The Future of Health Insurance in the U.S. System

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week's article. 

The future of private health insurance and the government’s role in shaping it in our health system is a recurring theme as implementation of the Affordable Care Act nears its half-way mark. It’s a $743 billion high profile industry dominated by the soon-to-be Big Three (United, Anthem, Aetna) and the Blues.

In last week’s news cycle, three relevant stories illustrate its prominence:

1-The 2016 Exchange Enrollment season kicked off last Sunday and there were no glitches—that’s news in and of itself. Private insurer participation in the marketplaces stayed at 2015 levels but premium increases varied widely (the second lowest silver plan premium increase range was -23% to +48% with the average increase of 7.5% for all) and plans offered narrower networks.

2-The CO-OPs were in the news as their viability was the focus of a Congressional subcommittee hearing.

3-And the Supreme Court agreed to hear a case brought by the Little Sisters of the Poor challenging the law’s requirement that the religious order notify the government about its religious objection to contraception as part of its health benefits.

These illustrate the complexities and centrality of health insurance in our system of health. It’s a huge part of our system of health, though uniquely complicated compared to other developed systems of the world.

For example, the marketplaces were intended to expand access to affordable insurance by giving individuals more options, especially those in lower income brackets who qualify for tax credits (representing 85% of the 9.1 million exchange enrollees to date). But results for exchange enrollment have fallen short of earlier goals (HHS dropped its estimate from 20 million to 9.4 million to 11.4 million last month) and the proportion of previously non-insured lower-income young invincibles enrolling has been lower than forecast. And last month, Harvard researchers reported that specialties were missing in 15% of plans in the federal marketplace prompting the National Association of Insurance Commissioners to propose legislation requiring broader networks.

Likewise, the CO-OPs were intended to provide increased options for consumers where the private insurance market was deemed non-competitive, but results for CO-OPs have missed the mark. Only 13 of the 23 will be operating next year due to insolvency, and those remaining are operating at a loss.

And the case to be heard by SCOTUS in March, 2016, will be the fourth challenge to the law since passage in March, 2010 and all relate to the ACA’s insurance coverage requirements. The pursuit of adequate coverage and essential benefits sought in the ACA remains a work in process in our pluralistic insurance marketplace.

Beyond these, the biggest questions about health insurance in the U.S. system remain unanswered: Is health insurance a right or privilege in our society? Is coverage required? Should health insurance coverage cover only major events or virtually everything? Should employers get a tax benefit for offering coverage that’s used to offset wages? Should the federal government offer “Medicare for all” and so on.

And stories about insurance coverage will continue to get attention in the weeks ahead and as Campaign season hits full throttle. How will 20 state legislatures grapple with Medicaid expansion?  Will the Cadillac Tax on rich employer health benefits that looms in 2018 be repealed? How will the individual mandate penalty be enforced this year by the IRS? And so on.  But an important story playing out in most communities is perhaps more fundamental to the future of the private health insurance industry in the U.S. than any of these.

It goes like this:

In the Affordable Care Act, and in regulation implemented by Medicare (CMS) this year, financial risk is be shifted to doctors and hospitals from payers. Through a variety of alternative payment programs (accountable care organizations, bundled payments, value-based purchasing programs, avoidable readmissions, patient centered medical homes et. al.), doctors and hospitals will be paid based on their management of cost and quality.  And capitated payments from insurers, employers, Medicaid and Medicare are likely to follow as payers shift their financial risk to providers.

Historically, integrated delivery systems focused on the provision of services that met industry-best practice levels of quality and safety. Payers—private insurers, Medicare, Medicaid, and large employers– negotiated rates paid for these services and coordinated care for their members. These players—integrated delivery systems and payers– lived in parallel, separate universes. But the Affordable Care Act, in tandem with Medicare, have changed the game: providers are now responsible for insurance risk and total population health management. Patients routinely ask their physicians about what’s covered and what’s not, and what things cost, only to learn their physician has no way of knowing without calling the insurer. Consumers (patients) expect their providers to know what’s necessary for their care, and what’s covered by their insurance. Thus, notable organizations like Presbyterian (Albuquerque), Carle Clinic (Urbana) and 60 others sponsor their own health plans to marry the two, and others are thinking they should. The reasoning is two-fold:

Capabilities: Since providers are increasingly responsible for managing total population health, the capabilities necessary to assuming insurance risk are essential to the organization’s core operating model. Care coordination, formulary design and medication adherence programs, enrollment and member services, medical management and outcome measurement, claims adjudication and other capabilities once the domain of insurers are necessary to the delivery system’s performance. And the integration of these functions facilitate access to verifiable data about costs that are otherwise hard to get from outside insurers. The transition from integrated delivery system to an integrated system of health seems necessary, so the capabilities required to manage risk are as essential as inpatient and outpatient services.

Mission: Provider organizations that sponsor plans, and those that seek to be an integrated system of health believe theirs is a purpose that’s different than private insurers. Mission matters. They believe cultures in insurance companies lack community responsiveness and are sometime callous about clinical processes and decision making that impact patients.  They recognize that the health and wellbeing of their patients has as much to do with their sense of financial and social wellbeing as the diagnosis and treatment. They’re not delusional: insurance purchases by consumers and employers are price sensitive, so benefits plans, premiums and coverage features must be competitive, but those sponsoring plans aka “integrated systems of health” affirm a different purpose for their plans.

Polls show most Americans think having health insurance is important to their wellbeing but they trust their doctors and hospitals more than their plans. It’s plausible to assume that a health plan sponsored by a local health system that’s priced competitively might compete favorably with non-provider sponsored plans if the prices for their plans are competitive. And it’s reasonable to expect that regulators will use their enforcement clout to maintain competitive markets; their purchasing power to keep spending at acceptable levels; and their oversight powers to establish and monitor access, safety and quality—all in a transparent marketplace.

To private insurers, this scenario is no surprise. Most offer to partner with integrated systems of health in shared risk arrangements renting their data and capabilities. Some are buying integrated delivery systems themselves, bolting them onto their insurance chassis. And all are carefully navigating their course to new markets, new services and leveraging their data to maintain a prominent role in the U.S. system going forward. They’re not going away, and the strongest are getting stronger.

In some communities, the integrated delivery system will choose to contract with one or more traditional insurers and pursue strategic partnerships. In others, integrated delivery systems will become integrated systems of health, partnering with their peers to offer competitive insurance plans that are integrated into the organizations total care management programs. In all, insurance risk will be borne by an integrated team of doctors, hospitals, allied health professionals, pharmacists and post-acute facilities responsible for cost and quality. And these fully integrated systems of health will operate their insurance programs with a purpose that’s different.

That’s the future for health insurance – a bigger role inside integrated systems of health, and a different role for the traditional insurers themselves.

Paul

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

©2015 Navigant Consulting, Inc.