Private HIX Riches Eyed in Group Coverage

A Pittsburgh-based Blue Cross Blue Shield carrier views private health insurance exchanges as a golden opportunity in the group market.

Highmark Inc. is banking on customer-driven private health insurance exchanges as a key growth area for group coverage over the next four to five years.

"We're looking aggressively to move groups to private exchanges," Bill Brown, manager of digital distribution at the Pennsylvania-based insurer, said in a phone interview on Wednesday. "We flipped from a defensive to an aggressive strategy. We've done a lot of demos for national accounts."

Highmark, the fourth-largest Blue Cross and Blue Shield-affiliate in the country, provides health insurance policies to more than 5 million people in Delaware, Pennsylvania, and West Virginia. It launched private exchanges for group coverage in January 2011, with "full scale" operations in place by January 2012. Analysts predict that percentage of consumers using HIX will grow from 1 to 3 percent now to as high as 40 percent in 2018.

"We are so early in the evolution of these exchanges, [that] to have growth that quickly shows how powerful this technology is," Brown says.

"More Depth with the Group'
Highmark is working to establish defined-contribution private exchanges that are consumer-driven and offers "many types of products." Beyond medical coverage Highmark's private exchanges offer dental, vision, and other types of consumer policies.

Brown says private exchanges appeal to small- and medium-sized businesses that have relatively high revenue and well-compensated employees. "The private exchange gets more depth with the group… low-revenue companies may not have the funding to do defined contribution."

Low-revenue companies and small business employees who have never had health insurance are often better served pursuing coverage options on the new public exchanges, Brown said.

Under the federal Patient Protection and Affordable Care Act, individuals and businesses may purchase health insurance policies on public exchanges in all 50 states. With the open enrollment period for 2014 now closed, federal officials say more than 8 million people have signed up. The Small Business Health Options Program public exchanges for group coverage are launching at a slower pace, with growth expected to accelerate in 2015.

"We do have a few groups that have already purchased through the SHOP," Brown says of Highmark's participation in the public exchange for group coverage. "There are different groups that will have more opportunities in the SHOP than a private exchange."

The ability to offer a large suite of insurance products is a major selling point for defined contribution plans on private exchanges. "We're getting a group or member to select from the umbrella of Highmark products," Brown says. "There's a benefit to Highmark to put all its products up and sell them as one. … It's a great opportunity for Highmark to grow our subsidiary business."

Private exchanges offer several advantages to employers and employees, Brown contends. On the employer side, he cites a 450-employee business that reaped huge administrative cost-saving gains from purchasing health coverage on one of Highmark's private exchanges. "They did all their enrollment on paper. They moved to our platform to move themselves to an online platform. It's saving them hours and hours of work every month."

For employees at small businesses, workers can choose a product tailored to their needs, Brown says. "For the most part, in the 100-and-under sized company, they had never had the opportunity to buy products that are what their families need," he said. "With private exchanges, you have employees picking policies that are right for their families and the stage of their lives."

Keys to Success
For insurers seeking to launch private exchanges for group coverage, Brown says the keys to success include careful market assessments and picking the best IT partner possible. "We wanted to make sure we hit the right markets at the right time."

Highmark looked for markets where the company could offer employers opportunities to manage costs, Brown said, "giving the small-group employer another option to dropping their employees on the public exchange market."

Medium- to large-sized employers present opportunities for both Highmark and its group coverage clients, who can realize significant human resources cost savings. With the private exchange handling administrative functions that were often previously sited in multiple locations, "you're really consolidating a lot," Brown says. "They love the administration aspect of it."

Highmark executives also chose carefully when they picked Seattle, WA-based Array Health as the company's IT partner for private exchanges.

"We were looking for someone who had the same vision as Highmark," Brown says. "They are really customer-focused. After the sale, we have very deep touch-points with our consumers… They wanted to make sure everything after enrollment was nailed down. That's why we chose them."

Array Health CEO Jonathan Rickert said Tuesday that he co-founded the company in 2006, when "Romneycare," the Massachusetts healthcare reform law enacted in 2006 by then-Governor Mitt Romney, sparked the imagination of healthcare executives across the country. "The original vision of the business was to offer employees an array of choices," Rickert says. "We wanted to ultimately personalize and humanize the experience of purchasing insurance."

Rickert says Array Health began licensing the company's private exchange IT platform in 2011. "The ACA happened, and we started getting approached by large carriers." Array Health views a private exchange's online presence like an iceberg. "The marketplace is like the tip of the iceberg, then there's the 90 percent under water," Rickert says.

The "90 percent under water" includes billing, customer service, data integration, and "a beautiful front-end shopping experience. You've got to pick the right partner and you have to set it up correctly."

"We loved their back-end technology," Brown says of Highmark's choice to partner with Array Health. "On the front end, we wanted something that was really simple… We do have a call center that supports the website. But we don't get a lot of use of our call center."