July 2015, Vol 3, No 7 - Inside Business
Alexandra Jung

The entire healthcare market is watching the evolution of healthcare exchanges, but many stakeholders have yet to form strategies around their response to this growth. In the pharmacy and clinic space, there is very little dialogue about the implications these exchanges will have on insurance plan designs, reimbursements, and patients’ out-of-pocket expenses that have to be managed in day-to-day operations. It is impor­tant, however, for pharmacies and clinics to understand what they should be changing in their business, operating, and economic models to remain competitive and relevant.

The Rise of Private Healthcare Exchanges

Although most of the focus has been on public or state exchanges that cover Medicaid- or dual Medicare/Medicaid-eligible participants, there are a growing number of private healthcare exchanges emerging as a result of employers making changes to their self-insured benefit strategies. We have already seen several large employers move their retirees and part-time employees into these privately sponsored exchanges, creating a new pool of members and plan designs.

These private exchanges loosely follow the same plan designs of public exchanges, but can also include add-on benefits that participants can buy up to achieve better control of their annual premiums—similar to current employer-sponsored benefit programs. There is also a greater focus on provider resources that are lower in cost, such as obtaining first-line care from clinics or pharmacies versus in a high-cost provider setting (eg, emergency departments [EDs] or physician offices).

Network Plan Designs

Ernst & Young Global Limited has been tracking the evolution of public and private exchanges, and has categorized them based on their characteristics. Figure 1 describes the 2 types of exchanges, and outlines the designs/models of these exchanges. There are single-carrier exchange models, comprising entire employee populations involved in exclusive agreements with a single insurance company, and multicarrier designs that are more similar to federal exchanges in that they provide employees with broader access to various insurance carriers and their competitors. One interesting development is the narrow network exchange model, which aims to lower costs by directing patients toward specific providers.

Figure 1

Migration to these exchanges is also projected to grow quickly (Figure 2). Many consulting firms and government agencies are predicting that large numbers of employer members will move into these programs, with the largest spike occurring in 2015. Driven by aggressive sales and marketing from the organizations that will administer these plans, employers across the country are currently analyzing their options and considering whether there are advantages to these exchanges. Many employers see these exchanges as a way to continue providing affordable benefits to their employees despite continued increases in healthcare costs. There is a particular focus on balancing costs between medical and pharmacy benefits, and the rise of very expensive drugs is also driving analyses on where the next round of savings can be found.

Figure 2

An Opportunity to Demonstrate Value

Private exchange plan designs attempt to balance current employer benefits with the public exchange’s gold-, silver-, and bronze-tiered designs. Ultimately, employers will tweak their designs to limit the number of differences between public and private exchanges, so that the transition is not as pronounced. This exercise provides the perfect opportunity for pharmacies and clinics to demonstrate their value proposition to the market as high-quality destinations for private exchange members at a lower cost.

In the case of narrow network designs, employers are looking for potential partners that can deliver consistent, high-quality care at a convenient location and for a lower cost. Triaging patients away from unnecessary ED visits and into community pharmacies and retail clinics is a high priority for employers, and there are many partnerships developing in the market to achieve this goal—not only accountable care organizations (ACOs), but alliances that create market-specific ecosystems that leverage the diverse strengths of all parties. Nontraditional companies that are forming alliances and collaborations are research organizations, retail pharmacies, pharmaceutical manufacturers, and consumer products and communications companies.

The challenge is that the value propositions from pharmacies and clinics are not currently aligned with these exchange-based plan designs; most service offerings were developed based on traditional payer models (eg, Medicare/Medicaid or self-insured employers). Private ex­changes are hybrids that contain elements of both. Understanding what the priorities are for these emerging models requires a focus on preserving access to high-quality healthcare, while making efforts to lower costs and reduce waste.

In the past, employers judged networks based on simple criteria, such as geoaccess parameters and discounts. In the future, private exchange plans will contain many different kinds of provider networks, including exclusive, narrow, and ACO-based models. Pharmacies and clinics need to not only understand those models, but also find ways to be a part of them; access to patient lives will depend on it.

Out-of-Pocket Expenses and Patient Experiences

There are also issues pertaining to patient experience and out-of-pocket expenses/affordability. Private exchanges often contain high deductibles, lower coinsurance rates, and require greater personal responsibility. Patients will need significantly more assistance navigating their care and finding affordable care options, and will have to shop around, which is something that patients are not accustomed to doing.

Providers, such as pharmacies and clinics, are also not accustomed to proactively selling their services to patients. There is a heavy reliance on network and formulary access to generate patient foot traffic. As more services require significant out-of-pocket payments from members, there will be increased pressure—from patients, payers, and plan sponsors—for transparent pricing, marketing, and advertising of the value propositions and competition surrounding quality outcomes.

In the past, patient experiences have also been a lower priority because the benefit plans, network, and formulary designs all governed patient choices. Although there may continue to be limits on choice, there will be a higher demand for a more positive patient experience, especially if the patient is paying the first $1500 of their deductible expense out of pocket. They will want to spend their own money in places that treat them well, and provide them with a high-quality experience.

Leveraging Technology to Meet Demands

There will also be more demand for channel agnosticism, and the ability to access resources from multiple platforms, including mobile or digital. The patient experience will be multimodal, and pharmacies and clinics will need to leverage the lower costs offered by digital platforms for routine transactions. There are many services and transactions that can be automated and performed on digital platforms, and reliance on mobile applications will drive investment requirements for pharmacies and clinics.

Many patients do not want to come into a brick-and-mortar location to use a kiosk; they prefer to fill out forms, place orders, make payments, ask questions, research care options, and ultimately drive decisions by leveraging technology. The companies that administer these private exchanges understand this, and are actively building tools to enhance the traditional eligibility and enrollment processes by proactively collecting data that can later be leveraged in transactions during utilization and claims adjudications.

Pharmacies and clinics need to be aware of this dynamic, and be active participants in the collection, dissemination, and use of that data. Once upon a time, administrators only collected transaction-level data (eg, financial values), but they are now increasingly collecting patient behavior data based on utilization patterns. As a result, they are refining their predictive models. Understanding how exchanges will impact the use of data—as well as implications to current operational platforms—are other considerations that will affect the operating models (not just the value propositions) of pharmacies and clinics.

As private exchanges continue to grow, patients will be given more responsibilities, and pharmacies and clinics need to understand what they should be changing in their business, operating, and economic models to remain competitive and relevant.

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