Halfway through the PPACA open-enrollment period, health insurance carriers in more than two dozen states had only about six weeks to resurrect non-PPACA-compliant policies. Medica found a way to revive 81 "zombie," or transitional policies.
Under fire for the persistent failures of the HealthCare.gov site and eyeing low enrollment numbers, President Obama last November extended the life of individual health insurance policies that did not comply with the new federal healthcare law. "You can keep your plan if you like it," he said.
For the more than two dozen states the idea of health plan extensions, which federal officials dubbed transitional policies, may have seemed nightmarish.
In North Dakota, Medica officials started talking about them around Thanksgiving. They called them zombie health plans.
The Minneapolis-based commercial insurance carrier had not planned for these policies leading into the 2014 plan year that began Jan. 1. Rather, says Craig Ashby, a senior director at the company, the zombies snuck up on them.
To comply with the Patient Protection and Affordable Care Act, Medica had a mechanism in place to transition 81 non-qualifying health plans in North Dakota to PPACA-compliant policies. Anyone enrolled in a Medica health plan also had the option to obtain a policy from other available carriers.
"We thought it was going to be pretty seamless," Ashby says.
When the White House changed course in November, halfway through the open-enrollment period for the new PPACA-spawned health insurance exchanges, Medica and other carriers in more than two dozen states had about six weeks to resurrect their zombie health plans.
Medica had sent out thousands of cancellation notices on Oct. 1, the starting date of open enrollment in the exchanges. The second largest commercial health insurance carrier in North Dakota, had potentially 40,000 zombie policies in the state, says Rebecca Ternes, North Dakota deputy insurance commissioner.
North Dakota Insurance Department officials were aware of the transitional policies, but had only a small role to play in bringing them back to life. "It didn't change what we had to look at," Ternes said, noting that it was up to the carriers to decide what to do with their non-PPACA-qualifying health plans.
Medica decided to resurrect all 81 of them in North Dakota. "It was the right thing to do," Ashby says.
By the fall of 2013, Medica had already built 156 health plans into the company's new "comprehensive, full admin system" to manage its health insurance business digitally, says Kimberly Branson, the company's VP of business architecture and strategy.
Software Was Key
The payer's new software system was a key factor in handling the sudden surge of zombie health plans, she said. "[The vendor] had 81 zombie plans ready for testing in 10 days," Branson said. "The team spent more time testing than they did building. It was amazing that we were able to be that nimble with something related to regulatory compliance."
As of May, Medica had the highest number of revived zombie health policies in the North Dakota, with 3,173 members, according to the state's insurance department. Sioux Falls, SD-based Sanford Health, the other carrier in North Dakota that allowed transitional policies, had 540 members with revived zombie policies.
Blue Cross Blue Shield of North Dakota, the state's largest commercial health insurance carrier, opted not to allow zombie policies.
The impact of zombie health plans on commercial carriers has varied not only by state but also by business strategy. Aetna, one of the largest commercial carriers operating in the new individual exchanges, took advantage of the option for early enrollment in 2014 health plans to avoid the zombie threat.
"We pushed an early renewal strategy," an Aetna spokesman said. "When the President made that announcement, it gave us even more flexibility. But we already had a strategy in place that made it easier for us to avoid the turbulence others encountered in this area."
It would have been possible for Medica to resurrect the zombie health plans in North Dakota with the company's previous administrative technology, but "the customer experience with that would have been very unpleasant," Branson said.
It would have been impossible to issue new insurance cards by Jan. 1 and "it would have created a customer service situation and a provider service situation. It would have created a PR issue for us. Even worse, it would have created cost," she said.
Disaster Averted
Resurrecting all 81 of Medica's zombie health plans helped the company avert a retention disaster, Ashby said. "We are preparing for their 2015 plan year," he said of zombie health plan members. "We retained more than two-thirds of the folks who enrolled in those plans. … We expect people to stick with us."
Unless federal officials change the rules again, all zombie health plans are slated to die off at the end of the 2016 plan year. "They can live until the 2017 renewal," he said. "We're looking at this on a year-by-year basis."
Branson and her Medica colleagues are "proud of our ability to raise the dead," but the experience had been humbling. "It demonstrates that change on this scale is hard," she said of national efforts to reform the healthcare industry. "There are fits and starts in that transformation."
Since successfully grappling with undead plans, Branson has "somewhat reluctantly" accepted the transformative power of technology. "The [healthcare industry organizations] that are going to be successful are going to be the ones that embrace technology," she says.
Christopher Cheney is the CMO editor at HealthLeaders.