Entries in health plans (35)


Snapshots of the Mega-Mergers

By Clive Riddle, July 24, 2015

With Anthem and Cigna’s merger announcement, the dance card has been filled out. Here’s what they had to say about their deal:  

“Anthem will acquire all outstanding shares of Cigna in a cash and stock transaction and Cigna shareholders will receive $103.40 in cash and 0.5152 Anthem common shares for each Cigna common share. The total per share consideration equates to approximately $188.00 for each Cigna share based on Anthem's closing share price on May 28, 2015, valuing the transaction at $54.2 billion on an enterprise basis.”

So let’s take a look at the mega-health plan profiles, before and after these mergers, understanding that the “after” picture will undoubtedly change due to regulatory required divestures in certain markets:


Here’s a couple of edited graphics from by the plans that provide some additional insight into their merged companies:



It will be interesting to see how long the regulatory hurdles take for these three deals, and how many regulatory concessions, including specific market divestures, are required.


Jurassic Park: Rise of the Health Insurers

By Kim Bellard, June 26, 2015

If you want to see dinosaurs fighting, stalking, and even mating, you don't need to go see Jurassic World.  Just pick up the business pages and see what is going on with the big health insurers, who seem intent on getting even bigger.

Whether anything actually comes of all the merger mania, or whether such mergers prove good for consumers, remains to be seen.

Everyone seems to be in play.  The Wall Street Journal reported that Anthem has made overtures to Cigna, while United is interested in Aetna, with Humana still attractive to Aetna and Cigna.  You can't make this stuff up. It would be ironic if Humana was one left standing in this game of musical chairs, but many feel their assets are too inviting to be left out. 

One conventional wisdom is that these kinds of mergers/acquisitions have to do with scale. Bigger means more lives to spread such costs over.  The other culprit often cited is a desire to gain more clout with providers,

The trouble is, no matter how big health plans get, if they face markets where there is, in essence, only one provider with which to negotiate, size doesn't really matter. Bigger isn't always better.

You can make dinosaurs bigger, but that doesn't make them more agile or better prepared to deal with new risks.  I'm wondering when we're going to see not bigger health insurers, but truly different models for them.

We've seen true integrated provider/health plan models like KaiserGroup Health Cooperative, or Geisinger for decades now, and they're generally successful in their core markets, but that model hasn't proved easily replicable. 

We've also seem health system building their own health plans, such as Intermountain HealthcareSentara, or UPMC.   We've even seen health plans buying/building their own health systems, such as UPMC's bitter rival Highmark Health.

If Anthem buys Cigna or United buys Aetna, it wouldn't be all that interesting, nor would it be novel.  Those are dinosaurs getting bigger but not evolving.  

If Humana and HCA got back together, that would be interesting.  That would be provider/payor integration writ large, and maybe produce something new. 

And if, say, CVS or Walgreens chose to merge with a health insurer, that would something even more unique.  I don't know how they'd change the health insurer, but it might be fun to find out.

Honestly, though, what I'd really love to see is a company from an entirely different sector, hopefully one with a strong consumer focus, buy into the health insurance business.  Maybe Humana should get back together with the Virgin Group, or perhaps Walmart would be interested in taking over a Medicaid managed care or Medicare Advantage plan.  Wouldn't you love to see Walmart take on the health care supply chain?  I bet they could squeeze better value out for its customers.

Jurassic World seems to be raking in the money despite being just another sequel about rogue dinosaurs.  Let's hope we see something with health insurers that isn't just another sequel as well.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


PwC and Milliman Examination of Medical Cost Trends

by Clive Riddle, June 10, 2015

PwC projects a medical cost trend for 2016 of 6.5%, netting down to 4.5% after benefit design changes. Milliman tells us that the 2015 actual trend was 6.3%, up from 5.4% in 2014.

PwC’s Health Research Institute this week released their tenth annual Behind the Numbers report, which includes a “projection for the coming year’s medical cost trend based on analysis of medical costs in the large employer insurance market. In compiling data for 2016, HRI interviewed industry executives, health policy experts and health plan actuaries whose companies cover more than 100 million employer based members.

Milliman released their fifteenth annual Milliman Medical Index report two weeks ago, which is “an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.”

With respect to 2015, Milliman found “the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $24,671”, up from $23,215 in 2014. The 2015 family costs works out to $2,055 on a monthly basis.

Milliman emphasizes the importance of the role the Rx costs play in the mix. They note “prescription drug costs spiked significantly, growing by 13.6% from 2014 to 2015. Growth over the previous five years averaged 6.8%. The 2015 spike resulted from the introduction of new specialty drugs as well as price increases in both brand and generic name drugs, increases in use of compound medicines, and other causes. Since the MMI’s inception in 2001, prescription drugs have increased by 9.4% on average, exceeding the 7.7% average trend for all other services. Prescription drug costs now comprise 15.9% of total healthcare spending for our family of four, up from 13.2% in 2001.”

