Is the Glass Half Full or Half Empty for Health Plans?

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

This week, 1000 convened in Nashville for the 2015 America’s Health Insurance Plans Institute headlined by Bill Clinton, Mitt Romney and others.

Notably, the 3-day program was upbeat. Pundits and healthcare luminaries challenged audiences to ‘Engage. Change. Disrupt. Innovate. Rethink. Imagine.’ Dire forecasts of the health insurance industry’s demise were dismissed as ill-informed. The bottom line per the speakers: The future for health plans is bright, the opportunities expanding, and the alignment of the industry’s interests with those of the average household consistent and strong. Per the Institute, the glass is more than half full for health plans.

A prominent theme in this year’s agenda was consumerism: how technologies enable increased shared decision-making by individuals (‘they’re not members’ anymore) in their treatments, how consumers define and desire value in their interactions with providers and payers and how they use their time and money in pursuit of health.

I share the view that rumors of the demise of the private health insurance industry are highly exaggerated if not outright ridiculous. And agree a focus on consumers in the industry is a necessary pivot. While criticism of insurers for sometimes less-than-understandable coverage and denial determinations and heavy-handed contract negotiations with providers is fair, health insurers, as a group, serve a worthwhile purpose. Fundamental in their business models are competencies that are increasingly salient to the health system’s sustainability—population health, consumer lifestyle changes, drug purchasing and medication management, quality measurement and cost containment among many. And it was the insurance industry, not providers that led the charge for transparency about costs, quality, outcomes and patient experiences long before the government joined the effort.

Looking ahead, the health insurance industry’s glass is more than half full because it enjoys three distinct advantages over other sectors in healthcare:

1-Data: Insurers process data from every interaction (encounter) that takes place in healthcare. They collect, analyze, and apply data from labs, clinics, hospitals, post-acute and ancillary providers to sophisticated models that allow prediction of outcomes, optimization of clinical processes and assessment of which providers provide the best value (low cost-high quality care). They’re loaded with information and use powerful statistical modeling to predict utilization that’s necessary or not, outcomes, costs and so on. The insurance sector is strategically positioned as the infomediary for healthcare going forward.

2-Culture: The culture in insurance companies, contrary to what critics allege, is not anti-provider. It is pro-health. Health insurance companies recognize that lifestyle decisions and social determinants of health matter incorporating these in plan designs and member services. Their business model rejects that doing more is always better care, deploying population health management programs, case managers for the sickest, and provider profiling to measure the effectiveness and efficiency of care. They cover treatments, drugs and tests that are necessary and evidence-based but they’re keen to structure plans that avoid paying the highest prices if they can be bought cheaper. Those who work for health plans do not see themselves as villains: they view their role as essential to an orderly, affordable health system that left on its own, would be non-sustainable.

3-Flexibility: Health insurance companies tend to have deep pockets and a desire to change. Their business model today is primarily linked to services for employers, Medicare and Medicaid. Tomorrow, they’ll pivot to direct-to-consumer retailing including wellness and healthy living programs and customized individual health plans, both online and virtual. The C suites in the health insurance sector are inclined to act fast: they do no face the regulatory hurdles and complexities intrinsic in the operation of hospitals, drug and device manufacturing and other sectors. They leverage data and scenario planning techniques to envision possible future states long before they appear in reality.

For these reasons, it seems to me their glass is more than half full. But it’s not completely full: the enmity between providers and plans is palpable and intensifying. Both are competing to win the race from volume to value and both are seeing their ranks thin through consolidation and attrition. Both face intensified regulatory scrutiny and unwanted attention from public report cards showing less than optimal performance and wide variability in their ranks. Both see a future wherein value-based purchasing by large employers, enrollments in private exchanges, consumer discretionary buying patterns and clinical results delivered efficiently will be market differentiators. And both see increased co-dependence on the core competencies of the other as keys to sustainability long term.

At the airport Friday afternoon, I caught up on the day’s healthcare news–the purchase of OmniCare by CVS, the approval of female viagra, the final regs for ACOs from CMS and so on. But it was a full page ad that caused me to pause: “Humanity Holds the Power to Heal It was sponsored by DignityHealth, the San Francisco-based multi-hospital operator led by Lloyd Dean.

The power to heal is a pursuit shared by both providers and plans. Though methods, cultures and organizational strategies vary widely in its pursuit, it’s the common thread that keeps sometimes dysfunctional relationships like payer-provider going. Payers and providers live in separate worlds. Each is keenly aware of the strengths and challenges facing the other, and both know winning the hearts and minds of individuals, a.k.a. consumers, is the long-term imperative.

For health plans, I believe their glass is more than half full. Likewise for provider organizations that are willing and prepared to change.

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.