Category: Health Insurance

Health Insurers Consolidate on Business; Fragment on Policy

A few days ago, this blog discussed the wave of consolidation among health insurers. The two main deals discussed in the business press are Anthem’s bid for CIGNA and the likely takeover of Humana by a bigger insurer which wants to beef up its Medicare Advantage and/or Medicaid managed care business.

While this consolidation plays out, the policy world was surprised to see the largest insurer, UnitedHealth Group (UNH), pull out of AHIP, the health plans’ trade association. Both parties soft-pedalled the exit of the association’s largest member.

I do not plan to speculate recklessly on the reasons for the exit. UNH noted that its “diversified portfolio” is not best served by membership in AHIP. UNH has two very distinct businesses, UnitedHealth Group and Optum. The former is a health insurer and the latter a vendor of big-data analytics. UNH consistently stresses that they are different businesses, to the degree that it sometimes verges on denying it is a health insurer at all.

Employer-Based Benefits Steady In Obamacare’s Second Year

Urban Institute researchers have published new research supporting the thesis that Obamacare has not harmed either offers or uptake of employer-based health benefits:

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  • Employer-sponsored insurance coverage, offer, and take-up rates remained unchanged among nonelderly workers from June 2013 through March 2015.
  • Coverage, offer, and take-up rates were stable for workers in both small and large firms as well as for workers with higher and lower incomes.
  • Employer-sponsored insurance coverage also remained unchanged among all nonelderly adults from June 2013 through March 2015.

This corroborates the case I recently made, although there is contrary evidence.

Health Insurance Consolidation Begins With A Bang

Just last Thursday, I wrote about the forthcoming consolidation in U.S. health insurance. My thesis was that only large, centralized, politically powerful insurers could continue to thrive.

With perfect timing, Humana, Inc., announced on Friday that it was putting itself on the block, and the shares rallied about twenty percent. They continue to climb today.

“Because of the Affordable Care Act, the whole insurance market is shifting towards a lower margin model,” said Chris Rigg, an analyst with Susquehanna Financial Group. “Generally speaking, the bigger you are, the better.” (Michael J. de la Merced & Julie Creswell, New York Times DealBook, May 29, 2015)

Price’s Health Reform Hit From The Right

I recently discussed Rep. Tom Price, MD’s Empowering Patients First Act in quite positive terms. Not everyone is on board. My good friend Dean Clancy labels the bill Health Care Cronyism:

Section 401, for example, authorizes new federal “best practice” guidelines written by medical societies, designed to give physicians extra protections from malpractice lawsuits. These guidelines aren’t merely educational, though. They’re established as powerful litigation tools in state courts. If a physician can show he followed them, his accuser must meet a higher burden of proof to establish negligence. That may be a good idea, but it’s unconstitutional. The power to regulate civil justice is reserved to the states under our federal system. There’s neither a legal nor a practical justification for federal medical malpractice reform. States have this. They can reform their tort systems, and many have done so, with success.

Mr. Clancy and I are in complete agreement that Congress has no role meddling in medical malpractice. So, why did I ignore this part of Dr. Price’s bill and leave Mr. Clancy prime real estate in U.S. News & World Report to lay into it?

Most Employers Will Use Private Benefits Exchanges by 2018

A new survey from Array Health reports four of five insurance executives anticipate that most employers will use private exchanges to offer benefits by 2018. According to the survey, private exchanges are a win-win situation because they reduce administrative costs.

We like private exchanges because they pave the way for individual health insurance to be the standard. The Array report seems to support this conclusion:

More exciting, perhaps, is the future outlook around business savings as single-insurer private exchanges start to move with consumers – from group settings to individual plans – keeping loyal consumers tied to particular insurance brands through the exchange model.

Maybe The Government Should Just Not Ask People If They Are Uninsured?

