A common theme in our FrenkelySpeaking blog is the reformation of the health insurance industry. While there is very rapid contraction in the established medical insurer market — especially now with the Anthem-Cigna and Aetna-Humana deals pending — there are many new market entrants. I have summarized these below:
The federal effort at incubating healthcare co-ops has been a dismal failure. Many are closing and those that remain are on shaky grounds. It will be interesting to see if any survive.
Medicaid entities are dipping their toes in the transitional market to provide continuity to those individuals whose income are variable and may lose Medicaid eligibility. I don’t see these as meaningful alternatives to the traditional private insurance carrier market.
Hospitals, facing revenue reimbursement pressures and increasing medical management, are also emerging as a viable alternative. Sutter Health in San Francisco, Catholic Health Initiatives in Colorado, North Shore-LIJ in New York and UPMC in Pittsburgh are examples of hospital systems that are saying to the market, “I don’t want health plans to manage me, I want to control my own destiny.”
According to recent industry news, 16 hospital-spawned insurers provide coverage to more than 7 million enrollees with $25 billion in premiums. This is about 2.5% of all Americans. But it is still unclear whether this will be a successful model. The key question is: can these facilities manage care at a lower cost than traditional insurers? Or stated another way: Can the fox effectively watch the hen house?
Also see: “11 reasons advisers are thankful for their job.”
The final market disruptors are well financed startups like Oscar, which are looking to recreate the marketplace with an emphasis on engagement and user friendliness. I am skeptical, since the infrastructure cost and ability to negotiate discounts with a large enough networks will take a lot of time and vast capital to create.
It’s a fascinating time to be in healthcare.
Hasday is president of Frenkel Benefits, LLC, one of the largest privately held independent employee benefits brokers in the United States. Reach him at email@example.com or (212) 488-0200, and read more from Hasday at frenkelyspeaking.com.
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