ST. PAUL, MINN. — Commercial health insurers are scrambling for position as a key part of the federal health law threatens to upend their marketplace in two years.
Health plans are trying to lock in business before government-sponsored health insurance exchanges go online in 2014. Several large insurers are launching private insurance exchanges to protect themselves against competition from the public exchanges.
Not since the advent of Medicare and Medicaid in the 1960s has there been such big changes looming on the horizon for health insurers. In less than two years, the federal health care law will usher in more restrictions on premium increases, tens of millions of new customers, and a way for consumers to comparison shop online for their health insurance.
An estimated 1 million Minnesotans will eventually get their health insurance through an exchange.
Sabrina Corlette, research professor at Georgetown's Health Policy Institute, said those are just a few of the changes coming in 2014. Just how insurance markets will shake out is anyone's guess, she said.
"Insurance companies are grappling with the uncertainty like everybody else and trying to look two years down the road and how to position themselves," Corlette said. "[What] also needs to be watched closely [is] that it's working for the consumer."
Corlette says there's a lot of jockeying going on as insurers try to position themselves to either maintain or expand the market share they currently have. That's no simple task given the shifting sands.
The prospect of public insurance exchanges are driving some of the maneuvering. As laid out in the health care law, they will allow consumers and small businesses to comparison shop for health plans. Now, a spate of new privately-run online insurance shopping sites are cropping up to cater to small businesses struggling with rising premiums, including "My Plan by Medica" in Minnesota.
Last August, United Health Group's subsidiary OptumHealth bought Connextions, an exchange company based in Florida. Then in September, three large, independent health insurers invested in Minneapolis-based Bloom Health's private exchange.
Medica's John Naylor said public or private, the basic concept of an exchange — allowing employees to choose among many different policies online — is a good one.
"We have seen a trend of giving consumers more choice. And in health care, it's an industry that with the exchanges out there coming in 2014, there's a lot of focus and energy around how do we give employees choice," Naylor said.
But with many private exchanges, there's only so much choice. On the public exchanges, users will be able to choose among a variety of plans offered by different insurers who are competing for business.
Not so on some of the new private exchanges. They may offer plans from only one insurer — the one that's providing the exchange. That's the case with both My Plan by Medica and the Blue KC Exchange from Blue Cross Blue Shield of Kansas City.
Blue Cross' Ron Rowe said the goal is to get people used to dealing with an exchange and the company's products before there's additional competition from the public exchanges.
"Our thought is that at least today we're better off to develop a relationship with them, have them used to getting their service from us, feeling good about the service they get from us, developing some rapport, some trust," Rowe said.
Rowe said the hope is to develop some customer loyalty, so Blue Cross won't lose business to the public exchanges once they go online.
Washington and Lee health law professor Timothy Jost said the private exchanges may help insurers fend off competition once the public exchanges go online.
"It's not all that easy to switch a plan once you have a plan in place; people are used to using the doctors and hospitals associated with a particular plan," Jost said.
Exchanges are also allowing employers to cap the amount they pay for workers' health coverage. Employees get to pick from a range of plans, some of which may require that they pay extra.
Abir Sen of the Minnesota-based private exchange Bloom Health said that approach is attractive to small businesses. He said it's a way for them to gain control over unpredictable, but growing health care costs.
"This is very much a market-driven solution where the market is telling us here's what we need and the industry is responding accordingly," Sen said.
But over time, capping employer contributions could leave workers shouldering an ever-growing portion of premium costs.
The big question for insurers is if they build exchanges, will small employers come?
Economist Paul Fronstin, director of the non-partisan Employer Benefits Research Institute said small business owners will approach both private and public exchanges with caution.
"Enrollment in both is going to start off slow and grow over time as employers see how they're working and get more information about them," Fronstin said.
Corlette said cost will be the deciding factor in whether businesses buy insurance from either a public or private exchange.
"It's got to be affordable. And if you're offering them an alternative, it's got to be cheaper than what they can currently get," she said.
Corlette says the exchanges also need to provide decent coverage that's easy to administer.