State Health & Wealth Benefits Administration: Simple Coordination…Millions in Savings

As government’s role in the provisioning of health care and welfare benefits continues to increase, the number of participants in state administered benefit programs and the burden of supporting those programs is also growing.   Anti-poverty spending as shown in the graph below, has reached 4% of GDP, of which healthcare entitlement programs represent more than 1.5% (and is speculated to be the largest risk of runaway spending). Given the demographics of the low-income population served by these programs, a high level of duplicative efforts are taking place on a state administrative level in order to manage and administer these benefits.

Below are a few more details –

What types of state funded programs potentially have significant overlap in addressable market?

• Medicaid
• Medicaid Transportation Payments
• Low Income Energy Assistance Program Payments
• SNAP (Supplemental Nutrition Assistance Program)
• WIC (Women, Infant & Children Program)
• TANF (Temporary Assistance for Needy Families)
• Child Care Time and Attendance
• SCHIP – State Children’s Health Insurance Program

The tip of the iceberg

In most states, individuals qualifying for food stamps, welfare, Medicaid, etc., must separately apply to different state agencies for these programs.  An individual enrolling in multiple programs is just the beginning, as separate departmental processes, eligibility compliance checks and inevitable movement in and out of various programs compound the issue.

Finding an efficient path

As with any inefficient system, waste evokes opportunity. The ability to bundle benefits and combine or transfer the management of those benefits across state agencies will be extremely important in the lowering of administration costs and streamlining the benefits distribution across the states. As states realize the efficiencies gained from this exercise, they will likely invest in solutions that help manage multiple benefit plans and technology that is able to track eligibility and even auto-enroll the appropriate individuals to the appropriate programs. Unfortunately, this is much easier said than done.

Clearing hurdles

The main obstacle in this situation is the lack of administrative and payment capabilities to enable the states to provide the benefits to the eligible consumer (enroll and administer the programs), track usage/transactions, and appropriately distribute the funds. While this will not happen right away, once the public health insurance exchanges are established, it would make a lot of sense to use that exchange infrastructure to allow people to enroll in not only Medicaid, but other government benefits.

This area of compliance in health care is a focus for our team and is rife with opportunities – let us know what you think.

Have a great week.

Emma Daugherty

Emma Daugherty is a Senior Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

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Insurance Exchange Enablement Heats Up as the Clock Ticks Down

Today’s news that Wellpoint and two other Blues (HCSC and BCSB MI) acquired a 78% stake in Health Insurance Exchange vendor Bloom Health is not the first – and won’t be the last – move in what is sure to be a consolidating market.

The Accountable Care Act (ACA or Obamacare) requires each state to establish an online shopping portal, known as a Health Insurance Exchange (HIX) for individuals and small groups to purchase health insurance no later than January 1 2014. We have written and blogged extensively on the topic. In our estimates, HHS and the states will need to spend in the neighborhood of $4-$6 billion dollars on technologies order to create these exchanges. In addition to the ACA HIX, there is perhaps a bigger market opportunity in the private sector to create non-government sponsored insurance exchanges, creating even a bigger market opportunity. Bloom Health is one of many vendors specializing in the private exchange market.

Wellpoint, the Blues, and in fact all health insurance companies are making the individual and small group markets a top priority for new business and growth initiatives. These markets will explode in growth due to the Obamacare legislation and the carriers recognize the opportunity and the challenge with tapping this market.

The insurance exchanges, both public and private, will be the primary vehicles to reach into the individual and small group markets. Wellpoint’s move on Bloom, and Optum’s acquisition of Connextions, is recognition of this fact.

In addition to the Connextions and Bloom transactions, the vendor community is also coming together to help create insurance exchanges. Accenture’s acquisition of Duck Creek, announced partnerships from Oracle, Microsoft, CSC and others such as Maximus’ partnership with Connecture, portend of additional transactions to come in the space.

Insurance companies need help in positioning into the individual market, and also need technology to help them more effectively participate in the public and private exchanges.  Several vendors are positioning into the market but only a few have broad, proven experience with exchanges.

Companies like eHealth and Extend Health, which have consumer engagement and online shopping capabilities from market adjacencies (a leading online brokerage for eHealth and a robust Medicare exchange from Extend) will be important players in the new world of insurance exchanges. Other players like DestinationRx are similarly active in the exchange marketplace, working with HHS and multiple insurance plans, and will have a meaningful impact on the public and private HIX marketplace.  These vendors already have a head start in exchange operations, plan comparison features and tools to help consumers sort through the confusing world of insurance costs and coverage.

TripleTree’s recent HIX research report lays out a number of vendors that are currently engaged in HIX solutions. The report concludes that no vendor provides a complete solution.  Given the importance of the exchanges and the immediate market opportunity, no doubt consolidation will continue.

Have a good week.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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The Clock is Ticking for Public Health Insurance Exchanges

The success of Obamacare relies entirely on every state having a health insurance exchange as mandated by the Affordable Care Act (ACA) up and running no later January 1, 2014.

By early 2013, the federal government (via Health and Human Services (HHS)) will make a determination as to each state’s readiness to bring their health insurance exchange online. Lack of readiness by the January 1, 2014 deadline means HHS will take over the implementation and operation of each exchange.

The clock is ticking…

We are following closely the progress that is being made by the states are convinced that only a handful will be ready by the deadline.   Moreover, we question whether HHS will be able to step in and offer their working version of an exchange either, or if that federal exchange will even be legally able to offer subsidized policies.

