Kent Bottles Private Views: Health Insurers & the PPACA: Extinction ...

Health Insurers & the PPACA: Extinction or Reinvention? Part II

Now that the Supreme Court has upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA), health insurers are scrambling to reinvent themselves for an era of health care reform.? In Part I, we quoted Aetna CEO Mark Bertolini as saying he wants to create a business model that makes sense under the new rules and regulations.? Bertolini in a speech stated, ?We need to move the system from underwriting risk to managing populations.? We want to have a different relationship with the providers, physicians and hospitals we do business with.? (http://www.healthdatamanagement.com/news/HIMSS12-Aetna-CEO-insurers-face-extinction-44041-1.html) ?Starting with Aetna, Part II will examine the ways that insurance companies are trying to reinvent themselves for a reformed health care delivery system that often wonders why we need health insurers at all. The Highmark WPAHS merger is complicated by Highmark?s unsuccessful attempt to merge with Independence Blue Cross and failed contract negotiations between Highmark and University of Pittsburg Medical Center (UPMC), the major health system in the Western Pennsylvania market that has its own insurance plan that competes with Highmark.? As if dueling advertising campaigns and lawsuits were not enough excitement, the plot thickened when Highmark fired its CEO Dr. Kenneth Melani, the architect of the merger, after he fought with his Highmark employee girl friend?s husband.? Assault charges were dropped against Melani after he successfully completed an anger management program. (http://pittsburgh.cbslocal.com/2012/06/06/assault-charges-dropped-against-former-highmark-ceo/) ?One wonders if new Highmark CEO William Winkenwereder, Jr., MD will continue to support the merger plans. (http://www.post-gazette.com/stories/local/region/new-ceo-winkenwerder-targets-trust-in-highmark-639015/) The Highmark WPAHS merger is an attempt to create ?what health-care thought leader, Clayton Christensen, in The Innovator?s Prescription, describes as an integrated, fixed-fee provider system. As such, Highmark and West Penn Allegheny are undertaking a tremendous change agenda.? (http://www.wphospitalnews.com/the-national-significance-of-the-highmark-and-west-penn-allegheny-merger/) ?Other observers are watching the merger with interest because such vertical mergers have not been extensively studied or investigated.? The Western Pennsylvania region clearly needs to try something new because the status quo is not working: the largest hospitals and health insurers are engaged in a legal battle; WPAHS, the second largest hospital system, is on the brink of failure; and health care costs in Pittsburgh are substantially higher than in similar markets, relative to the quality of care. (http://www.jdsupra.com/post/documentViewer.aspx?fid=ea6c6a19-8547-4978-bf63-4ea8cf70d1d4) Wellpoint, which covers about one third of the nearly 100 million Americans who receive their insurance from a Blue Cross plan has been investigated by Congress for canceling policies retroactively in order to achieve at least a $128 million profit. Wellpoint has also been criticized for having 39 executives who each make more $1 million a year and for spending $27 million on staff retreats at resorts in 2007 and 2008. (http://www.amazon.com/Deadly-Spin-ebook/dp/B0049195R0/ref=sr_1_1?s=books&ie=UTF8&qid=1342447040&sr=1-1) ?Reform advocates point out that such overhead costs contribute to the $400 billion a year in administrative costs that would largely disappear under a single payer system. ?Wellpoint?s response to health care reform has been to spend $100 million on technology upgrades and to buy Medicaid provider Amerigroup for $4.46 billion and CareMore for $800 million.? Angela Braly, Wellpoint?s CEO said, ?First and foremost there are significant growth opportunities ahead in the Medicaid marketplace resulting from economics, demographics, budgetary issues, as well as healthcare reform. We expect Medicaid spending under managed care programs to increase by nearly $100 billion by the end of 2014.? (http://www.chicagotribune.com/business/breaking/chi-wellpoint-to-buy-medicaid-provider-amerigroup-for-446b-20120709,0,7644697.story)?? ?At least one critic has wondered about the wisdom of this purchase, based on two future possibilities: 1) if Romney becomes president and the GOP takes control of the Senate, then the Medicaid expansion in the PPACA might be overturned and 2) the Supreme Court ruling left the door open for GOP governors to refuse to participate in the Medicaid