Technology companies are reinventing the insurance industry, and health plans are looking for ways to take advantage of their expertise.
Companies in the health insurance business are looking to do to health plans what Uber did to the taxi business: Use technology to create an entirely new, customer-friendly approach to a traditional business model.
Insurtechs—companies using technology to improve efficiency and lower costs in the insurance industry—are bringing new approaches to various facets of the insurance industry.
The number of insurtechs is growing rapidly, financed by billions of dollars in venture capital, says Bill Fox, JD, chief strategist for global healthcare, life sciences, and insurance at MarkLogic, a database company. Some of the biggest players are companies such as Metromile,Oscar, and Insureon.
These companies are not looking so much to bring technological solutions to stodgy old insurance companies, however. Rather, they are creating entirely new ways to sell insurance and service customers, Fox says.
They are driven in part by the customer-centric business trends that have made businesses such as Uber and Airbnb so successful, he says.
"They are skipping right over the problems that 200-year-old insurance companies have with legacy architecture and old databases to ask how they can do insurance the way Amazon and Uber do business," he says.
"The insurtech movement is saying they can take a piece of the insurance business, completely free it from the technical restraints, and make it low-ball, customer-centric, omni-channel, frictionless. If I can sign someone up for life insurance in 15 minutes instead of it taking months, with all that paper involved, I'm going to take over this industry. I'm going to disrupt it," Fox says.
Some Insurance Lines Changing
That is already happening in some insurance industry channels, with Lemonade, for example, now selling renters insurance in 26 states after only two years.
Fox expects insurtechs to disrupt the healthcare industry in the same way by creating new ways to market health insurance, playing into the continuing trend for consolidation.
"All gloves are off now as far as what's a healthcare company, what's an insurance company, what's a financial services company," Fox says.
"There used to be this idea of owning the covered life, with everyone wanting to be like Kaiser, Intermountain, and Geisinger in the way they owned both the insurance of the patient but also oversaw the care from the moment they walked into the doctor's office, through the hospital visit, and on to maintaining the chronic condition. That's open to everybody now," he says.
Legacy Insurers Want to Play
Traditional insurers are acknowledging this likely future by creating venture funds that provide capital for insurtechs, keeping themselves in the game.
Nationwide recently launched a $100 million venture fund to support "next-generation experiences for Nationwide’s customers by exploring leading-edge topics from analytics and automation technology to new insurance and financial services platforms," as written on their website.
"Their job is to find these insurtechs that can accelerate their innovation so they don't get left behind," Fox says.
"It's going to be really hard to disrupt a UnitedHealth with 60 million insureds or an Anthem with 20 million insureds, but what they can do is change the business model so that these large legacy insurers can buy into that quickly," he says.
Fox notes that the organizers of the Amazon-JPMorgan Chase-Berkshire Hathaway deal are having a difficult time finding a CEO to run the organization because they realize that the data and technology driving the future requires someone who is more than just a good business leader.
"They've interviewed many of the usual suspects and no one so far has had the right skill set. That's because most senior executives in these organizations have a lot of knowledge about one thing, usually banking and financial services or payments and risks, and the Amazon people understand retail," Fox says.
"But to find an executive who can empower an organization to get the synergy from those things and embrace the data and technology necessary to more forward? That's hard," he says.
Less Room at the Top
Insurtechs will push the bigger and more innovative health plans to success, but the more mediocre insurers will suffer, Fox says.
"I think it's going to be very good for the ones that quickly make the big moves to become digital businesses," Fox says. "With these various kinds of businesses being built—the pharmacies joining with retailers, organizations that understand the world is changing around them will do very well."
As some of the biggest players in healthcare join forces and leverage their mutual data capabilities, insurtechs may be either the way they make it work or their new competitors.
"If you take too long or make the moves that could be successful, but you're dragged down by your legacy technology and the legacy people tied to that technology, it's going to be harder to stay in the middle. We're seeing across industries that there are fewer big winners and more losers," Fox says.
"All of these big mergers we're seeing in the healthcare arena seem to make sense for those companies, with obvious benefits, but it's going to come down to what they do with it and what kind of traction they get out of that data they traditionally ran their businesses on. Can they get these entrenched healthcare systems to move quickly to a better way of doing business?" he says.
Insurers are starting to file their rate requests for next year and all signs point to a third year of double-digit increases.
Stop me if you've heard this one before. Health insurance premiums are going to rise again next year, even after a startling increase this year.
Health plan executives say they really have no choice. With their costs rising and political moves driving consumers away from their products, they have to charge more just to survive.