While we are not prepared to unilaterally conclude that ACA’s exchange deadline won’t be met by any state, a former HHS secretary is equally skeptical.

We want exchanges to succeed and believe they ultimately will (in some form).  Our reviews of the exchange initiatives have included studying the Early Innovator grants and interviewing state policy administrators and vendors selling into the exchange concept.  The amount of work that will need to be done in order to get the public exchanges stood up by 2014 is daunting.

TripleTree’s recent report on exchanges, HIX: An assessment of the complexities and opportunities emanating from the ACA’s public health insurance exchange concept introduces these challenges and some innovative solutions that could emerge as part of the solutions.  Since then however, the planning, procurement and testing are in the early innings; and operational integration is far from reality.   Unfortunately very few states have a demonstrated ability to pull off the kind of implementation prowess needed to come online, on time.

Putting politics and policy aside, there are at least three major challenges that each state will need to overcome (quickly) if the public exchanges have any chance of meeting the 2014 deadline:

1. States need more clarity on what they are building even though many states have RFPs out for technology and have drafted high level architectures.  There is universal uncertainty and lack of guidance from HHS on major issues such as to exactly how payments and subsidies will be processed  or how the carriers will integrate their workflow into the exchanges
2. States lack successful architectural models and commercially proven technical capabilities because there is no working model of an exchange. Those charged with building the models – the Early Innovator grantees – are far from ready, or have dropped out of the program and/or returned their remaining funds.  The often cited Massachusetts and Utah models fall short of the ACA requirements (as do the Medicare exchanges).   And no vendor has a turnkey solution.
3. States need more time – Given the massive scale and complexity of the exchanges and the integration that needs to be done with existing state and federal systems, it will be next to impossible to build an automated exchange as envisioned by the ACA in the next 16 months.

In our report, we also introduced the notion of private entities that may have the acumen and motivation to bring an insurance exchange online by the 2014 deadline.  We speculated that the private exchanges would start to roll-out in the second half of 2011 and even identified some of the likely players that would have compelling capabilities to drive the private exchange concept.

Our research asserted the real opportunities for the private sector to capitalize on the HIX mandate through a market-aligned solution that will have more impact to improve health insurance access than the federal mandates.  We are excited to see and will continue to watch the early launches of the private exchanges and believe the states and public HIX will benefit from modeling their efforts and approaches around the early successes from the private exchanges.

Let us know what you think.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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HIX: Finding the pony hidden within the ACA’s “exchange concept”

Change is coming to the U.S. health insurance market and the road will be bumpy.  Nowhere is the change more apparent than the current debate surrounding the state-run public health insurance exchanges. Our research underscores that the Affordable Care Act of 2010 underestimated the cost and complexity of establishing public exchanges. In spite of these issues, new and unforeseen opportunities are emerging relative to health insurance distribution. The application of retail, product design and customer service expertise could be transformational relative to the health insurance market for individuals.

As the Affordable Care Act (ACA) marks its first anniversary, a number of key questions remain. One of the largest revolves around the costs and benefits for the federally mandated and state-run competitive marketplaces called Health Insurance Exchanges (HIX), where individuals will be able to shop for and purchase health insurance. The public (state-run) HIX is one of the cornerstones of the health reform legislation, and for individuals without healthcare coverage today – an estimated 34 million people – the public HIXs are the intended mechanism by which individuals will acquire health insurance.

Our latest research report assesses the ACA requirement that each state build and operate a multi-channel (i.e. online, phone, and paper-based) marketplace where any qualified individual can shop for and buy health insurance.  The legislation provides some specifics as to what types of “essential health benefits” must be provided within the exchange, dictates guidelines and mandates as to how the states must run the HIX, and defines specific features the exchanges must possess. These include:

• A choice of certified and approved health plans from different carriers.

• Simple plan comparison tools that allow consumers to research and select the best policy for their needs.

• Enrollment assistance for those purchasing private insurance, and eligibility information for those qualified to receive government subsidies or Medicaid enrollment.

• A process for recouping operational costs of the HIX through surcharges in order to make them self-sustaining.

For these exchange-based insurance policies, federal and state law will closely regulate the products and benefits offered and the prices insurance companies can charge for their products. To keep the HIXs viable, insurance companies are forbidden from undercutting prices of products sold on a public exchange with competing products in the open market. They will also be required to pool risks across exchange and non-exchange participants. Further, the U.S. Department of Health and Human Services (HHS) will mandate a set of essential health benefits that must be provided under each policy, including coverage and deductible tiers for each plan offered.

While the public HIX concept seems simple and straight forward, our research predicts that their implementation will be fraught with costs, technical challenges, and sustainability issues that are neither recognized nor acknowledged, much less understood. Thus far, much of the debate about HIXs has focused on constitutional questions – and therefore political issues – related to the individual mandate which would compel citizens to purchase health insurance. As the states ramp their HIX implementation efforts in order to meet the 2014 deadline, we anticipate that several new challenges will come to the forefront. They will need to be addressed and will propel further change.

Healthcare reform and the resultant need for serving the individual market are propelling new approaches to capturing share in the insurance marketplace, and we expect that a range of new market entrants are just around the corner. Recognizing that it is still early in the progression of these alternative, free-market approaches, this report will review the concept of “private” insurance exchanges and reveal how they will likely serve a larger population than their public counterparts, and will provide more compelling insurance options and opportunities.

Thanks and have a great week.

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

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