Acquiring and retaining the best risk, meeting the 80 percent medical loss ratio and establishing cost-effective distribution channels and working with exchanges are top priorities of executives of health insurance companies, according to a recent survey.
Conducted by the Gantry Group for outsourcing company HealthPlan Services, the survey's top three priorities were not surprising, though the top priority was somewhat unexpected. Ninety-two percent of all respondents identified compliant risk acquisition and retention as being among their top three priorities, while 58 percent identified both the MLR mandate and cost effective distribution. Another 54 percent gave one of their top three spots to working with exchanges.
"I think what is going through a lot of the boardrooms right now is what will life be like in 2014 when there is no more individual underwriting, the rate bands are substantially compressed and a whole host of insureds who couldn’t afford coverage and probably have not been getting treatment will now be subsidized and a part of the pool," said Jeff Bak, CEO of HPS. "What I was hearing was retention and servicing the policy holder would become the new form of underwriting once underwriting was abolished."
Bak said he thought MLR would be the top concern of insurance executives instead of risk acquisition, due to debate over the definitions of administrative expenses.
“Managing the MLR is a top carrier priority due to the heavy focus that has been placed on reigning in administrative costs. It is an especially complex task because a significant portion of administrative expenses are difficult to scale back due to the nature of what is defined as non-claims expenses,” said Dennis Prysner, chief project officer at HPS. “Thus it was surprising to see it rank second, although one possible explanation is the indirect tie between managing loss ratios and retaining risk. When the best risk is acquired, the claims experience is more positive, which can impact the MLR.”
Also surprising was the low ranking for premium rebates which will be required of health plans if they don't meet the 80 percent MLR mandate. Less than 1 percent of respondents identified it as their top priority, with only 15 percent placing it in their top three concerns.
“This is surprising considering that the rebate mandate is one that will be particularly challenging from a compliance perspective,” said Bak. “When coupled with MLR, rebates become a double-edged sword and evoke processes that few carrier systems are equipped to manage.”
Insurance companies will need to eventually tackle the rebate issue, Bak said. He anticipates many payers will initially elect to work with an MLR that is in the 78.5 percent to 79 percent range.
"I think most will find that it is better to build in a little cushion and return rebates to their members," he said.
The online survey, conducted in September, sought information from operational executives representing 26 health plans with a commercial product line and at least 50,000 members enrolled in individual/small group products.