6 Keys to Addressing ACA Exchange Challenges and Opportunities

The Affordable Care Act Marketplace has experienced numerous twists and turns since the inaugural open enrollment period in 2013. This period is no different as we are witnessing a rebound following significant contraction between 2015-2018. Total On-Marketplace membership climbed to 14.5 million in 2022. Combined with an estimated 2.9 million Off-Marketplace members, overall participation sits at over 17 million. Marketplace retention rates also increased the last four open enrollment periods, from about 74% to 95%.

We estimate that the number of carriers in the Marketplace will remain about the same from 2022 to 2023, returning to roughly the same to the number of carriers in 2015. In performance year 2023, national chains including United Healthcare, Centene (Ambetter), Aetna, and Cigna, and Blues plans entered or expanded in the most federally-facilitated Exchange markets.

Despite these gains, executives should be attuned to a few cautionary tales, none looming larger than Bright Health’s exit of the Exchange business, leaving over one million members without coverage. Carriers can infer how Bright Health’s quick rise led to its immediate decision to discontinue coverage, but signs indicate that a variety of factors that led to losses and drawing down reserves. These recent events emphasize the need to balance aggressive pricing to achieve scale with a roadmap to long term sustainability and optimization of risk adjustment and other capabilities that drive long term sustainability.

The Marketplace continues to remain volatile and uncertain. Based on our research and work with various carriers, we developed “6 Keys to Success” to guide insurers as they drive toward overall success in the Marketplace.

This is the first in a series of articles on the keys to success. Below is a broad overview; we’ll do a deeper dive in each area over the next few months.

Be ‘Selective Aggressive’

Market strategies are becoming more sophisticated and more focused. Placing bets well is a key part of success in the Marketplace. This may involve very surgical plays, such as selective-aggressive marketing, product, and pricing strategies at the county level. As new entrants can most easily be nimble, rapid action is required from those that continue to expand their footprint or compete for market share. Additionally, given the consumer base of the Marketplace is very community-based, carriers should coordinate with community resources in addition to broker channels to leverage these resources to win membership through better brand, product, and pricing awareness.

Revisit Product Portfolio

With a concerted push from the Centers for Medicare and Medicaid Services towards greater transparency and standardization, now is the time to revisit portfolios. While the number of products offered on exchanges continues to grow despite CMS standard plan rules, many new entrants this year often had much more focused portfolios, opting to differentiate based on value-add features and innovative designs — disease specific, virtual first — than wide coverage of the actuarial value range. Along with offering differentiated products, it’s critical to relentlessly measure the factors that drive consumer selection behaviors, such as plan design, network breadth, supplemental benefits, standard vs. non-standard plans, and more. A test-and-learn approach and adaptive implementation of the learnings is critical to capitalize on consumer behavioral insights.

Put Pricing Under the Microscope

While new standard plan rules stir the pot on product design, the fundamentals of the market have not changed: price is still king. And pressure on pricing has never been greater, with more competition and inflation driven provider pressure. There is a need to optimize every link in the pricing chain and assess the ranges of both actuarial opportunity and operational management of profitability, which will help with balancing the cost of member acquisition against the ability to generate increased profits over time. This requires constant pressure testing of methodology and management of pricing and competitive uncertainty with a cross functional lens, combining actuarial insight and modeling, competitive intel and market backed target setting, financial forecasting that acknowledges uncertainty in pricing and competitive positioning outcomes and finger on the pulse of market-specific consumer behaviors.

Develop an Exchange-specific Approach to Networks

Design Exchange and product-specific provider networks, accounting for the retail nature of the segment, the price sensitivity of customers and the Exchange’s close connections with Medicaid. Doing so requires leveraging actuarial support to establish exchange specific contractual terms and frameworks tied to competitive positioning goals that create boundaries for negotiations with health systems and providers. Use network analytics with internal data and externally available data to identify high value providers, leverage price transparency machine readable files to provide negotiators with market intelligence and leverage in rate discussions.

Use Member Experience as a ‘Cheat Code’ for Retention

Compete with a cohesive and end-to-end consumer experience. Deploy digital assets throughout the member lifecycle with apps, web content, and passive learning to help consumers shop, select, and utilize services with minimal friction. This should include consumer-focused communications channels to help educate and support members, all of which must be well-integrated with broker channels. Conduct routine, focused testing to understand and address process bottlenecks and points of member abrasion. Develop an integrated, omni-channel experience for consumers that minimizes the confusion of finding and buying the right plan.

Adopt A Lean Start-up Mentality

Constant focus on operational efficiency and automation is critical to drive improved profitability over time. A focus on capabilities that improve profitability such as risk adjustment is also essential, including optimizing core capabilities such as claims processing, sales, and medical management.

The volatile and changing nature of the ACA Marketplace requires an agile and adaptive organization. Leaders should adopt “lean startup” methodologies and mindsets, as well as pursue partnerships with key system and solution vendors to help scale operations efficiently.

For more information about OW’s Exchange platform contact Shyam Vichare, Partner, Health and Life Sciences and Travis Kistler, Partner, Health and Life Sciences.

To learn more contact Matthew Weinstock, Senior Editor, Health and Life Sciences.