagement is much more than shopping during open enrollment. There is a fundamental administrative element paired with data analysis that is critical to creating long-term viability through richer customer engagement.
Choice architecture is a recognition that every decision we make as humans is influenced by the environment and context we face when making that decision. For private exchanges initially this will be the point of enrollment. There is evidence that consumers need some help to make the right benefits decisions. If consumers simply buy the cheapest plan and then get sick, they will not look back at their enrollment and decide they chose the wrong plan. They are much more likely to believe their health plan did not support them when they needed it most, a perception that will be very difficult to overcome during the next enrollment period. There are a number of tools that exchanges can use to create an optimal choice architecture, but each requires access to a great deal of data to ensure a full picture of a customer.
You mentioned system level design. Could you expand on this term and its relevance in healthcare and private exchange strategies?
System level design takes a much broader view of customer engagement than traditional tactics. For example, Apple’s iPhone is hugely powerful not because of the hardware but because of iOS, the App Store, the SDK, iTunes and iCloud that allow consumers access to a much broader set of data, activity and media than the hardware by itself could allow. Plus, you can get access from other devices like your Macbook or iPad. The iPhone is an access point, but the system is much bigger, and that larger system was designed with intent. Apple understands the broader system of customer interaction and offers a focal point that captures the attention, but it’s the administrative elements of the broader system that truly differentiate it in the market.
In healthcare the shift down to the consumer level is creating the need to take this view. A new level of the customer is required. Every touch point with a member matters and can be learned from and the data gained can be used in an entirely different way.
You touched on narrow networks as part of the plan development strategy. Talk a little more about the activity there and how it’s impacting the employer and employee/consumer.
Many plans are establishing network structures that have access to fewer physicians and hospitals as a mechanism to offer a different price point. In the public exchanges, nearly 70% of plans have a narrow or ultra-narrow structure. This strategy is one to be undertaken carefully. There have already been some negative responses from consumers who chose a narrow network plan from a traditional market leader known for its broad network structures. But there is certainly opportunity with a narrow network approach. One interesting difference is how people make plan selections. Those who have previously been insured typically evaluate plans based on whether they can keep their doctor. However, for those who have never had insurance, they’ve not had a regular doctor and are much more willing to take the tradeoff of a narrow network for reduced price then find a provider that is in network. The key to capitalization on the narrow network element of product strategy will be education and transparency through a well-defined choice architecture so consumers are knowingly navigating trade-offs when choosing a plan with a narrow network.
How has the carrier relationship with the broker evolved since the ACA was passed? How do carriers view the technology and relationships in that sales and support channel changing over the next 3 – 5 years?
The carrier broker dynamic has been very fluid since the passing of the ACA. Early on there was a lot of talk about whether the broker would go the way of travel agents. However, health insurance is more complicated, and a larger decision than booking a vacation. While there are certainly dynamics changing the shape of the broker community, it’s not really an apples to apples comparison. A better comparison is property insurance where there is still a significant volume of activity that is done through a broker.
What has been interesting is the evolution of the relationship between health plans and regional brokers. As large consulting firms bring offerings down market, it is threatening local brokers causing them to act to ensure they are still adding value to their employer clients. Many are seeking private exchange solutions or trying to establish their own. This has placed pressure on some health plans to determine how to navigate the private exchange sprawl. In response some plans are proactively working directly with regional brokers to provide them with the private exchange solution they need to compete.
How health plans and brokers continue to navigate through change will certainly be interesting to monitor.
For the full discussion, listen to the webinar here.