SaaS: The future of health insurance enrollment

The choice of which technology platform to use for the state-based marketplace (SBM), also known as Affordable Care Act exchanges or simply “exchanges,” can greatly impact a state’s success when it comes to health insurance enrollment and is one of the most consequential decisions a state government will make. 

While there are several options available today, as states make moves to lower operating costs, increase policy flexibility and autonomy and leverage product innovation to drive enrollment, software-as-a-service (SaaS) state-based marketplace solutions have emerged as the platforms of the future. Let me explain why this is the case by reviewing the differences between the technology options available to state and local governments today.

Custom builds

In the early days of state-based marketplaces, custom-built solutions were the only viable way to deliver a workable solution. However, it was soon apparent that these systems were cumbersome and expensive to maintain. Ongoing fixes, security updates and additional features to promote operational efficiency inevitably require continued investment beyond the initial implementation.  Because high IT costs are passed on to consumers by way of higher monthly premiums, it is therefore important to keep operating costs and ongoing IT investment as low as possible.  

Also, the amount of time to design and develop a custom state-based marketplace solution is estimated at two to four years, depending on the resources and skills available. During this development time, states’ needs and policies can, and likely do, change, making any custom solution potentially obsolete by the time it is deployed.  

Open source-based custom builds

Open-source software is typically released into the public domain by a developer and made available for others to use and build upon as they see fit. Open-source technologies benefit from a community of users supporting and improving the technologies. Other benefits inherent in using open-source software include reliability and security thanks to the developer community continually identifying and patching issues.

This model also has a relatively low initial cost, since open-source technologies do not bring along the burden of licensing fees. However, open-source initiatives only fulfill their promise when a robust community of users and developers commit to the ongoing development and maintenance of the software and follow through to put all updates made to the shared code base into the public domain. 

Open-source initiatives work well for operating systems and widely used components with broad developer community support. Conversely, purpose-built state health care IT solutions such as health insurance marketplaces do not have the broad developer support needed to maintain and enhance the platform. Open-source solutions demand client states make continued investments to improve or enhance the platform, since no financial incentives exist for independent developers or others to invest in the platform. Core product improvements specific to the state’s requirements and enhancements driven by state or federal policy and regulatory changes will add costs and investment.  

Like custom-built solutions, narrow-use open-source platforms require extensive customization and maintenance by specialist firms, adding an unpredictable cost component to build the features and functionality needed to maintain the underlying platform. In addition, all the issues around infrastructure maintenance, management, data security and operational issues are identical to custom builds and are not eased by adopting an open-source code base. 

Software as a service

SaaS is a methodology of delivering software services that has rapidly gained acceptance in the private sector. SaaS vendors deliver functionality “on tap” by deploying their software in the cloud and leveraging a common code base across clients. This approach is extremely efficient since it enables development, infrastructure and other costs to be shared, and it does not require clients to have large technical teams to maintain and support the platform. 

Some of the most common examples of SaaS we use every day include SalesForce CRM, Microsoft Office 365 and Google Docs, platforms in which new features are delivered as part of platform enhancements that are available to all users.

While many SaaS solutions make use of widely used open-source technology, the code base is typically proprietary and is maintained by the SaaS vendor. Providing a SaaS product that uses open-source technologies delivers a configurable platform that benefits from open-source principles without requiring large investments from clients. 

Implementing a SaaS platform costs a state less on the initial implementation, and, over time, SaaS models continue to cost millions of dollars less than custom-built or open-source solutions. This is obviously important for saving budget dollars, but when a state operates an exchange at a lower cost, savings can be passed along to consumers via lower premiums.

Here are some real-life examples of how operational cost savings can benefit exchanges:

• The Pennsylvania exchange (Pennie) increased the number of enrollees by 9.7% year-over-year and was able to offer lower premiums in its first open enrollment period as an SBM.
• Get Covered New Jersey plan selections for 2021 coverage increased 9.4% year-over-year, as the state successfully expanded access to health coverage through its new state-based marketplace during its first open enrollment period.
• Nevada Health Link saw a 2% decrease in premiums after switching from an SBM-Federal Platform to a state-based marketplace.

SaaS also presents the opportunity to innovate and improve operations. For example, bug fixes for one state are available automatically and applied proactively to other states, resulting in a reduction of overall consumer-visible issues. Similarly, product improvements that are designed based on one state’s experience benefit other states as well. This ensures that customers have the capabilities needed for competitive success. In the custom and open-source deployments, this type of shared improvement does not take place. 

A look to the future

As we look ahead to the 2022 Open Enrollment Period, states will continue lowering operating costs, increasing policy flexibility and autonomy and innovating to drive health insurance enrollment -- making SaaS state-based marketplace solutions the most suitable technology available.