PWC Report on What Employers Want from Health Insurers

Price Waterhouse Coopers released a survey last week of what large and small group insurers want from health insurers which is available on their website. In short employers value technology and wellness but want better ways to engage employees and manage costs. Satisfaction from large employers dropped 5% from 2008 while satisfaction from small employers (surprisingly) held steady. Key recommendations include:

• Look beyond the provider discount strategy.
• Assist in the coordination of care.
• Educate the employer and employee about their health coverage.

In short, employers are looking for health insurers to take a much more active role in controlling costs. One way to show this would be to actively approach providers regarding episode based payment pilots. Episode based payments raise an incredible amount of issues but just sitting on the sidelines I don't think is an option. Health plans who have strong relationships with the provider community have an edge on this development because it will take an incredible amount of trust to successfully implement.

What Do Health Insurers Do Now?

No matter what happens in the next few weeks to health care reform, health insurers will still need to focus on controlling costs and engaging members. The increasing cost for health insurance will continue to squeeze employers so those health insurers who show they can manage care not just cost will be successful.

Being a Successful Health Insurer

With the impending passing of health care reform, it is now apparent that future health care plans will need a new set of skills to be successful. Instead of being good at screening out and pricing risk accurately, health plans are going to need to be good at managing and improving the lives of those people they cover. And with the individual market growing in the next 5-10 years, health insurers will have to change their perspective from being a wholesaler (selling to employers) to that of a retailer (selling to individuals). This means a greater emphasis on the customer service experience which will bring changes in how they interact with their members through websites, written correspondence and phone calls. It also means that a company's brand will continue to grow in importance. Who do I think will successfully make this transition? I will discuss this in future posts.

The Senate House Compromise

There have been numerous articles written about the differences between the Senate and House bills. Many policy analysts agree that the Senate version will dominate in the final bill. One change I would like to see is the effective date of many of the provisions which should be earlier than 2014. Also, I think the penalties for not getting coverage need to be more severe as they are presently in the House bill. This will lessen the chance of adverse selection for health insurers. Right now health insurance lobbyists are busy fighting the premium tax. It will be interesting to see how effective they are in getting this lowered or eliminated.

Cigna CDHP Experience

Cigna just released its 4th annual study of its CDHP business or Choice Fund. The study showed significant reduction in medical trend--14%--from 2007 to 2008 along with an increase in preventive services as compared to traditional plans. This increase in preventive care services is significant because of the the concern that CDHP members are not seeking care because of the high deductibles. While the results are encouraging I still think that CDHP plans will only be effective for a select group of consumers. Most consumers know little about their health care coverage and while giving them "skin in the game" I still doubt that CDHP plans will dominate the marketplace.

Which Way For Healthcare Reform?

Before I even had a chance to comment on the Medicare buy-in proposal it appears to be dead even before the CBO gives an estimate of its potential costs. 55-64 yr. olds are a market that many insurance companies have looked at. But given their age and likely poor health profile insurers have not rushed into this marketplace, not without strong underwriting at least. The only way for the buy--in to work would be to require all 55-64 yr. olds to purchase the coverage from the government. This potentially would spread the risk enough that premiums would not be outrageously expensive and there only attract the sickest individuals. But this discussion may be moot since some senators believe this Medicare buy-in concept is the "first road to a single-payer system".

So it appears the alternative to the public option is dead. Where will Reid find his 60 votes to move discussion along? That right now is a very good question withoout an obvious answer.

Contrarty to Popular Belief, Medicare Cost Savings Initiatives Are Implemented

One of the biggest criticisms of health care reform is that the proposed Medicare cost savings measures are ephemeral because these types of reform are never implemented because of political pressure. Well a study put out by the Center for Budget and Policy Priorities (http://www.cbpp.org/cms/index.cfm?fa=view&id=3021&emailView=1) refutes this thinking. To quote from the report directly:

"The history of health legislation in recent decades demonstrates that, despite some critics’ charges, Congress has repeatedly adopted measures to produce considerable savings in Medicare and has let them take effect. For example, Congress took such action as part of major deficit-reduction packages in 1990 and 1993 and as part of more modest deficit-reduction packages in 1997 and 2005. Virtually all of the cuts that it enacted in 1990, 1993, and 2005 went into effect. After Medicare spending slowed dramatically after 1997 — in 1999, it was for the first time lower than it had been the year before — and the budget was balanced in 1998, Congress did ameliorate some of the Medicare cuts that it had enacted in 1997. But, even in those special circumstances, it allowed four-fifths of the 1997 cuts (other than those described in the next paragraph) to take effect.

In arguing that Medicare cuts never “stick,” critics point in particular to Congress’ repeated refusal to let the reductions in physician reimbursement rates under Medicare’s so-called “sustainable growth rate” (SGR) mechanism, which it enacted in 1997, take full effect. The SGR cuts, however, represented a badly designed measure that was not intended to produce large savings (the projected SGR savings represented less than five percent of total Medicare savings in the 1997 bill), but turned into a blunt instrument that would have produced cuts far in excess of what was anticipated and would have had harsh and indefensible effects. (Moreover, even though Congress did not allow the full cuts required under the SGR formula to take effect, it has still cut the physician reimbursement rate substantially — at its current level, the reimbursement rate in 2010 will be 17 percent below the rate for 2001, adjusted for inflation.) The SGR mechanism has little in common with most of the other provisions that Congress has enacted over the years to produce savings in Medicare and that have, in fact, taken effect. This distinction is important because most of the Medicare savings provisions in the House and Senate health reform bills are similar in nature to the types of Medicare provisions that Congress has enacted in the past that have taken effect — and they differ markedly from the blunt-instrument design of the SGR cut."

So it appears that the conventional wisdom on the "non-enactment" of Medicare cost savings measures is wrong. Kudos to the Center for doing the research to prove it.