Sometimes a lot more. Some Maryland residents will be asked to pay almost double their current rates.
They probably won't pay it though, because Marylanders now have other options such as short term health plans.
And that's part of the problem, the insurers say.
Health Insurance Price Drivers
Higher healthcare premiums in 2019 will be driven by several factors that payers say are beyond their control, including
Increases in medical trend and pharmacy costs
The elimination of the individual mandate penalty
The impact of new regulations that expand the availability of association plans and short-term plans
The only saving grace, they say, is the one-year moratorium on the health insurance tax, which could counter some of the factors driving the increases, but only a little, not nearly enough to make a dent in the overall increases.
CBO Eyes 15% Average Premium Increase
The health insurers' explanation for why they're raising premiums so much in 2019 is outlined in a recent report from America's Health Insurance Plans, the trade association representing the country's largest health plans.
Next year will be another challenging one for the health insurance market, says, Greg Gierer, AHIP's senior vice president for regulatory affairs.
"Medical spending is on the upswing, about 6.5%, and there are policy actions that create uncertainty and instability in the market," he says.
"Uncertainty in a market drives instability and pushes upward pressure on premiums. With the individual mandate penalty going away in 2019, independent experts say that is going to drive up premiums between 9% and 10% because the individual coverage requirement is one of the key factors for getting younger, healthier people to purchase coverage."
The Congressional Budget Office estimates premiums for benchmark plans on the health insurance exchanges will increase by about 15% on average in 2019. That's a steep rise, and the cumulative effect is even worse for consumers after premiums increased by an average 34% in 2018.
Some states are begin to release information on proposed rates health insurance rates for 2019:
Oregon is reporting rates that range from a decrease of 9.6% compared with 2018 rates to an increase of 16.3%.
Vermont is served by two plans. Both requested increases. Blue Cross and Blue Shield of Vermont wants an average 5.3% increase for plans offered to individuals, families and small businesses and MVP Health Care is asking for an average 6.4% percent increase.
Maryland has seen requests for premium increases ranging from 18.5% to an incredible 91.4%.
Virginia rates for 2019 range from a decrease of 1.9% to an increase of 64.3%.
Higher Spending and Rules Changes
AHIP breaks down the factors leading to those increases this way:
Medical price inflation and prescription drug cost increases are responsible for a premium increase of 5.7% to 6.5%.
Elimination of the individual mandate penalty will result in an increase of 9% to 10%.
The moratorium on health insurer tax for 2019 will reduce rates 3%.
Some of these changes leave payers at a serious disadvantage in a competitive market, they say, particularly the increased availability of non-ACA compliant health plans.
"The association health plans would be allowed to operate exempt from many of the requirements that apply to qualified health plans on the exchange, including the requirement for coverage of essential health benefits and the community rating requirements that make sure people don't face higher rates because of their health status," AHIP's Gierer says.
"Allowing these noncompliant plans to operate outside the ACA requirements bifurcates the risk pool and siphons younger, healthier people out of the ACA market and into these alternative coverage options. That has a detrimental effect on the risk pool and raises premiums for everyone else."
The increases predicted for 2019 would be the third year of double-digit increases in healthcare premiums, and Gierer says that shows how much the insurance industry is struggling to find its way in this new healthcare landscape. Consumers are being asked to pay more because the insurance companies are fighting to survive, he says.
"This is a symptom of a market that is not stable," Gierer says.
How States Could Help
He notes, however, that this instability is seen primarily in the individual marketplace, which covers about 18 million Americans. Another 150 million are covered through their employer-purchased plans.
"We're not seeing this kind of premium increase in the employer market, so this is an issue of very specific factors in the individual market fueling these types of premium increases," he says.
The 2019 increases in the individual market also are not set in stone yet, Gierer says. Some state policy decisions, such as creating re-insurance programs to back up health plans and cut some of their risk, could still influence the final numbers, he says.
Alaska, Maryland, and Minnesota have created or plan to start re-insurance programs, and about half a dozen more are seriously considering it, Gierer says. Any forward movement from those states could hold back 2019 premium increases if it were to happens soon, he says.
"I wouldn't say there is nothing to be done at this point, but time is running short," Gierer says.
"Plans are finalizing their decisions about participation in the market and premiums, but there are a number of policies at the state level that could help strengthen risk pools and allow states to protect their markets."
The insurance giant is suing a consumer group and law firm that called it to task for inadvertently revealing the HIV status of customers. Aetna says it was their fault.
