In a little more than a year, physicians and insurers will begin serving a large new patient population that looks, and in many ways behaves, distinctly different from today’s insured population. The Affordable Care Act’s coverage provisions — representing the single largest insurance expansion since the creation of Medicare in 1965 — present phenomenal opportunities for the health sector.
Under the 2010 law, revised by the Supreme Court ruling at the end of June, up to 30 million people are expected to gain health insurance coverage. Nearly one-third will move onto Medicaid; almost a quarter will enroll in plans sponsored by an employer; and 45 percent will purchase insurance through new state-sponsored online marketplaces known as exchanges.
Public exchanges will become operational in 2014. By 2021, they are expected to generate $205 billion in insurance premiums. It is a market too big to ignore. But attracting and serving this new group will not be easy for state governments or private industry. And although 2014 may feel far away, the time horizon for preparing is tight.
To draw a more comprehensive portrait of the uninsured Americans under age 65 who stand to gain coverage under the law, PwC’s Health Research Institute (HRI) analyzed the federal Current Population Survey, the Medical Expenditure Panel Survey and projections by the Congressional Budget Office. PwC’s HRI did a separate analysis of the exchange population. For both industry executives and policymakers, the data contain some reassuring news and a few warning flags.
The Characteristics Of The Newly Insured
As a whole, the newly-insured are relatively young (median age 33), single, and overwhelmingly report feeling fit (88 percent.) In the early years of ACA implementation, it appears unlikely they will flood the system or substantially drive up costs.
At the same time, the data indicates this will be a poorer, less educated, more ethnically diverse patient population. Their median income will be 166 percent of the federal poverty level (FPL), or about $18,542 for an individual and $38,263 for a family of four. Less than 15 percent will hold at least a bachelor’s degree, versus 37 percent of today’s insured adults.
When compared to those who now have coverage, the newly insured are significantly less likely to have a full time job—42 percent versus 59 percent. Many are expected to have seasonal or part-time work; income fluctuations will shift many back and forth between Medicaid and the exchanges, a phenomenon known as churn.
Nearly one-third speak a language other than English at home, compared to just 12 percent of the current market. One-in-four will be African American, Asian, Native American, or multi-racial, compared to 21 percent who now have coverage.
Studies published by the Agency for Healthcare Research and Quality indicate that race and ethnicity often influence a person’s access to certain medical treatments. Fewer African Americans, for example, receive routine cancer screening or procedures to treat heart disease compared to whites, according to the agency. It will fall to government officials, providers and insurers to address these historic inequities.
Providers and public health officials also worry that although this relatively young population reports feeling healthy, many may arrive for their first check-up in years with undetected chronic conditions or mental health issues.
The Coming Exchange Deadline
States have until November 16 to declare what type of exchange they will operate: one that is distinctly their own; a federally facilitated exchange (FFE); or a blended federal-state approach dubbed a “partnership.” Additionally, states may choose to act as an “active purchaser,” selecting which plans may compete in the marketplace, or a “passive purchaser,” allowing a freer open marketplace.
So far, 13 states and the District of Columbia have indicated they plan to create their own exchanges, though not all will be ready for enrollment by October 2013. Of the remaining 37 states, most will have the federal government involved in running their exchange, either through the FFE or a partnership model. Many states have postponed an announcement until after next week’s elections.
Regardless of which model they choose, states should focus now on the high hurdles involved in enrolling and serving a patient population that largely has never interacted with the insurance system. First and foremost, states carry the responsibility to make consumers aware of the new coverage and financial assistance options. State-run exchanges must set up websites, call centers and navigator functions, and certify which plans can operate on an exchange and monitor premium rates.
Innovative exchange strategies. A handful of innovators across the nation have begun developing strategies for attracting and serving this unique group. California, for instance, plans to translate all of its exchange materials into about a dozen languages, much like the state’s Healthy Families program has done.
Board members for the California Health Benefit Exchange have focused intently on the state’s diverse population, which includes large clusters of Hispanics, Latinos and Asians; with nearly 14 percent of residents falling below poverty levels. Another key demographic: the state’s gay, lesbian and transgender community. Exchange officials have worked closely with representatives from that community to ensure that their unique health challenges are addressed as well. A diverse set of focus groups have been recruited to offer input on everything from benefit design to how the plans should be marketed.
Some states, such as New York and Tennessee, are merging many of the Medicaid and exchange functions to avoid duplication and reduce disruptions for members likely to move back and forth depending on job status.
In Massachusetts, which first created an exchange in 2006, officials went to where the new customers were: Fenway Park. Their success in enrolling such a large portion of the predominantly single and male uninsured population offers clues for the states that are only now beginning to contemplate how and where to reach eligible individuals.
Similarly, federal subsidies provided in the ACA will act as a major enticement for future enrollees. But explaining the subsidies and the four levels of coverage — bronze, silver, gold and platinum — will require effective and sustained educational campaigns.
The 2010 law steers in that direction. In September, health plans in the individual market began offering an easy-to-understand summary of coverage benefits, complete with a standardized glossary of commonly used yet hard to understand terms. The summaries were inspired by the nutrition labels required for packaged food.
Still, it’s a small step in an industry that requires giant leaps. Navigating today’s fragmented health system is challenging for the most insurance-savvy among us. Transparency efforts are just barely getting off the ground. Insurance companies that have historically run wholesale businesses selling group plans to large employers must now go after customers one person at a time.
Across the nation, private exchanges offer insights for states on how to fashion a more consumer-oriented approach with greater choices and comparison cost data. These exchanges are growing and delving into new terrain, such as defined-contribution health benefits that set a spending cap and place more decisions in the hands of consumers.
Whether the ACA is revised, repealed or stands as written, the healthcare marketplace is changing rapidly. Innovations such as insurance exchanges offer the potential to irreversibly alter how medical care is sold and delivered in this country, and they open the door to a new era of consumerism. States can play an important role in shaping this future — if they start now.