I’ve spent the whole of this week in San Francisco, catching up with old friends, making new ones, and generally enjoying the warm Bay Area weather. I spent the first couple of days working, hosting a meeting of health plans chief marketing officers, product development managers and other business development leaders. We’ve done this type of meeting with these folks for the last three years, but this year had a much different feel to the conversation and general energy level. Whereas in prior years the presentations and roundtables focused on competitive marketplace innovations (narrow network offerings, partnerships with communities or employers, value-based benefits, etc), this year was a lot more centered on the donkey in the room: health care reform.
For the non-health care folks, here is the situation in a nutshell: The biggest impact of the reform bill will be expansion of insurance coverage through individual and employer mandates. On the surface, this seems like a coup for insurers, who will collect new premiums from millions of individuals. After all, the underlying logic behind making everyone pay into a risk pool is that healthy folks who don’t use health care as often will help to subsidize the care for the really sick folks. This offsetting is theoretically supposed to help lower costs.
The problem here is moving from theory into practice: How will an additional 17 million people sign up for care, and what are the associated costs and challenges that will ultimately determine if the bill is successful in providing affordable coverage for millions – or whether it fails by over-regulating private businesses and underestimating consumer engagement, technological capacity and administrative wherewithal? A few specific challenge areas:
Health Insurance Exchanges: People will have to buy insurance through state-based web portals called insurance exchanges. More than just websites, these exchanges will be full-blown organizations that manage a morass of population information (health status, utilization, income and tax, family status), provide real-time consumer services (online enrollment, comparative searching by quality and price point, marketing and information) while managing a series of ongoing relationships with health insurers whose benefit plans they are listing, employers buying coverage for their workers, as well as state and federal government officials, brokers, etc. The IT systems to coordinate all of this are no joke either. Another minor detail: These have to be fully functional by 2014.
Churn: We will start to see this term pop up more and more. It refers to movement in the market – when an individual switches from one coverage policy into another. To understand why it’s a problem take this example: A pregnant woman who is insured through work quits her job after the birth of her baby. There could be two or three different coverage statuses this woman fits into in a few months’ time: Employer Sponsored Insurance (ESI), individual mandated coverage if she earns enough money, or state-subsidized coverage if she doesn’t. Unfortunately, these few months happen to be among the most complicated, health-care wise, in her life. Is this the time to be getting notices that pre-natal check-ups, post-partum care, hospitalizations and the like are not covered?
Addressing this issue on the back end is a problem because it creates administrative headaches related to information management, while handicapping the extent to which a single organization (a health plan or an integrated system) can provide high quality health care (what the patient needs, when the patient needs it). This is an old problem in health insurance but the way the mandates are structured make it even worse. Ironically, improving quality was supposed to be a major focus of the bill.
Unspecified Regulations: What is throwing yet another monkey wrench into health plans efforts to understand regulations, develop strategic plans and begin all of the above hard work is the fact that many essential provisions are simply not defined yet. To paraphrase a summary shared with us by a consulting firm, the health care bill is 2400 pages with over 400 separate (and mostly undefined) rules, enforced by 183 brand new agencies and departments. At this point insurance companies have resigned that the regulation IS future of the industry – but this is turning into one of those games where one kid seems to be making up the rules as he goes.
Health care reform will never be this fun.