In what has become a comedy of errors, Aetna is suing the nonprofit Consumer Watchdog, which tangled with the insurer for trying to require mail order purchase of HIV drugs and for accidentally disclosing the HIV positive status of thousands of its members.
The insurer says it actually is their fault that it used a window pane envelope that revealed the recipient's HIV status.
Aetna filed suit against Consumer Watchdog and Whatley Kallas LLP, a consumer law firm, which were responsible for suing Aetna after it used a window pane envelope that revealed members' HIV status. Aetna says the defendants should pay $20 million in damages for the settlements and fines Aetna has been forced to pay so far, as well as additional civil penalties from ongoing federal and state investigations.
The law firms currently represent a consumer whose HIV status was publicly disclosed through the window pane envelope. This John Doe was one of several plaintiffs who Consumer Watchdog and Whatley Kallas LLP represented in a 2014 lawsuit challenging Aetna's prior practice that mandated its HIV patients obtain their life-sustaining prescription medicines by mail order, rather than by going to their local pharmacy.
This is how the situation unfolded:
The plaintiffs contended the mail order policy exposed HIV patients' health status to their families, friends, neighbors and coworkers, a violation of state and federal privacy laws.
They also contended the mail order program threatened HIV patients' health by cutting off access to community pharmacists who provide essential advice and counseling.
Aetna settled the lawsuit by permanently stopping the mail order system and reimbursing patients who paid higher prices by choosing to go to local pharmacies.
Aetna mailed a required notice of the settlement to its 11,875 affected members, advising them of their rights under the settlement. Aetna sent the letter out in an envelope with a large window that showed the first line of the letter, including the words, “when filling prescriptions for HIV medications.”
Aetna settled a class action suit related to the privacy breach in federal court in Pennsylvania and also agreed to new privacy practices with the State of New York.
Aetna filed this latest lawsuit, claiming that the settlement administrator sought approval only from Whatley Kallas when specifying what type of envelope would be used, that Aetna did not sign off on the proposed envelope.
"Aetna's attempt to blame us is a frivolous waste of judicial resources and Aetna knows it," said Harvey Rosenfield of Consumer Watchdog. "We had no control over the mailing process and had no idea that Aetna decided to use an envelope with a giant window that exposed the recipient's HIV status."
Addressing problems such as transportation and lack of healthy food improves the health of the insured while saving money for health plans, new research shows.
Health plans can substantially reduce the amount of money spent on healthcare expense by investing in solutions that address social barriers keep their customers from living healthy lifestyles, new research shows.
Research from WellCare Health Plans, which serves approximately 4.3 million members nationwide, and the University of South Florida (USF) College of Public Health, Tampa, indicates that healthcare spending decreases when people are successfully connected to social services that address social barriers, or social determinants of health, such as secure housing, medical transportation, healthy food programs, and utility and financial assistance.
The study assessed the impact of social services among Medicaid and Medicare Advantage members on healthcare costs such as physician office visits and emergency department use. These are some of the findings:
There was an additional 10% reduction in healthcare costs for people who were successfully connected to social services compared to a control group of members who were not.
That reduction equated to more than $2,400 per person per year in savings.
Among participants in the analysis, 56% reported all of their identified social needs were met and 44% reported that none of their needs were met.
Among the 5,035 social services received in the second year, the 10 most commonly reported social services represented 78.7% of all services.
The most commonly reported social services were medical transportation support (14.5%), utility financial assistance (12.1%), food pantry or program (11.8%), free or reduced vision services (9.9%), general financial assistance (7.9%), free or reduced dental services (6.1%), medication assistance (5.7%), general transportation support (4.2%), housing support (3.8%), and rent assistance (2.7%).
Lead author Zachary Pruitt, MD, at the USF College of Public Health, Department of Health Policy and Management, says the findings add to the growing body of evidence suggesting that support for social service programs and interventions can improve community health outcomes and reduce healthcare spending, especially among Medicare and Medicaid populations who are often challenged by social determinants of health.
"While there is growing recognition that socioeconomic factors substantially affect a person's health status, this research is an important step toward quantifying how addressing social determinants of health impacts health costs," Pruitt says. "The results of our study show that providing social service assistance relates to significantly lowered healthcare spending."
The study examined medical expenditures associated with 2,718 WellCare Medicaid and Medicare Advantage plan members who accessed WellCare's Community Assistance Line—a toll-free, nationwide line open to the general public. Study participants called the Community Assistance Line between January 1, 2015 and March 1, 2016 and identified at least one unmet social need and received at least one referral to a social service organization.
