Under a Trump administration, public exchanges are “dead men walking,” while private exchanges are poised for significant expansion, says Oliver Wyman’s Howard Lapsley. Below he explains why.
Even before Americans awoke on November 9 to President-Elect Trump’s stunning election upset, the ACA and its public exchanges were in trouble. The average marketplace plan saw a rate hike of 22 percent (before subsidies); and due to mass insurer exits, more than one-third of US counties faced enrollment with only one carrier option.
President-elect Trump and the Republican Congress are now set to “repeal and replace” the ACA. While we don’t yet know the details or timeline of their plan, the uncertainty surrounding the individual marketplace will likely lead to further exits and rate hikes, with the sicker signing up and the healthy “young invincibles” staying clear.
Given these realities, the public exchanges from here on out may be “dead men walking.” On the flip side, private exchanges for the individual and small group marketplace are set to flourish. Here are five reasons why:
1. Individual market void
With potential loosening of essential health benefits rules, private exchanges will fill the void and provide a platform for insurers to offer new, innovative products. These products will likely be skinnier versions of what is offered today, with sculpted local networks.
2. Value-conscious consumers
Under the Republicans’ repeal-and-replace plan, federal subsidies are expected to be decreased or eliminated. In addition, people are facing ever-higher premiums and out-of-pocket expenses. Going forward, consumers will be even more focused on value. Private exchanges, which allow consumers to see the true cost of benefits, provide a transparent marketplace and could fill consumers’ increasing interest in shopping for value.
3. Interest in total-risk protection
The expected loosening of regulations will make it easier for insurers to bundle core and ancillary benefits customized to each consumer’s life-stage needs. The private exchange platform – with its consumer-centric choice algorithms – will make it easier for value-conscious consumers to consider their total risk, and then spend their dollars with greater understanding of their total-risk protection needs.
4. Employer needs
Expect large group and self-insured employers to accelerate adoption of private exchanges, as those employers will be seeking new product offerings to both keep costs down and allow their employees more flexibility of choice.
5. Provider acceptance
Providers and integrated delivery networks will likely embrace private exchange platforms, as they (and Wall Street) are concerned about the potential for increased bad debt if more individuals choose to go without health insurance.
For payers, the results of the 2016 election have created numerous product and legislative scenarios to consider, and much remains unclear. One thing is certain, however, and that is the ever-increasing importance of consumer-centric distribution approaches, chief among them private exchanges. Now that open enrollment is ending for 2017, it’s time to reset distribution strategies that will thrive in 2018 and beyond.