Providers should brace for rate compressions after the state exchanges launch, agreed three Forum speakers. Healthcare finance leaders should also strategize about possible market shake-ups incited by the exchanges-and prepare financial counselors for a slew of newly insured patients.

The Forum's first virtual networking event, on Feb. 23, 2012, gathered three experts to discuss the 2014 launch of state-based health insurance exchanges under the Affordable Care Act-and how healthcare finance leaders can prepare for these exchanges.

This is a sample article from HFMA's Forums. It sums up the key take-aways from a virtual networking event for Forum members that was held in February 2012.

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After a brief overview of the exchanges by HFMA's Jim Landman, director, thought leadership initiatives, the virtual event focused on lessons learned from the Massachusetts' exchange, which launched in 2006. Two of the speakers-Jon Kingsdale and Patrick Holland of Wakely Consulting Group, Inc.-were involved in the set up of the Massachusetts' exchange. The third speaker, Richard W. Silveria, senior vice president and CFO, Boston Medical Center, provided a healthcare finance leader's perspective on how the exchange has affected his hospital and the hospital's revenue cycle operations.

Below are the key take-aways from the event.

The exchanges will likely encourage price comparison-and price compression. A major component of the Massachusetts' exchange is the Health Connector website, which allows individuals and businesses to shop for insurance plans. In Massachusetts, both small group and individual plans are sold via the exchange. 

"The website is fairly simple to use for shopping," said Kingsdale. "You enter a few pieces of information, such as your geography, age, and the kind or tier of coverage you want, and up pops a half dozen packages. All of these plans offer pretty much the same coverage but differ quite a bit in price."

Take a 37-year-old single person. As of last year, this consumer could find health plans on Health Connector that varied from $242 to $381 a month, said Kingsdale. "If an exchange does nothing else, it should simplify comparison pricing and will probably make price king," he said.

As price transparency increases in Massachusetts, the state's providers are gearing up for price compression. "This [individual/small group purchasers] is a very price sensitive market segment," said Silveria. "Negotiated rates tend to be benchmarked to public payer rates."

So far, the commercial products being sold on the exchange have not yet had a large impact on employers dropping current health plans. However, the Massachusetts' government has made premium affordability a priority in recent years, which seems to be indirectly impacting rates, said Silveria.

"There is a lot of rate compression in Massachusetts. But it depends on who you are and how much market clout you have. Some of the more powerful providers that were able to get better rates are going back to the table and renegotiating deals before they are up in anticipation of dislocation in the market related to price and quality."

The exchanges may stir major market shake ups. "Massachusetts has seen a tremendous amount of activity in the private market between health plans and provider groups, which are inventing limited or tiered network products and moving into capitated and global arrangements," says Kingsdale.

The introduction of the Massachusetts' exchange as well as other state health reforms has spawned numerous consolidations, mergers, and insurance product launches in recent years. Here are a few examples:

  • Multi-state CeltiCare Health Plan was actively recruited by the state's exchange in 2009 as a new competitor and is one of few new health plans in Massachusetts in a couple of decades.
  • Partners Healthcare took over Neighborhood Health Plan, creating one of lowest-priced, select network plans that serves both Medicaid and commercial members.
  • Steward Health Care Systems partnered with Tufts Health Plan Health to offer a limited network product; the plan's premiums are about 15 percent to 30 percent below typical premiums for a Tufts full network plan, according to a FierceHealthPayer article.
  • Boston Medical Center created a not-for-profit managed care plan called BMC HealthNet Plan.

"There has really been a shake up," said Kingsdale, pointing out that Massachusetts had a competitive market to begin with. "If this is going to carry through to states with one-hospital towns, it is hard to know. But in geographies where there are competitive provider systems, we are seeing a whole new mindset. Providers who played the game beautifully-that is, by getting as much market share as possible and leveraging as much from health plans as possible-are all of a sudden thinking, 'Gosh, I'm going to lose patients if I don't cut my prices.'" This probably won't play out everywhere, but if the [market] situation is right, then you could see a 180-degree turn to much more efficient, tighter relationships with a limited number of providers and health plans participating."

Most states will probably go with the passive exchange model-at least at first. The state exchanges can be completely state-run, run initially as state/federal collaborations, or federal-run for states with no interest in running their own, explained Landman. States that choose to run their own exchanges may choose to be either "passive" purchasers (i.e., certifying any plan that meets minimum criteria) or "active" purchasers (i.e., selecting plans based on additional cost and quality criteria).

Massachusetts has selected an active model, which may partially explain some of the market shakeups as payers and providers try to differentiate themselves on cost and quality. Three other states have also chosen an active model: California, Connecticut, and Oregon.

At this point, however, these four states are the exception. "As part of HFMA's Value Project, we've had conversations with a number of payer representatives, and indications from them is that most states are just trying to get these exchanges started," said Landman.

Once states learn the ropes and get their exchanges operating, this may change, said Kingsdale. "Robust competitive markets could get more selective over time."

Hospitals may need to invest more in financial counseling. At Boston Medical Center, patient access and financial counseling were the revenue cycle areas most impacted by the launch of the Massachusetts' exchange. "We had to beef up our staffing and the education level of our financial counselors," said Silveria.

Patients are first screened via a state-provided Medicaid eligibility IT application, which also assesses patients' eligibility for other state-subsidized programs. If patients do not qualify for subsidized care, the financial counselors point them to the exchange's Health Connector website and educate them on how to select and enroll in a health plan.

"In some cases, patients will select or get defaulted into programs that your [hospital] might not have contracts with," said Silveria. "If they end up out of network, you have to work with the patients to move the care to in-network providers." Boston Medical Center is also working to increase the number of payers it contracts with, he added.

Information exchange and automated enrollment will be key. For the exchange to function properly, a lot of information has to flow among providers, carriers, and regulators, said Holland. "This is kind of common in Massachusetts, but the availability of data from carriers is not widely available in other states."

"The exchange needs to be really plugged into and interoperable with the qualified health plans' systems," added Kingsdale, "so there can be a smooth, instantaneous set of transactions that occur with enrollment in a health plan on the website. Some plans will be able to do it and others will not."

From the provider's perspective, it comes down to real-time automated enrollment-for both Medicaid/subsidized programs and for commercial plans sold on the exchange, said Landman.

The federal government is providing capital to states through 2014 to build all the IT systems for the exchanges, including Medicaid eligibility systems, said Holland. "A lot of states are getting after this, and the focus is on Medicaid eligibility systems and how that relates to the exchange. Should they build something completely new or leverage an existing system? It will be very important for the exchange to get it right the first time."

Increased churn will be a reality. Shifts in patient eligibility for Medicaid and other subsidized coverage is expected to increase substantially after three core elements of the Affordable Care Act-insurance exchanges, expanded Medicaid coverage, and insurance subsidies-go into effect in 2014.

Silveria confirms that his hospital did see more churn after his state's exchange launched. "There is a fair amount of churn, as patients go in and out of different classes, in terms of whether they lose their jobs or get jobs and no longer need subsidized care," he said. "You find yourself in a role of helping these people navigate through this, and working with payers to make the change more seamless."

Access related material from the Forum's virtual networking event:  

The on-demand recording of the Forum's virtual networking event, "Preparing for the Health Insurance Exchanges"

Slides from the event

A list of HIX questions for finance leaders