Social determinants of health could have more influence on a person's outcome than the actual care received. Addressing those factors is increasingly important for insurers.
Real progress on addressing social determinants of health (SDOH) to improve outcomes and quality of care within a health plan population could depend on gathering SDOH data and making it accessible to the frontline provider.
For years, health plans have been talking about SDOH—socioeconomic and societal issues that can affect people's health and impede proper healthcare delivery—but finding a way to apply it and gain some practical benefit for both the insurer and the customer has been challenging, says Gabriel Medley, vice president of quality and risk adjustment programs at Gateway Health.
Gateway Health provides Medicaid services to about 500,000 people in Pennsylvania, Delaware, and West Virginia, and Medicare coverage in Pennsylvania, Kentucky, Ohio, and North Carolina.
SDOH data will become increasingly important to health plans as they develop ways to collect better information on SDOH and put it to use, Medley says.
Gateway Health is making headway using data to gain better insight into their population’s socioeconomic barriers to care. The approach can support members who might have otherwise fallen through the cracks if SDOH were not captured, Medley says.
"The future is a data game. The health plans that are able to keep up with the member with dynamic, current, useful information in a cost-effective, real-time way are the ones that will be at the forefront of improving quality for the member," Medley says.
"We have to nest that SDOH data with claims experience and all other different buckets of data flowing to create a common picture in a risk stratification model, then place that information wherever that member is getting care," he says.
Doctors Want SDOH
Providers are looking for SDOH data because they are tired of hearing that they are not meeting quality measures, Medley says. They realize that there are SDOH factors that affect their efforts to provide quality care, so they want to incorporate that information, he says. Such factors can account for more variance in health.
"There is a lot of information available to providers in the chart, but not all of it is provided in a way that makes it actionable in a timely fashion, and some SDOH issues are not reflected in a typical patient's medical record," he says.
"That's where the healthcare sector is going: How do you get this data in a fast, cost-effective manner, and how do you get the data aggregated and organized in a way that the provider, care manager, pharmacist, or even the call center can use it?"
Gateway Health uses a health engagement management system called HMS Eliza for SDOH data collection, as well as cost and quality management, revenue control, and customer engagement.
Gateway Health’s focus on SDOH has improved chronic disease management performance so much that it now outperforms most Medicaid plans in the country, Medley says.
There have been dramatic improvements in control measures for diabetic issues, including blood pressure and medication adherence, Medley says, as well as 40% higher engagement rates in some chronic disease measures.
Chronic disease performance metrics have improved by 3% or 4% each year for several years now, he says, with some measures reaching the 75th percentile. Clinical spending also has become more efficient, with the health plan's medical loss ratio reaching 85%.
Duals More Affected
Gateway Health is a dual eligible special needs plan (D-SNP), and Medley says that puts an emphasis on SDOH for the company. Duals are affected by SDOH more than the average consumer, he explains.
"SDOH factors are particularly important for the D-SNP population because they don't necessarily react to a care program the same way a typical MAPD does," Medley says.
"We use the SDOH data to help gauge the member's propensity to engage, how the member will react to the intervention. That helps us determine the best way to work with that member, knowing up front what the SDOH challenges might be and tailoring our intervention for the best outcome in light of that information," he says.
Many health plans are employing more outreach strategies such as texting and mailing flyers to remind patients of follow-up visits, but the effectiveness of those strategies is limited without better use of SDOH, Medley says.
"Communication is good but you can't get members to close the gaps if they have a social determinant of health that is not being addressed in their daily activities of life. The member may need shelter, may live in a food desert, or not have money to pay for food at the end of the month," he says.
He continues, "If you're trying to get a member to control one of the chronic conditions prevalent in these populations, like diabetes or heart disease, you have to remove those barriers to care for that member before you can expect them to follow through with the care you're trying to provide."
SDOH data can indicate that some members will never be able to comply with a care plan without community intervention, Medley says.
"The higher-level data collection means that you don't stop when you find out the number they gave you is no longer valid, or they don't live any longer at the address you have for them. You may be able to determine that they don't live there now and instead they're living under a bridge somewhere or at a shelter," Medley says. "We have to use that data to triangulate the intervention method that will help this person, and that may mean getting community resources involved."
Recent moves to consolidate insurance customers under one corporate structure could lead next to carriers acquiring hospital networks.
The continued market consolidation and efforts to create an “all-in-one” approach to healthcare insurance customers may lead to carriers acquiring large hospital networks, particularly if the CVS-Aetna transaction proves to be successful and profitable, one analyst says.
