Archive for category Connect for Health
Connect for Health Colorado (C4HCO) sits midway between a government agency and a startup. As a government agency it purpose was defined to create an individual and small group marketplace for health insurance. As a startup it still had to find a “product market” fit or a method for actually creating the marketplaces and then once finding a product market fit scaling that method to reduce costs or increase the marketplace.
I can be argued that C4HCO has found a product market fit for individual health insurance but the recently released operating report doesn’t provide a good indication that C4HCO knows how this was done or how it will scale. Furthermore the operating report doesn’t provide a clear prioritization of the remaining “startup” tasks. Will C4HCO be focusing on scaling the individual marketplace? Does C4HCO believe that it has achieved product market fit in the individual insurance market? How does small group fit into all of this? Does C4HCO have an overall business model to organize all of these questions?
Last week I discussed some of the problems with some of the initial work around Connect for Health’s financial modeling. The next step is start breaking down the individual lines in the Connect for Health(c4H) . The first step is breaking down the top line revenue. An initial updated model can be found here.
There are two key assumptions in the revenue figures, enrollment and premiums, and a factor that is primarily in C4H control, the administrative fee for policies sold through the c4h. For the moment, we take the baseline enrollment figures as given and only make adjustments based on other modeling. That leaves the interaction between the administrative fee and premiums as the only remaining item to model.
As the number of enrollments in Connect for Health has come in lower than expectations some of the focus has shifted to the future sustainability of the organization. While some initial projections released last week show that even on the reduced enrollment figures there may not cause a dramatic increase in the administrative fees charged to carriers.
More problematic is the lack of dynamism in the projections. A lower enrollment number implies a higher admin fee. However, the higher admin fee is not reflected in a higher premium in the lower enrollment scenario which raises the question of whether the lower enrollment projection captures the possibility of death spiral at the lower enrollment leads to increasing admin fee leading to lower enrollments.
More importantly, the fixed operational and technical budget are never varied. One of the most important questions facing the current board is what types of projects should be green lighted to increase enrollment and decrease cost. Without some linkage between costs and enrollments it implies that enrollment is completely out of management’s hands.
The lack of modeling around the link between costs and enrollments also sidesteps difficult but important questions around the more fundamental nature of Connect for Health. What is a realistic customer acquisition cost Connect for Health? What is the customer retention cost for eligibility redetermination and re-enrollment? What happens if the cost of outreach or customer acquisition for a substantial number of eligible consumers is too high for what is seen as an acceptable revenue basis?
In many cases it is not the projection but the modeling that leads to the projection that are the key value of projection. This modeling leads to key assumptions that initially be hidden. The modeling also creates a great opportunity to build in early feedback cycles that enable a management team to alter outcomes.
Over the next few weeks I’ll be building some of the more detailed modeling to create more complete Connect for Health sustainability projection.