The race is on for carriers planning to participate in state insurance exchanges. Under interim final rules issued by the Department of Health and Human Services (HHS) March 12th, states will be allowed the flexibility on how many key provisions of the law are implemented, and at the same time, if they wish to operate their own exchanges, they must "demonstrate complete readiness" by Jan. 1, 2013.

This means carriers must also be ready to respond and be far enough along in their exchange planning to satisfy any requirements states may set – as well as to meet the October 2013 enrollment launch date—or risk being excluded from the exchange. This includes:

Designing and securing certification of exchange-specific Qualified Health Plans that meet the Actuarial Value and provide all Essential Health Benefit (EHB), the details of which will not be finalized until September of this year

Establishing physical connections to each state exchange to publish plan and rate information and manage enrollment and benefits, which for carriers operating in multiple jurisdictions could mean implementing scores of different technical interfaces

Designing business processes to administer exchange plans, including the ability to calculate subsidy levels and out-of-pocket limits and bill multiple sources for premium payments

Clearly, participating in state exchanges, while potentially advantageous, is resource intensive and requires a fundamentally different approach to administration. That is why outsourcing to experts is gaining favor as one of the best, most cost-effective strategies for accomplishing all the heavy lifting that goes into state exchange programs.

Partnering with an experienced outsourced provider to handle the infrastructure and administration allows carriers to focus internal resources on core competencies. Carriers can focus on plan design and certification while their partner focuses on establishing the technical gateways and administrative business s operations. This includes ensuring the interface with each exchange meets the technical specifications, data collection, reporting and communication requirements of each state.

Outsourcing also enables carriers to tap into a depth of expertise that is often not available internally. It allows them to leverage their partner’s experience administering individual plans, as well as Medicare and Medicaid, to meet the unique needs of exchange participants.

For example, the members purchasing insurance through exchanges will typically be eligible for varying levels of subsidies, which will necessitate flexibility in premium billing, payment processes, and reconciliations. Many of these members will also be new to the individual insurance market and will require a higher level of customer support than most carriers are accustomed to providing.

Experienced outsourcing partners can provide transparent plan administration which enables carriers to reap the rewards of exchange participation without diverting valuable resources away from other profitable business lines. They can also implement strategies designed to maximum the investment into state exchanges, such as analytics-driven marketing, retention and cross-selling programs.

Time is short for carriers to finalize their exchange readiness programs, even for those who recognize the distinct advantages offered by outsourcing some or all of their needs. Resources are limited, and carriers that wait too long to establish key relationships could find themselves standing on the exchange sidelines.