See this article by Penstock president of regulatory solutions Joe Boyle as it originally ran in Healthcare Business Today.
Entering the Affordable Care Act (ACA) marketplace or expanding into new states presents a potentially major opportunity for health plans. More than 20 million Americans are insured through the ACA, with 5 million enrolling last year alone. These plans serve a great need in the health insurance market.
Expanding into the ACA marketplace opens the door for health plans to reach new members and diversify revenue streams. However, it also brings substantial challenges, including significant financial investment and a great deal of operational legwork to get up and running.
Before diving in, health plans must take a step back and craft a strategic approach to ensure their organization is well-prepared to navigate the complexities and seize the opportunities within the ACA’s competitive environment.
Identifying Costs and Necessary Investments
Cost is one of the biggest considerations when contemplating a move into the ACA marketplace. It’s not enough to have a product to sell; you need to create a robust system where your plan can thrive.
Initial set-up costs can be substantial, including expenses related to network development, system integration and regulatory compliance. Beyond these, ongoing operational costs like managing member services and claims processing can add up quickly.
If you can’t build your capabilities internally, you will need to buy them (to the tune of not hundreds of thousands, but possibly millions of dollars).
A comprehensive financial analysis is your first step towards understanding these costs. This should include projections for at least the first five years to identify your break-even point and plan for sustainable growth. Additionally, it’s crucial to set aside contingency funds to manage unforeseen expenses and high-cost claims, ensuring financial stability.
Navigating Compliance Requirements
Compliance is an ongoing commitment that requires continuous improvement and adaptation by health plans. By prioritizing ACA compliance from the outset, health plans can avoid costly penalties, which can range from $500-$1,000 per day by various state divisions of insurance until any known issues are resolved. Alternatively, noncompliance could lead to a barring of re-entry to a marketplace.
A dedicated compliance team and system is critical for monitoring federal and state regulation updates, conducting audits and implementing any necessary changes. It is also important for this team to collaborate with regulatory bodies and engage in proactive risk management to ensure smooth operations.
Whether it be entering receivership for financial solvency, or putting under a carrier state or CMS review, plans need to build trust with regulators, providers and members, and position themselves for long-term success.
Building a Robust Provider Network
A strong provider network is the backbone of any successful health plan—especially those entering the ACA marketplace. One of the main challenges is securing enough providers and facilities to ensure network adequacy. This process involves a deep understanding of local healthcare markets and the ability to meet your members’ comprehensive needs. Implementing advanced network management systems is crucial for efficient operations in this area.
These systems help manage provider data, monitor network adequacy and facilitate communication between health plans and providers. For example, systems that track provider performance and member feedback can help plans identify areas for improvement and ensure high-quality care.
This is reflected during the certification process and displayed when members shop on the Federally Facilitated Marketplace (FFM) or state-based marketplace (SBM). Issuers only get one chance per year to implement new quality initiatives that may not even come to fruition for 1-2 years to allow for member utilization and claims tracking.
Designing a Strategic Plan Portfolio
To stand out in the ACA marketplace, your plan offerings must go beyond compliance. They need to offer unique features that differentiate them from competitors.
This is a team effort, bringing together actuarial, legal, marketing and customer service teams alike to design plans that are both attractive to consumers and financially viable.
Health plans must conduct ongoing market research to analyze competitor plan designs, pricing strategies and market trends, identifying gaps and opportunities in the current market. Tailoring plans to address specific needs of your target population, such as offering varying levels of coverage, flexible payment options or additional benefits like wellness programs, can significantly boost member satisfaction and retention.
Many state divisions of insurance will begin to publish their issuer’s filings on public record between October and November of this current plan year. While there is a push to collect this data (as different filings are managed by different reviewers), it’s critical to check your DOI partner sites and associated systems on a regular and ongoing basis and add this into your routine or assign a key member from your team to become a subject matter expert on the process. For states that are fully redacted or are unavailable, there is no time like the present to begin your public records requests, as they can take a long time to process.
Long-Term Growth and Sustainability
Entering the ACA marketplace is a long-term commitment that requires focus on continuous improvement, scalability and diversification. Regularly reviewing and refining your processes to enhance efficiency and member satisfaction is key to staying competitive.
Additionally, considering product lines like Medicare Advantage or Medicaid can help diversify and stabilize your revenue streams while having increased brand recognition within the geographies and marketplaces that you serve today. Many state divisions of insurance also require issuers to offer more than one product that is non-ACA or non-individual to ensure compliance with their entire product shelf and equitable options for members across the country.
To remain financially viable in this marketplace, it’s also critical for health plans to consider expanding into additional states over time. Plans need a multi-state expansion strategy that includes a phased approach to entering new markets, ensuring that they have the resources and infrastructure to support growth without overextending themselves.
Unless there are drastic unplanned factors impacting your top competitors, plans should be strategically considering expansion into a minimum of 1 state each year following their first market entry. It is critical to be prepared to maintain this growth—if you are an established carrier and you decide to exit any market or segment, CMS may ban your issuer’s presence in the marketplace for up to five years, putting your business at risk.
Ultimately, not every health plan needs to be on the ACA marketplace. It’s important for your organization to step back, think strategically, and plan meticulously to determine if this opportunity aligns with your goals and capacity. Entering the ACA marketplace is a significant undertaking that requires careful planning and substantial financial and operational investments. However, with the right strategies and resources in place, your plan can be compliant, competitive and secure success in the ACA Marketplace.
