PwC's Health Research Institute today released the second installment of "Health Exchanges: Open for Business," which examines the early positioning by insurers and other new competitors, many of whom will be entering the individual insurance market for the first time.  While the courtship of newly insured Americans begins in earnest on October 1 with open enrollment in online insurance exchanges, HRI research finds that the allure of a new customer base has insurers gingerly entering the individual market – but they face significant challenges and new competition in their efforts to attract and retain customers.

"With open enrollment about to begin, large national insurers and new players, some from other industries, are jockeying for position in the new exchange market," said Ceci Connolly, managing director, PwC's Health Research Institute.  "Investment in retention programs will be crucial to securing the loyalty of a new crop of technologically-savvy buyers.  Companies should think beyond initial implementation challenges and focus on building a meaningful customer experience, with an eye on cost reduction and personalized communication."

HRI conducted in-depth interviews with insurance executives, consumer experts and health policy leaders about exchange strategies and surveyed more than 100 insurance executives to understand their plans, progress and pain points related to participation in the state insurance exchanges.  Some notable findings of the survey include:

• Most insurers surveyed (69 percent) plan to offer coverage on the exchanges, reflecting the rising significance of this new business opportunity
• Ten of 18 national health insurer executives said their companies won't offer exchange coverage in all the states where they currently have business, and 50 percent expected to enter additional states after 2014
• Sixty-three percent said technology integration and 61 percent said coordination of subsidies were major barriers to implementation
• Only 34 percent of insurers said understanding newly eligible customers was a major barrier to implementation, suggesting they may not thoroughly understand the challenges associated with attracting and maintaining this new group of buyers armed with the power of choice, a major shift from the wholesale approach many insurers are used to
• Nine in 10 insurance executives (91 percent) expect that premium costs, followed by total out-of-pocket costs, will be what consumers care about most
• Yet industry and consumer experts expect other factors, such as personalized communication, tangible rewards and health management programs, as well as brand recognition, will be the ultimate differentiator

"Organizations that are planning to offer coverage on the exchanges should prepare to compete in new ways to earn consumers' business and loyalty," said Sandra Hunt, principal with PwC's Health Industries practice. "Transparency around pricing, quality and customer satisfaction should be foremost in their minds as consumers become much more aware of the cost of healthcare and how to access it."

According to the report, new exchange entrants will include Medicaid managed care companies, new health plans run by large provider systems, healthcare start-ups, and non-insurer players such as web brokers and tax preparers.  Their participation won't come without challenges as many will need to learn how to operate effectively in the new exchange market and manage the needs of a largely unknown population.