The health care reform feature that likely will affect the greatest number of Americans — and hospitals — is state-run health insurance exchanges. As mandated by the Patient Protection and Affordable Care Act, every state must establish and launch its own exchange by Jan. 1, 2014, or default to a national fallback program. (States that cannot meet the 2014 deadline still can set up their own exchanges later as long as they give the federal government a year's notice to transition from a federally administered exchange.)
Health insurance exchanges will have a profound effect on how individuals and employers select and buy their health care. There will be an online, one-stop shopping mall where consumers, employers, insurance brokers and still-to-be-defined "navigators" easily will view competing health plans — comparing benefits, costs, provider networks and other features. Exchanges also will enable individuals to access subsidies and employers to access tax credits.
This transparency and accessibility is designed to lead to more value-based purchasing as buyers are able to select the health plan, benefits structure and providers that best meet their needs and budget. It is also intended to provide greater access to affordable health insurance for more people, making it a key element in the federal government's attempt to reduce in number the more than 45 million Americans who are uninsured.
In its initial phase, state exchanges will be available to individuals and small businesses only; in 2017, states can expand their exchanges to large employers.
More Employers to Provide Insurance
The impact health insurance exchanges could have in your local market is significant, as employers who previously did not offer health insurance for their employees soon may choose to do so, thanks to the cost predictability and ease of administration with an exchange.
A survey by the nonprofit Pacific Community Ventures, released in March 2011, gives insight into how receptive employers might be to exchanges. The survey focused on California, a state where health insurance premiums have increased by 117.5 percent since 2002. It found that 55 percent of California's small business owners would participate in an exchange once they are provided information on how they work. Presently, workers at these businesses are almost three times as likely to be uninsured as those who work for large businesses.
Extrapolating this finding nationally, it is easy to see its significance: There are 47 million Americans working at 5.9 million small businesses. Health insurance exchanges provide many of these small groups with the means to offer health insurance to their employees.
State-run exchanges also will empower individuals and families without employer-sponsored coverage to purchase their own affordable health insurance. These consumers will be comparing not only plans, but the providers that best meet their needs.
Building a Marketing Strategy
Hospital leaders should be planning now how they will market to and nurture relationships with these employer groups and their employees. By working through local business coalitions and organizations that specialize in employer-directed hospital revenue growth strategies, or by working directly with small businesses, hospitals can develop strategies to gain access to new patients and build more profitable market share.
Hospital leaders also need to focus on the individuals who will join the exchanges, as many are potential new patients. That makes this the perfect time to increase community outreach and marketing efforts in ways that distinguish a hospital as the health care destination of choice in the community.
Any way you slice it, more paying patients are good for a hospital's bottom line. Putting a strategy in place that will attract more insured consumers is the best way to offset other budgetary shortfalls, such as reductions in Medicaid reimbursement.
The Promising Future of Exchanges
We know from experience that if properly marketed and managed, health insurance exchanges can work. Private exchanges already exist in select markets, and the best of them are growing steadily. The nation's most mature privately run exchange, CaliforniaChoice, has been operating for 15 years and serves more than 150,000 members and more than 10,000 small employers with2 to 50 employees. Two state exchanges exist in Massachusetts, serving the individual and family plan as well as small-group markets, with 220,000 members. And in Utah, a state exchange serves the small-group market with 2,200 members. For hospitals in these markets, there are thousands of newly insured patients.
The Congressional Budget Office estimates that 8 million people will use health insurance exchanges in 2014, and participation will triple by 2018. Hospital leaders would be wise to know all they can about this new apparatus and should begin working now to have a strategy in place that maximizes its potential.
Ron Goldstein, C.L.U., is the president and chief executive officer of CHOICE Administrators in Orange, Calif., a developer and administrator of health insurance exchanges.
