Transitioning to a state-based exchange (SBE) is a complex process that impacts numerous stakeholders. Given how complex the process can be areas of uncertainty can arise among some stakeholders regarding the tangible benefits a SBE might offer. This lack of clarity can give rise to misconceptions or inaccurate information. In this blog, we aim to differentiate between myths and facts about how state-based exchanges impact insurance carriers. Let’s dive in! 

Myth: Transitioning to a SBE will disrupt existing business processes and require significant changes for insurance carriers. 

Fact:  

  • Plan Certification: The certification process for plans remains similar to the process on the federal HealthCare.gov platform.
  • 834 Adjustments: Insurance carriers’ IT teams will only need to make minimal changes to their systems. All changes to the 834 files are enhancements designed to provide carriers with additional financial information that they do not currently receive from HealthCare.gov.  
  • Reconciliation: SBEs offer advantages in terms of reconciliation. Carriers working with SBEs have direct access to view enrollment records online, allowing for timely access for staff from both the SBE and the vendor. This facilitates the resolution of discrepancies more efficiently. 
  • Broker Integration: Brokers affiliated with the carrier will receive communication about the transition to the SBE and will need to complete certification to continue doing business. Modern broker tools on the exchange platform enable better management of the brokers’ Book of Business (BoB) and provide timely assistance to customers, reducing errors due to missing information. 
  • Improved Shopping Features: E-commerce shopping features on SBEs provide consumers with side-by-side plan comparisons, leading to a more informed experience. This benefits both carriers and consumers by increasing customer satisfaction. 
  • Carrier Tools: SBEs offer carriers access to enhanced reconciliation and consumer issue management tools. Carriers can directly communicate with SBE staff and call center representatives, enabling quick and efficient resolution of consumer issues. 
  • Churn Management: SBEs are closely integrated with Medicaid agencies, allowing better coordination and minimized churn. The automatic population of applications and eligibility information, along with targeted outreach efforts, results in improved statewide coordination and reduced gaps in coverage. 
  • Minimal Disruption: SBEs leverage existing carrier systems, leading to minimal disruption, if any, to existing business processes.  
  • Renewals: GetInsured runs renewals and provides renewal files in advance of the Open Enrollment (OE) period, providing carriers with a solid foundation before OE even begins. This proactive approach enables carriers to have a clearer picture of their status, enhancing operational efficiency.   

Myth: Some carriers will have an advantage over other carriers when it comes to market share as a result of a transition to an SBE.  

Fact: Transitioning to a SBE does not provide a competitive advantage to specific carriers.  

Market success in the insurance industry has always been determined by factors unrelated to the exchange platform. Carriers that offer competitive pricing, attractive plan options, superior customer service, and broad provider networks are more likely to appeal to consumers and as a result, will capture a larger share of the market. These elements directly impact customer satisfaction and are the key drivers of success in the industry. The technology and platform used to manage exchanges, whether federal or state-based, have historically had little influence on carrier market share. 

During the transition to a SBE all active enrollments and applications are transitioned to the new platform and all carriers have an equal opportunity to participate and adapt to the new system. The advantages associated with a SBEs, such as better broker tools, enhanced shopping experiences, and streamlined operations, are available to all carriers operating on that exchange.  

Ultimately, carriers that effectively leverage the advantages provided by a SBE and align their business strategies with the needs and preferences of consumers will be better positioned to succeed in the market. The transition itself does not inherently favor one carrier over another. 

Myth: Transitioning to a SBE increases the risk of adverse selection.  

Fact: Transitioning to a SBE helps mitigate the risks of adverse selection. 

Adverse selection refers to the phenomenon where insurance plans attract a disproportionate number of higher-risk individuals, leading to imbalanced risk pools and higher costs for carriers. SBEs help mitigate adverse selection in a variety of ways. 

  • Special Enrollment Periods (SEPs): SEPs allow individuals to enroll in health insurance outside of the standard Open Enrollment Period, typically due to qualifying life events. However, some individuals may exploit SEPs to enroll only when they have immediate healthcare needs, leading to adverse selection.Transitioning to a SBE provides the opportunity to address this concern effectively. SBEs can implement stricter SEP verification processes, ensuring that individuals enrolling outside of the standard enrollment periods qualify for SEPs based on legitimate actual life events. By maintaining robust verification mechanisms, SBEs minimize the risk of adverse selection during SEPs.

    Additionally, SBEs can proactively engage in targeted outreach and communication campaigns to educate individuals about the importance of maintaining continuous coverage. By promoting consistent enrollment and discouraging opportunistic enrollment during SEPs, SBEs can further mitigate the risks of adverse selection

  • Risk Pool Expansion: SBEs often have a broader reach and a better understanding of their local markets compared to the federal exchange. This allows for more targeted outreach and educational efforts to attract a diverse pool of enrollees. By expanding the risk pool, carriers are more likely to achieve a balanced mix of healthy and high-risk individuals, reducing the impact of adverse selection. 
  • Consumer Outreach and Education: SBEs actively engage in consumer outreach and education initiatives. This includes disseminating information on the importance of insurance coverage, available subsidies or financial assistance, and the variety of plan options. Through these efforts, exchanges encourage a greater number of individuals, including healthier individuals, to enroll in coverage, promoting a more balanced risk pool. 
  • State-Specific Policies: SBEs have the flexibility to implement state-specific policies that address adverse selection. This may include implementing risk adjustment mechanisms, reinsurance programs, or state-funded subsidies to stabilize premiums and mitigate the impact of higher-risk enrollees.   
  • Effective Data Analysis: SBEs have access to valuable data and insights specific to their local markets. This allows them to identify trends, assess risk levels, and make informed decisions to address adverse selection. By proactively analyzing enrollment data, exchanges can develop targeted strategies to attract and retain a balanced mix of enrollees. 

Through comprehensive outreach, education, state-specific policies, and data analysis, SBEs can effectively mitigate the risks of adverse selection. This benefits insurance carriers by promoting healthier risk pools, reducing costs, and ensuring more sustainable and competitive market conditions. 

Conclusion: 

By busting these myths and presenting the facts, it becomes evident that transitioning to a SBE offers numerous advantages and opportunities for insurance carriers, ensuring a smoother experience for all stakeholders involved.