Safe Harbor for FFM States
First I felt relief for the 6.4 million Americans with subsidies participating in the 34 Federal Marketplaces across the country. However, not all of the fourteen State-Based Marketplaces (SBM) including D.C. who are running their own exchanges are successful. Here is what is next for Exchanges:
State Migration to FFM
Arkansas, Delaware, and Pennsylvania in mid-June did receive tentative approval from HHS for a state-based insurance exchange. But in light of the decision will these states actually build their own state-based exchanges? I’ll suggest, it will not happen. States with rocky histories will be hard pressed to build momentum for state based exchanges, especially given the enormous challenges with developing and standing up a self-sustaining exchange when the FFM is working well. States will stay with the FFM and states considering a state based exchange will realize that the FFM is a low cost and low risk working model.
SBMs Lose Opportunities for Resale
States will stop exploring options to become state-based exchanges for the individual markets. I forecast that Vermont, Pennsylvania, Colorado, Washington, Oregon will all explore FFM options in the next 12 months. We will see a separation of strategies between Individual Exchanges defaulting to the FMM and the Small Business Health Options Program continuing to explore state run options. Canned leading SHOP solutions like Softheon, bSwift and hCentive will be norm as price, time to market and low cost cloud support models become top factors in state procurement decision making.
Conventional state integrators we saw prevalent into 2015, will be rip-replaced with strong Tier 2 vendors like Cognizant, Amtex, Infosys and Dell Healthcare as focus realigns on low cost maintenance as experimentation into off-shore models grows in popularity. Several progressive states including Kentucky have incorporated offshore development models to protect their citizens from absorbing the high costs of on-shore technical development.
This value shift towards low total costs of ownership models will erode opportunities for states with ‘Exchange in a Box’ solutions.