The mergers and acquisitions in the insurance industry over the last year is the preamble for what will happen over the next two years, says CEO of Tom Borzilleri of InteliSys Health, a company aimed at bringing greater transparency to prescription drug prices, and the former founder and CEO of a pharmacy benefit manager (PBM).
The effort will ramp up to include hospitals if health plans start seeing financial rewards from the recent moves, he says.
"We are seeing carriers acquiring PBMs, as with Cigna/Express Scripts, and pharmacy chains/PBMs acquiring carriers, like CVS/Aetna, in search of cost efficiencies to increase earnings," he says. "One may view these mergers and acquisitions as a favorable strategy to delivering both cost savings and patient convenience, but this strategy also has the potential to produce a serious negative effect on other critical stakeholders like doctors, hospitals, clinics, and others."
In the past, many carriers managed their pharmacy benefits internally and found that it would be more cost-efficient to outsource that function to third-party PBMs, Borzilleri notes.
"As the PBM industry grew significantly over the last decade, allowing PBMs to gain market share and buying power for the millions of lives they managed, it opened the door for PBMs to methodically profiteer at the expense of both the carriers and their insured through the vague and complicated contracts for services the carriers were forced to sign," he says.
Borzilleri continues, "In essence, the carriers really didn’t know what they were paying for at the end of the day for these services. As the market began to change with the onset of a movement and demand within the industry for more price transparency, carriers began to realize that they would be better served to bring the PBM function back in-house to reduce costs and increase earnings."
Creating a Closed Loop
Borzilleri explains that a merger like the CVS-Aetna acquisition provides the insurer the ability to:
Control drug costs by eliminating the profits that the PBM formerly enjoyed
Realize cost efficiencies to dispense medications at the pharmacy level
Directly employ the providers that can treat their members at a cost much lower than the reimbursement rates they currently pay their network doctors
Create a brand-new revenue stream from the retail products sold in these stores
That brings a ton of reward to CVS-Aetna, but not to anyone else, Borzilleri says.
"This type of closed-loop network will limit patient options to everything from who will be treating them, where they will be treated, and how much they will be forced to pay for services and their prescriptions," he says.
"Based on the millions of patient lives that both CVS-Caremark and Aetna manage, patients will be herded into their own locations to be treated by their own doctors/providers and the independent physician or practice will be significantly impacted. So in essence, both the patients and doctors who treat them will lose," Borzilleri says.
Returning to Classic Design
Hospital acquisition also could be driven by consumers, says Bill Shea, vice president of Cognizant, a company providing digital, consulting, and other services to healthcare providers. As consumers select health services on demand, they will create their own systems of care instead of relying on a third party to do so, he says.
"The impact of these changes likely means integrated delivery systems must focus on providing on-demand healthcare and do so on a large scale. These systems can point to the proven value of offering a vetted and curated set of cost-effective providers and coordinating care to deliver better cost and quality outcomes," Shea says.
Health plans also may consider returning to their pre-managed care origins to purse a classic insurance model of benefit design, risk management, and underwriting, he says. Some organizations could become a one-stop shop for every insurance need.
"These diversified insurance players will have the economies of scale to better manage profit and loss across multiple lines of business and to take creative approaches to health-related insurance, such as offering personalized policies targeted to specific market segments," Shea says.
"As providers with market dominance command higher prices, insurers will need to amass greater market power to push back. This means fewer choices of insurers for employers, other healthcare purchasers and consumers," Delbanco says.
She says, "Fewer choices means less competition and less pressure to innovate. It’s possible we’ll see more of the integrated delivery systems and accountable care organizations beginning to offer insurance products where state laws and regulations allow them to as new entrants into the market."
Those changes will make it more and more difficult to thrive as a small insurer or a small provider, she says.
Also, while rising prices and a continuation of uneven quality will motivate employers and other healthcare purchasers to demand greater transparency into provider performance and prices, larger players may more easily resist that call, she says.
"Increasingly it will be a seller’s game, not a buyer’s," Delbanco says. "While quality measurement, provider payment reforms, and healthcare delivery reforms increasingly move toward putting the patient at the center, this may be more lip service than reality. Even if consumers end up with more information to make smarter decisions, their options may have dwindled to ones that are largely unaffordable."
Texas is the latest state to create a simplified physician credentialing system for health plans. The goal is to draw more physicians into Medicaid programs.
The bureaucratic hassle of applying to different health plans is enough to keep some physicians from participating in Medicaid programs where reimbursement levels are lower than private plans, so some state health plan associations are finding ways to streamline the process.
