To get the Patient Protection and Affordable Care Act (PPACA) exchanges and their insurer-suppliers ready to open Oct. 1, 2013, technology vendors may really need to have final, workable, flexible program specifications and details by July 1.
Even having the details available in a flexible, easy-to-digest form by June 1, 2013, would require the technology vendors to cope with a “very aggressive timeframe.”
John Sarich, vice president for strategy at VUE Software, a health plan software and service hosting company, gave that assessment during a recent interview about PPACA implementation.
VUE sells and runs systems that can help the insurers that will be selling “qualified health plans” (QHPs) through the PPACA exchanges with matters such as bringing agents and brokers on board, managing producer relationships, customer service, billing, electronic contracting, handling new business, managing producer incentives, and running broker portals.
Clients include many big national and regional insurers, including some — including BlueCross BlueShield of Vermont and UnitedHealth — that have already agreed to participate in one or more exchanges.
VUE already has systems that could plug into exchange systems or QHP systems up and running, but simply tweaking one enterprise-level system to connect with another enterprise system can easily take months Sarich said.
In theory, if an exchange or QHP that was starting up Oct. 1 agreed to use a plain-vanille VUE system hosted on VUE servers by Sept. 1, and all went well, VUE could hook up a system by the Oct. 1 deadline, Sarich said.
But, before that, VUE would want at least two months, and, ideally, three months to get its systems ready to plug and play in the new PPACA universe, Sarich said.
Getting the systems PPACA ready could be challenging, because, in many cases, regulators have been developing regulations that seem to be hard to understand and hard to administer, Sarich said.
But Sarich said he believes that, in the long run, whatever money insurers spend on preparing for the arrival of the PPACA exchanges will be money well spent.
“This is going to happen in some form,” because insurers see using exchanges as a good way to cut administrative costs, regardless of what happens to PPACA, Sarich said.
But, especially at first, Sarich thinks smaller companies will be more likely to sell through the exchanges.
If the PPACA exchanges work well, the larger companies will simply buy out that companies that have figured out how to use the new system, rather than spending $100 million to $200 million to develop their own exchange divisions, Sarich predicted.
Getting a large company to switch to a new strategy “is like turning around a battleship,” Sarich said.
Because of that big entry cost for larger carriers, many larger carriers would prefer to wait to see how the PPACA exchanges will do before jumping in, Sarich said.
Managers of most federal and state PPACA exchanges have said they will leave producer commission levels up to the producers and QHP issuers.
In practice, Sarich said, because of PPACA limits on administrative costs, most carriers will try to hold individual QHP policy producer compensation to $75 to $100 per year, or about 1.5 percent to 2.5 percent of premium revenue.
That level of compensation is much lower than the current typical health producer compensation, but “there’s going to be a lot more agents,” because many consumers will find that signing up for coverage is complicated, Sarich said.
Some have suggested that producers might find that the new PPACA exchange QHP market is similar to the existing Medicare Advantage plan market. In the Medicare Advantage market, commissions average about 5 percent of premium revenue.
Sarich said he thinks producers and issuers in the QHP market will have to provide more customer service than producers in the Medicare Advantage market do.
To cope with the need for live-human advice, many insurers hope to make heavy use of customer service centers in India and the Philippines, Sarich said.
Even though producer compensation levels will be low, the QHP carriers also will try to shift some of the work they do for commercial plans themselves onto the shoulders of the QHP producers, Sarich said.
Because small-group QHPs will have to bill enrollees individually, one difference between the QHP market and the commercial small-group market will be that insurers and producers will have to figure out how to bill the enrollees individually, Sarich said.
Today, he said, most health carriers simply bill the carrier and have little or no ability to collect cash from the enrollees.
Simply ironing out the many problems that will crop up when an enrollee pays $105, or $95, rather than the exact $100 amount billed could lead to huge administrative problems, Sarich said.