Market Segments And Distribution Channels Discussion

Market Segments And Distribution Channels Discussion

Market Segments And Distribution Channels Discussion

This week’s chapter discusses the various market segments and distribution channels for the MCOs. Outline the market segments and identify the most successful distribution channels for those markets. Use some outside research to support your statements. Why do you believe each distribution channel successfully reaches the targeted market?


Discussion Board Requirements: 250 word count One original post and two reply posts, APA Format, please include references

ACA created state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which small businesses with up to 100 employees can purchase qualified coverage

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Separate exchanges for individuals to access coverage

Permit states to allow businesses with more than 100 employees to purchase coverage in the SHOP Exchange beginning in 2017

States may form regional Exchanges or allow more than one Exchange to operate in a state

Feds operate exchanges in states that refused to build them

Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Creation of plan rating systems similar to that used in Medicare Advantage


Health Insurance Exchanges (cont.)

Brokers still allowed to operate in this market segment for health

Exchanges do not prohibit a non-Exchange market for individual and group coverage, but rates must be the same if sold both in and outside of the Exchange

Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity

Each multi-state plan must be licensed in each state and must meet the qualifications of a qualified health plan

Members of Congress and congressional staff may only enroll in either plans created under ACA (e.g., CO-OPs) or in plans offered in Exchange – but this also required a “fix” because ACA as written did not allow of an employer contribution to coverage purchased through the individual exchanges Market Segments And Distribution Channels Discussion

Two-way data exchange requirements are huge

© P.R. Kongstvedt


Actuarial Services

Actuaries analyze the data and predict costs, adjusted for




Benefits design

Behavioral shift

Distribution amongst different providers with different cost profiles

Actuaries generally do not create the rates, but only model costs

Large payers have their own, smaller and mid-sized plans use actuarial consulting firms


Rating and Underwriting

Underwriting has had two distinct but related meanings:

Medical underwriting referred to using an individual’s or small group’s medical history to determine whether to offer coverage at all

General underwriting includes gathering of information to assist in the development of premium rates

Underwriters use the actuarial data and other factors to calculate rates

Three types of premium rating:

Community rating

Experience rating

Premium equivalent or imputed premium rates

Type of rating only affects the calculation of the base rate, not the mechanics of creating actual premium rates

Community rating requires the same base rate for all, though may be different for all individuals vs. all small groups

Experience rating uses base rate from actual costs of the group

Premium equivalent is calculated just like experience rating for the base rate


Rating and Underwriting in the Individual and Small Group Markets under the ACA

Extension of dependent coverage to age 26

Prohibition on rescissions except in cases of outright fraud

Prohibition of preexisting condition exclusions and coverage rescissions Market Segments And Distribution Channels Discussion

Lifetime and annual policy coverage limits prohibited

Require first-dollar coverage for preventive services

Minimum medical loss ratio (MLR) of 85% for large group and 80% for individuals and small groups – applies only to insured business, not self-funded (no premiums)

Insurers required to guarantee availability and renewability to individuals and groups.

Insurers not allowed to use health status as a rating variable

Only the following will be allowed:

Age related pricing variations are limited to a maximum of 3 to 1.

The number of people covered under the policy (e.g., “single” vs. “family” coverage).

Tobacco use (except rates may not vary by more than a ratio of 1.5 to 1)

Other provisions such as out-of-pocket cost limitations based on income, etc.

Requirement to include Essential Health Benefits at one of four different coverage levels

Premium risk-adjustment mechanism for individual and small group markets

Beginning in 2018, impose an excise tax of plans with premiums that exceed a certain level


© P.R. Kongstvedt

The ACA’s Four Coverage Tiers What’s in Your Wallet?

Allows for 40% swing in cost sharing between Platinum and Bronze plan designs

Coverage levels based on in-network costs for all but emergency care (defined via “prudent layperson), not billed charges

Coverage based on actuarial equivalency, so may be spread around benefits, except cannot have different cost-sharing for MH/BH than for Med/Surg.

Room to futz with benefits as long as cost sharing ends up where it’s supposed to


High deductible plan with preventive services and limited office visit coverage for the under-30s


Eligibility in the Commercial Market

Eligibility in the commercial (non-Medicare/Medicaid) market may be thought of in four categories:

Eligibility in Employer Sponsored Group Benefits Plans

Eligibility changes based on life events

Individual eligibility

Eligibility for subsidized coverage

Employer sponsored coverage

Must be full time

Dependent coverage through employee

Must first enroll during defined periods such as upon employment following a defined number of days after they start working


Life Events and Eligibility Options

[Put Table 6 – 2 here]


© P.R. Kongstvedt

Life Events and Eligibility Options (cont’d)

[Put Table 6 – 2 here]


Elements of Claims Complexity

Multiple Lines of Business

Provider Payment Rules

Sophiscated Px & Dx Coding

Unbundled Claims

Referral/Authorization Rules

Government Mandates

Medicare/Medicaid Standards

Other Party Liability

Cost Sharing Features

Benefit Plan Variations

Multiple Lines of Business

Rules and Regulations of Exchange

Tracking MLR for Groups and Individuals

Value Based Benefits

New Payment Models


Claims Operational Functions

The modern claims capability is the set of operational functions within the payer organization that together process claims from receipt to issuance of payment and/or Explanation of Benefits (EOB). Market Segments And Distribution Channels Discussion

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