Medicaid health plans in the state initiated the effort, responding to physician requests for a simpler process, says Amanda Hudgens, director of special projects with TAHP. The Texas Credentialing Alliance participants include Aetna, Superior, Cigna, UnitedHealth Group, and Blue Cross and Blue Shield of Texas.
"We want to simplify the credentialing process for physicians here in Texas and we're focusing on Medicaid providers because we understand they have a lot of paperwork burdens and administrative requirements to become a Medicaid provider," Hudgens says.
She continues, "The intent is to make their lives a little easier. If providers applied to all 19 plans before this program, they would have had to go through 19 different credentialing processes."
The CVO became operational in April and is required for all Medicaid plans in the state but it is open to commercial plans as well. Participating insurers are expanding it to their commercial health plans, Hudgens says.
Physician participation in the Medicaid program varies across the country, with about 70% of office-based physicians accepting Medicaid, according to data from the Kaiser Family Foundation.
The percentage of physicians accepting new Medicaid patients ranges from 39% in New Jersey to 97% in Nebraska. Texas is in line with the national averages.
The Texas Credentialing Alliance allows physicians and providers to submit credentialing paperwork with multiple Medicaid insurance companies at one time, Hudgens says.
TAHP is working with Aperture, which provides credentialing verification services to the healthcare industry.
The program is expected to lower administrative costs for providers and Medicaid health insurance plans, save time by eliminating paperwork for providers who credential and
recredential separately with multiple Medicaid health insurance plans, and streamline recredentialing dates across multiple health insurance plans for providers.
"Aperture will provide the primary verification on behalf of all the plans, verifying the providers' credentials, education, [and] malpractice history; vetting that all the information the providers are sending to the plan are accurate," Hudgens explains. "They will send that information back to the plans and the plans are still going to make the final credentialing decision."
A key benefit will be creating a single recredentialing date for the provider, Hudgens explains. Rather than the provider having a different expiration and recredentialing date for each health plan, the Texas CVO will create a single date.
"Providers have to be recredentialed every three years and if they were credentialed with 19 different health plans, they probably would have had 19 different dates to keep up with," Hudgens says. "Aperture consolidates those dates so they only have to keep up with one date moving forward."
Data may be the key to surviving in the changing healthcare industry.
The proposed merger between Partners HealthCare and Harvard Pilgrim Health Care is yet another response to pressure on all healthcare industry sectors to find innovative paths to success in a market where old business models aren't going to work.
Data is the necessary element in any solution, healthcare leaders are concluding, so someone else who has more data, or a different kind of data, is an attractive partner.
That appears to be the case with the nonprofit healthcare system Partners and Harvard Pilgrim, a medical insurer in Massachusetts. Partners was founded by Brigham and Women's Hospital and Massachusetts General Hospital and includes community and specialty hospitals, a managed care organization, physician network, and a community health center.
Leaders from both companies have been in negotiations for months, The Boston Globe reported. The options include Partners acquiring Harvard Pilgrim.
The deal is likely to face scrutiny from regulators, the newspaper notes. Massachusetts Governor Charlie Baker was once the head of Harvard Pilgrim and said the state would look carefully at the proposed merger to assess the effect on consumers.
Data could be key
The proposed merger is "a defensive one," says David Friend, MD, chief transformation officer and managing director of the Center for Healthcare Excellence & Innovation with the consulting firm BDO. Friend also sits on the board of FallonHealth, a health plan in Massachusetts.
"Partners HealthCare brings access to patients and their data to the table, and Pilgrim brings access to their customers, as well as pharmacy benefits and claims data," he says. "By banding together as one, the two entities are better positioned through access to more potential customers, a streamlined supply chain and, ideally, improved care coordination and outcomes."
Both companies are primarily motivated by the search for data, Friend says.
"Care is being pushed outside the walls of the hospital, and traditional care models are being challenged, putting pressure on providers to cut costs and improve outcomes," he says. "This is especially true in Massachusetts—a state with higher-than-normal healthcare costs driven by hospital spending and enrollment changes. One key ingredient to lowering costs and improving outcomes is access to population health data."
Friend notes that the Partners-Harvard Pilgrim merger is the latest in a spate of deals signifying that the entire healthcare system is converging, and by next year, the traditional pharmacy benefit manager model could be extinct.
"If the Partners-Harvard Pilgrim merger comes to fruition, the combined entity has the potential to provide better care outcomes at lower costs. It could also use its combined population health data to develop new services and better serve its consumers through more personalized care," he says.
