Health reform is in such a chaotic state and will continue to be so even after the Supreme Court ruling on the constitutionality of PPACA - and the November election. This is where scenario planning can help. At the April conference for the Institute for HealthCare Consumerism, I listened to a panel on alternative planning scenarios in regard to health reform using scenario planning. Let's see how it works.
In its simplest form, scenario planning starts with two sets of opposing possibilities. In the case of health reform these are currently 1) PPACA constitutionality versus unconstitutionality; and 2) Obama is re-elected versus Romney is elected.
Note: when you actually dig into the details you will most likely want to create additional scenario grids, giving you a quadrant within a quadrant. This is helpful in developing business plans. Following are some things to consider in each scenario. The intention here is to get your thought processes going and not to provide an exhaustive list of the possibilities.
PPACA found constitutional, Obama re-elected
This means full-speed ahead on both federal and state health insurance exchanges. Except the timing may be off - will the feds and/or the states really be ready for enrollment to begin in the fall of 2013? So all of the work on exchanges will continue at a frenzied pace. Regardless of the timing, the number of insured will be significantly reduced once exchanges begin operation. And the number of small-group employers utilizing SHOPs is likely to be high because of the various incentives. Another consideration is, what happens if health care costs continue to rise at historical rates - how will Washington and the health care market respond? Will private exchanges be able to compete in this scenario?
PPACA found unconstitutional, Obama re-elected
This is an interesting scenario given the recent gridlock on Capitol Hill, begging the question, how will the issues get resolved? It does depend on the breadth of an unconstitutional ruling by the Supreme Court. The Court could nullify just the individual mandate or the entire PPACA (a good example for developing a quadrant within a quadrant scenario).
The implication of the first case is that guaranteed issue and exchanges remain. Fixing the unconstitutionality of the individual mandate could be as simple as changing from a penalty to a tax. Without an individual mandate, the issue of health care costs looms large and will need to be addressed legislatively. In the case of the entire PPACA being declared unconstitutional, we end up with quite an interesting situation. Already enacted components of the law, many of which are quite popular, will need to be addressed (e.g. dependent coverage up to age 26 or no lifetime limits). Plus, the legislative requirement for exchanges goes away. But, will the states continue their exchange initiatives? Do private exchanges offer potential, "free-market" alternatives in this scenario?
PPACA found constitutional, Romney elected
This quadrant may best be characterized as the "put up your dukes" category. The severity of the political debate depends on the makeup of Congress after the November elections. Anything resembling the current makeup will likely result in federal gridlock. Attempts to de-fund or marginalize PPACA through executive order are quite possible. A legislature leaning toward Romney will probably lead to quick repeal of PPACA. What comes in PPACA's place remains to be seen, but state-sponsored exchanges may continue to evolve and private exchanges may offer a great market opportunity.
PPACA found unconstitutional, Romney elected
In this scenario, hopefully, the new administration will act quickly and definitively to forestall any market chaos and set a new course. Clearly, exchanges will fall by the wayside, although some states may continue their exchange initiatives. Again, private exchanges may have an opportunity to flourish. Maybe ideas like a national risk pool or tax incentives will come into play. Employers working with carriers, in an attempt to control continual cost increases, may act together to implement change. Workers will have to take on more ownership of their medical costs through vehicles like HDHPs or defined contribution arrangements. Plus workers may be required to pay higher premiums if they smoke or don't actively control their weight or cholesterol.
Scenario planning is an excellent tool, and if used properly it may uncover an area of opportunity for you in the market and a way to bring innovation to our industry.
Lamb is VP and group head of the EbixBenergy business unit at Ebix Health.