Sir John Cowperthwaite was the Financial Secretary of the British Colony of Hong Kong when it began to boom in the 1960s:

Asked what is the key thing poor countries should do, Cowperthwaite once remarked: “They should abolish the Office of National Statistics.” In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back. (Alex Singleton, The Guardian)

What does this have to do with health insurance? The Wall Street Journal’s Jo Craven McGinty reports on the Census Bureau’s rejigging of its measurement of how many Americans are without health insurance:

Have Employer-Based Health Benefits Dropped?

Just the other day, my analysis of the RAND Corporation’s survey of health insurance from September 2013 through February 2015 led me to conclude that “economic growth improved coverage more than Obamacare did.”

However, there are other sources that contradict the RAND survey’s conclusions about employer-based benefits. My Forbes colleague Scott Gottlieb, MD, reviews a new report from Goldman Sachs that estimates small employers dropped 2.2 million beneficiaries from coverage, a reduction of 13 percent from 2013.

Last year, Ed Haislmaier and Drew Gonshorowski of the Heritage Foundation concluded that nearly 3.8 million people lost employer-based coverage through June 2014.

Both the Goldman Sachs and Heritage Foundation analysts relied on data from insurers rather than beneficiaries. Nevertheless, I am at a loss to understand how people who lost employer-based benefits would not say so in a phone survey.

At the Health Affairs blog, Marc Berk issues a caution about the “quick turnaround” surveys that are exciting the Obamacare debate, noting that the government itself is relying especially on the Gallup-Healthways survey instead of sober estimates produced by its own Census Bureau and Centers for Disease Control and Prevention.

The surveys agree that more people are dependent on Medicaid and Obamacare exchanges have enrolled a few million. The great divergence is with respect to employer-based health benefits.

Why Would Health Insurers Learn From Life or Auto Insurers?

Businessman Sitting at His DeskDori Zweig at FierceHealthPayer has written a good article with examples of how life and auto insurers provide excellent customer service, and encouraging health insurers to do the same. It would be a great idea and there are no shortage of consultants providing advice on health insurers to do exactly that. There are entire conferences dedicated to the topic.

Unfortunately, there are significant differences between health, life, and auto insurance that mitigate health plans’ interest in replicating the excellent service we’ve seen from other types of insurer:

Who’s To Blame For Doctors’ Cash Flow Crisis?

Doctors never cease from complaining about insurers’ bureaucracy. It’s one reason why they cannot stand the repeated Medicare “doc fixes” that have occurred at least once a year for over a decade: When Congress does not increase the physician fee schedule before the previous fix runs out, they fear that Medicare contractors will slow roll their claims, creating a big cash flow problem.

(That’s one reason why the lobbyists supporting today’s fiscally irresponsible “doc fix” waited until March 19 to let us know it was coming to the House of Representatives. Last year’s fix expired on March 31. Delaying until the last minute means the lobbyists can more easily drive politicians into a panicked herd and head them off a fiscal cliff.)

The cash flows can be observed by patients, who receive physicians’ invoices and insurers’ Explanation of Benefits (EOBs). One reader went to the doctor on July 31, 2014. As shown in the graphic below, the health plan processed the claim on August 25 and mailed it to the beneficiary on August 29.

“Next Frontier” – Health Plans Covering Yoga?

When a leading benefits consultant writes an article in the Harvard Business Review recommending that health plans should cover yoga, it should be glaringly apparent that we have perverse incentives in U.S. health benefits:

Cigna insurance CEO David Cordani says the Centers for Medicaid and Medicare Services’ recent payment changes that emphasize quality over quantity in healthcare will shift the focus on “sick care to more well care.” But a widespread embrace of diet, fitness and other wellness programs is still a way off……”

Insurers should cover “new wellness- and prevention-oriented treatments such as yoga and meditation, Sukanya Soderland, a partner in consulting firm Oliver Wyman’s health practice, wrote recently in the Harvard Business Review. (Jayne O’Donnell & Laura Ungar USA Today)