PWC on the Retail Health Insurance Business

The consumer is all the rage in health care–sell to them, engage them, maybe even help them stay healthy.  A PriceWaterhouseCooper report analyzes the rise of the new retail health market, focusing on the insurance exchanges.   (PWC Report)   The report notes for insurers, there are two primary tasks.  One is to decide whether and to what extent they will participate in the public health insurance exchanges.  In the first year of those exchanges, counting only those people who stayed enrolled and actually paid a premium, maybe 7 million enrolled, and somewhere around 90% got a subsidy.  The authors make the oft-used claim that growth on the public exchanges will be “exponential”, which is an incredibly gross exaggeration.  Exponential growth would literally mean 49 million this year!!  I suspect that we will see very slow growth, because people are not enrolling if they don’t get a subsidy and they are figuring out how to avoid the penalty.  The second task for insurers is to decide whether to play in the private exchange world, which has shown substantial growth in the last few years.  The report does a good job of setting out the players in that private exchange world, which include not just the insurers themselves, but the large benefit consultants and some stand-along companies offering technology and other solutions.  The report also lists some areas that private exchanges likely need to cover, like ancillary benefits, and price and benefit comparison tools.

In terms of employer strategies, those with less than 50 employees could decide to simply stop providing coverage, if they currently are, and send employees to the public exchanges, with or without some subsidy.  There is also a small group exchange concept, which might lower benefit costs.  Larger employers have a more complex set of calculations and will likely adopt a more heterogeneous set of solutions.  Most have been aggressively working to lower the growth of their health spending, with the greatest success being achieved by shifting more of the costs to employees, both through more premium sharing and higher deductibles and copayments.  That is likely to continue whether or not the employer begins to offer products through a private exchange.  And while it is off to a slow start, the defined contribution approach to health benefits has a tremendous logic to it and would drive greater competition between health plans, particularly if the contribution is set at the level of or some percent of the lowest price health insurance offering.  Private exchanges seem to us to also be beneficial because they do encourage consumers to be more attuned to their health and health care and with proper education and decision support, may make real strides in the goal of greater consumer engagement.