A new reality
Health insurance third-party payers, such as Harvard Pilgrim, and healthcare providers, such as Partners, are facing a new reality regarding the business side of healthcare, says C. Timothy Gary, JD, healthcare attorney with Dickinson Wright and CEO of Crux Strategies, a compliance and consulting firm.
"There is a great deal of what economists refer to as transactional costs in the current system," he says. "As both providers and payers look to reduce costs, returning to an integrated staff model is one option that many will consider, as that approach presents the opportunity to reduce those transactional costs."
Staff model HMOs were not at all unusual in the 1980s and 90s, Gary notes. Humana Health, for example, was a staff model payer before it sold off hospital holdings. The healthcare industry tends to recycle old models with new features, Gary says.
The proposed merger is part of a trend and Gary expects to see more in the future.
"Harvard Pilgrim has a footprint that extends outside of the state. One would assume that both parties look to gain market share and reduce transactions costs," Gary says. "A gain in market share for either will come at the expense of their competitors, including Blue Cross Blue Shield in Massachusetts."
"However, I would be very surprised if he didn't want to explore the potential impact of this type of merger on the health insurance industry, the hospitals in Massachusetts, as well as impacts on costs and access to care for patients," he says. "There is a long history with integrated staff model health systems. Some of that history is good and some far less so."
The proposed merger could benefit consumers as well as the two organizations, says Jeffrey Le Benger, MD, CEO of New Jersey–based Summit Medical Group, a physician-owned, multispecialty medical practice in the New York/New Jersey metropolitan area.
"The health system is looking at cutting out the payer and becoming their own payer, and that is where the cost savings will come. The beneficiaries could eventually benefit from that," he says.
Consumers could benefit if employers enjoy lower premiums and pass on some of the savings to employees in the form of improved benefits and higher wages, Le Benger says.
Such mergers appear unavoidable in the current healthcare environment. The necessity of managing rapidly growing healthcare costs along with a continuously changing health insurance landscape have forced regional health insurance carriers and healthcare providers to look for opportunities to drive efficiencies in healthcare delivery, says Tom Silliman, regional vice president of sales with Hodges-Mace, a benefits management company.
"While we are always concerned about mergers limiting the healthcare choices of our customers, we have seen similar strategies executed across the country," Silliman says. "Our hope is that this proposed merger would deliver more competitive health insurance options for our customers while improving access to the care that they need."
Participants in Medicare's ACO program are not willing to take on the risk of losing money. A recent survey found most will quit the program altogether instead.
Requiring risk-based contracts will force accountable care organizations (ACOs) to decide whether the potential upside is worth the possibility of losing significant revenue if they miss quality targets, and the answer for many will be no, according to a recent survey.
The group surveyed Track 1 ACOs entering their third agreement periods in 2019, specifically targeting the 82 ACOs that began the MSSP in 2012 or 2013 and remain in Track 1 in 2018. They are required to move to a two-sided ACO model in their third agreement period beginning in 2019.
These were some of the findings:
When asked how likely their ACOs were to leave the MSSP as a result of having to assume risk, 71.4% said they were likely to leave, 22.9% said they were not at all likely, and 5.7% said they were unsure.
When asked what they view as their top challenges or barriers to assuming risk, the top concerns were the amount of risk being too great, unpredictable changes to the ACO model and CMS rules, and a desire for more reliable financial projections. Those were cited by just 39.4% of ACOs.
Another top challenge, selected by 36% of respondents, was "concerns about past performance."
The survey also asked ACOs if they were given an opportunity to continue in Track 1 for a third agreement period, how likely would they be to continue participating in Track 1. Seventy-six percent of respondents said they would be "completely likely" or "very likely."
NAACOS notes these facts that are driving ACO decisions about continuing participation:
MSSP ACOs subject to pay-for-performance quality measures earned an average quality score of 95% in 2016.
MSSP ACOs that earned shared savings in 2016 had a significant decline in inpatient hospital expenditures and utilization as well as decreased home health, skilled nursing facility, and imaging expenditures.
ACOs participating over a longer period of time show greater improvement in financial performance. For example, 42% of MSSP ACOs that started the program in 2012 earned savings in Performance Year 2016 versus 18%t of those that began in 2016.
The vast majority (more than 80%) of Medicare ACOs remain in MSSP Track 1, which is largely a result of the challenges listed by the ACOs in the survey.