expansion. (http://www.forbes.com/sites/aroy/2012/07/11/wellpoint-buys-amerigroup-bets-big-on-medicaid-expansion-but-will-states-and-voters-cooperate/) ?Braly, of course, is the health insurance executive who stubbornly defended proposed 2010 premium increases in California that President Obama attacked during the debate over the passage of the PPACA. Anthem Blue Cross, a unit of WellPoint, attempted to increase premiums for individual insurance policies in California by an average of 25 percent, with some rates going up as much as 39 percent. (http://www.nytimes.com/2010/02/25/health/policy/25health.html) CIGNA has developed a new ad campaign ?Go You? that focuses on consumers for the first time. The chief communications officer at CIGNA states, ??It is a shift, it?s an important shift.??? In the past insurers addressed their advertising campaigns at wholesale business accounts, not individual consumers. (http://www.nytimes.com/2012/06/22/us/politics/insurance-companies-are-trying-to-soften-their-image.html?pagewanted=all) ?To bolster this consumer strategy, CIGNA bought Kronos Optimal Health to obtain their health coaches, health education programs, and lifestyle management systems. (http://www.prnewswire.com/news-releases/cignas-mergers-and-acquisitions-will-help-distinguish-them-from-other-national-carriers-101077224.html). ?CIGNA also spent $3.8 billion in cash to buy HealthSpring and its 340,000 Medicare Advantage participants in 11 states and its 800,000 member Medicare prescription division. (http://dealbook.nytimes.com/2011/10/24/cigna-to-buy-healthspring-for-3-7-billion/) ?The company is also expanding their Medicare Advantage position in Texas and Arkansas (http://www.streetinsider.com/Mergers+and+Acquisitions/Cigna+(CI)+to+Buy+Arcadian,+Humana+Medicare+Advantage+Plans+in+Texas,+Arkansas/7545734.html). UnitedHealth Group was one of the earliest converts to evolving from a health insurance company to a health care data mining company.? As early as 2007 their subsidiary Ingenix bought The Lewin Group, a respected health policy think tank in Northern Virginia. A Lewin report in 2009 claimed to show that a public option would force 119 million Americans out of their private health plans and into the government sponsored plan. Although the Lewin report was shown to be faulty, the GOP used it to great advantage in excluding the public option from the final PPACA bill. (http://www.amazon.com/Deadly-Spin-ebook/dp/B0049195R0/ref=sr_1_1?s=books&ie=UTF8&qid=1342447040&sr=1-1) UnitedHealth Group has also been active in exploring private sector payment and delivery system pilots. Their Patient Centered Medical Home model provides primary care providers a prospective care management fee as well as a performance incentive payment.? Their ACO pilot with Tucson Medical Center includes a spending target based on three years experience by each physician group or hospital and shared savings and bonuses are given to those that meet their goals. United Healthcare is also experimenting with bundled payment programs with oncologists in Georgia, Missouri, Ohio, Tennessee, and Texas.? Whether these branding and advertising campaigns and payment and delivery system pilots will be successful is an open question.? An Edelman global survey about trust found insurers, banks, and financial service companies at the bottom of a ranking of 16 industries.? They found that corporate reputations were determined by high quality products, transparent and honest business practices, and how companies treat their employees.? They also discovered that when a company is distrusted, 57% of people will believe negative information when they hear it once or twice and only 15% of people will believe positive information. (http://www.edelman.com/trust/2011/)? Of all the players in health care, insurers routinely rank last in terms of consumer trust. The PPACA and the health care reform movement offer tremendous retail opportunities for health insurance companies.? There may be as many 30 million Americans seeking insurance through the exchanges.? There will be about 15 million Baby Boomers who will eligible to sign up for their preferred plan, Medicare Advantage.? The Medicaid expansion could cover as many as 17 million citizens, despite the reservations of many governors.? Whether health insurance companies can overcome the mistrust that many consumers feel and whether they can truly add value to a reformed system remains to be seen.? They might want to listen to Dr. Elliott S. Fisher, the ACO guru at Dartmouth:

Source: http://kentbottles.blogspot.com/2012/07/health-insurers-ppaca-extinction-or_6401.html

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