Health plans will face a new competitive environment when health insurance exchanges open for business Oct.1, along with a new focus on efforts to attract and retain consumers.
A survey from PwC's Health Research Institute showed that most insurers, or 69 percent, plan to offer coverage on the exchanges. However, 10 of 18 national health insurer executives reported that their companies will not offer exchange coverage in all the states where they currently do business.
Exchange readiness and profitability were primary reasons for tempering their participation, PwC said the report, released Wednesday. For example, some of the large national insurance companies, including Humana and Aetna with its subsidiary Coventry, are entering 12 to 14 markets in the first year.
But half of the executives anticipate entering more states after 2014 when they have had time to evaluate premiums, population and competition, the report noted. One third of insurers do not plan to participate in public exchanges or remain undecided.
While every state will have at least one insurer, some will have far fewer than others. For example, two companies will sell on the exchange in Mississippi in 2014, but most of the state's counties will have just one insurer. In New York, 16 companies will sell coverage. Blues plans will sell in at least 36 states, the report said.
Many said that public perception and serving in their communities was important. In March, HCSC, which operates Blues plans in five states, established a community-based education effort, Be Covered, which partnered with 200 non-profit organizations to get the word out about the exchanges. Other insurers have also developed campaigns through online video, social media and other outreach at events.
PwC conducted interviews with insurance executives, consumer experts and health policy leaders about exchange strategies and surveyed more than 100 insurance executives to understand their plans for participating in the state insurance exchanges.
About 63 percent said technology integration and 61 percent said coordination of subsidies were major barriers to implementation. Other challenges were adverse selection, profitability and managing churn.
Nine in 10 insurance executives expect that premium costs, followed by total out-of-pocket costs, will be what consumers care about most. Yet industry and consumer experts expect that other factors, including personalized communication, clear rewards, health management programs, and brand recognition will differentiate them. Capturing the "young invincibles," especially through targeted messaging and products, will help insurers balance financial risk, the report said.
However, only 34 percent of insurers said that understanding newly eligible customers was a major difficulty to implementation, suggesting that they may not thoroughly understand the challenges associated with winning and retaining the business of these buyers who are empowered with choice, which is a major shift from the wholesalers' approach that many insurers have been familiar with.
About 57 percent said they were far along in dividing customers into groups that share similar characteristics.
Large national insurers and new players will jockey for position in the new exchange market. New exchange entrants will include Medicaid managed care companies, new health plans run by large provider systems, healthcare start-ups, and non-insurer players such as web brokers and tax preparers. They will need to learn how to operate effectively in this new market and manage the needs of a largely unknown population, said Ceci Connolly, managing director of PwC's Health Research Institute.
"Investment in retention programs will be crucial to securing the loyalty of a new crop of technologically-savvy buyers," she said in a news release. "Companies should …focus on building a meaningful customer experience, with an eye on cost reduction and personalized communication."
Data analytics and mobile strategies for targeting purposes will also be important. Mobile apps will enable customers to access important medical and cost information.