Clif Gaus, president and CEO of NAACOS, said the survey results "paint a bleak future of what will happen if the government keeps its mandate to push ACOs into risk. It's naïve to think ACOs that aren't ready will be forced into risk in what is ultimately a voluntary program. The more likely outcome will be that many ACOs quit the program, divest their care coordination resources and return to payment models that emphasize volume over value. This would be a real setback for Medicare payment reform efforts."
An alliance of five healthcare organizations will run a blockchain pilot to create a provider directory. If successful, the approach could lead to cost savings.
Two health plans and three healthcare companies are combining forces and using the latest technology to improve what consumers think should be a fairly straightforward task – telling them what healthcare providers are covered by their insurance.
If successful, the approach could lead to cost savings across the board.
The blockchain pilot involving Humana, UnitedHealthcare, Optum, Quest Diagnostics, and MultiPlan is the latest example of how the pressure of creating value-based care is spawning innovative partnerships, says Ben Pajak, strategy lead with Willis Towers Watson.
The participating organizations are piloting a blockchain program aimed at helping payers optimize their mandated provider directories.
The alliance is thought to be the first national one to use blockchain, a technology originally developed for the digital currency Bitcoin. With blockchain, information is held on a shared database that is constantly updated; if one participant updates a data set, that updated information is available to all participants immediately.
"Today, UnitedHealthcare may make an update in its directory, but Humana didn't get that change in the status of that provider so their separate directory is not updated," Pajak says. "It's about combining forces in a way that decreases the work for everyone involved while improving the quality of the data."
CMS wants accurate directories
The health plans are looking for help from technology such as blockchain because the Centers for Medicare & Medicaid Services now requires them to provide consumers with accurate information on providers and imposes fines if they don't.
CMS completed its second round of Medicare Advantage online provider directory reviews between September 2016 and August 2017 and found that 52.2% of the provider directory locations listed had at least one inaccuracy, including the provider was not at the location listed, the phone number was incorrect, or the provider was not accepting new patients when the directory indicated that they were.
Across all provider directories, the percent of locations with inaccuracies ranged from 11.20% to 97.82%. The majority of the directories (37 out of 64) had between 30% and 60% inaccurate locations.
The blockchain technology will enable all five organizations of the alliance to obtain the provider information at the same time. The companies have not released details of how they will implement the technology.
"I wish we had more intel on exactly what they're going to do, but I think they're still pulling all of this together," Pajak says. "The fact that they're using blockchain is innovative and intriguing, and now we have to wait and see exactly what they're doing with it."
Errors frustrate consumers, increase costs
The alliance is an offshoot of the pressure health plans are experiencing to provide better value and less cost, Pajak says.
One of the headaches consumers face is inaccurate information about which doctors are covered in their network, which can lead to surprise medical bills and being locked into plans they otherwise wouldn't have chosen, Pajak says.
"Provider directories have not been accurate in recent years and that means it has been somewhat misleading to consumers when they were picking their plans in open enrollment. Some people choose their plan based largely on whether their particular physician is in that network, and by the time they find out the directory was inaccurate, they're stuck in that plan for the rest of the year," he explains.
"The same problem occurs once you're in the plan and you need to see a specialist, for instance, and you consult the online directory to determine who you see. The information in the online directory often is incorrect and that leads to consumer frustration, added expense, and sometimes compromises quality of care if people are discouraged from seeking the care they need," Pajak says.
Consumer engagement at stake
The blockchain pilot could lead to cost savings for the participating organizations, as well as employers, by making it possible for consumers to make more informed decisions about their healthcare.
They can't do that without accurate directories, Pajak notes.
"For consumers who are trying to do the right thing and follow this advice from their health plans and their employers, their expectation is that the data is accurate," he says.
"When they go to the provider they think is in-network and then weeks later they receive a bill for out-of-network services, you end up with effects that go beyond just the initial hit to the pocketbook of that consumer. The experience undermines the whole effort to promote value-based care and get people involved in that decision-making, because people talk to their friends and family about their bad experience," he says.
If the pilot is successful, using blockchain to address the provider directory may be just the first step, Pajak says. Once the insurers prove the concept with improved accuracy in the directory, the technology also could be used to address cost transparency, he says.
Healthcare is one of the few business transactions in which the consumer often does not know the actual cost of the service until afterward, Pajak notes, despite much lip service in recent years about improving transparency.
Efforts to improve transparency have been hampered by the same sort of data-gathering burden that results in incomplete and inaccurate provider directories, he notes.
"If you take the blockchain technology beyond the provider directory and address transparency, that's where you really have the potential to affect costs in the future," he says. "Having insurers collaborate like this to build a single ledger of providers is something that we could build on in the future and do greater things."