Milliman also highlights the role of cost-sharing, citing that the “total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 43% from 2010 to 2015, while employer costs increased by 32%. Of the $24,671 in total healthcare costs for this typical family, $10,473 is paid by the family, $6,408 through payroll deductions, and $4,065 in out-of-pocket expenses incurred at point of care.”

PwC also keys on these two issues for 2016 as well, with drugs as an inflator, and cost-sharing as a deflator of the medical trend.  PwC spotlighted two inflators of the 2016 medical trend: (1) New specialty drugs entering the market in 2015 and 2016 will continue to push health spending growth upward; and (2) Major cyber-security breaches are forcing health companies to step up investments to guard personal health data, adding to the overall cost of delivering care.

PwC notes three factors that serve to "deflate" the 2016 medical cost trend: (1) The Affordable Care Act’s looming “Cadillac tax” on high-priced plans which is accelerating cost-shifting from employers to employees to reduce costs; (2) Greater adoption of “virtual care” technology that can be more efficient and convenient than traditional medical care; and (3) New health advisers helping to steer consumers to more efficient healthcare.

PwC also comments on the longer range medical trend perspective, citing four key cost growth factors H observed over the past decade:

  • The healthcare-spending trajectory has leveled off but is not declining;
  • Cost sharing slows consumer use of health services;
  • Curtailing inpatient care lowers costs; and
  • The ACA has had minimal direct effect on employer health costs.

Future of Provider-Sponsored Health Plans and Managing Risk

By Cathy Eddy, Health Plan Alliance, December 1, 2014

Deloitte Consulting conducts an enterprise wide risk assessment with Presbyterian Health Services annually and the information is leveraged by the health plan.

Health systems are looking at their range of options for the future – most with an eye for making the transition from fee-for-service to value-based reimbursement. These options include shared savings programs, bundled payments, accountable care organizations, some form of capitation or global payment and for some, starting or growing a health plan. These options involve varying levels of risk.

As the lines blur between payers and providers, it is important for health systems to carefully evaluate their strategies and their partners to be successful in the future. It will also mean doing business differently and navigating through the major challenges that have been driven by marketplace dynamics and health care reform.

Many organizations have identified provider-sponsored plans as a “hot topic” and are trying to identify the keys to success with this model. As systems move to value-based reimbursement, a health plan can act as both a catalyst and an accelerator for change.

For almost 20 years, the Health Plan Alliance has been working with integrated delivery systems that have health plans. These are the systems that stayed with the vertical strategy when many of their colleagues sold off or closed down their insurance arms. The health systems that stayed committed to owning a health plan are now at a strategic advantage in many ways:

  • They have a vehicle to understand and manages risk
  • Health plans have the infrastructure to manage populations 
  • A closer link to the marketplace 
  • Better understanding of managing care 
  • Ability to gather and analyze quality data for the populations served 
  • A driver for more clinical integration 

What are some of the key considerations for systems to consider when owning a health plan or partnering with one?

  • What are the populations you want to serve – commercials, exchanges, Medicaid Advantage, Medicaid or duals? These all have different risk challenges 
  • Do you have the financial resources to fund a start-up and maintain the risk-based capital requirements? 
  • Do you have or can you acquire the expertise to run a successful plan? 
  • Does it make sense to partner with another health plan or payer?
  • Are you willing to make the delivery system changes need to manage risk? 
  • Are your physicians organized to take on risk and support quality measures of a health plan? 
  • Are you organized to manage the care of a population along the healthcare continuum?
  • Are you thinking about direct contracting with large employers in your marketplace?

The members of the Health Plan Alliance have a wealth of knowledge about how integrated delivery systems are managing risk. Last month, our Fall Retreat addressed the various levels of risk that a health plan manages – governance, product lines, physician alignment, clinical integration, financial and business continuity.

If you weren’t able to attend this meeting, you can find the presentations on our website and you can request a video recording of the meeting.  Managing multiple levels of risk will continue to be a challenge for health systems in the future, especially those that have made the strategic investment to own a health plan. 


Study on Health Plan Shopping – Reluctants, Premiums and Defaulters

By Clive Riddle, October 10, 2014

Vitals – who provide a consumer health information platform including doctor ratings and reviews, has released a study on health plan shoppers in open enrollment season, and lumping many of the shoppers into three categories: (1) The Reluctant; (2) The Premium; and (3) The Defaulter. Vitals study was based on their August online survey of 1,000 adults.

The big takeaways from their survey?

  • 80 percent of respondents said they were not planning to switch their insurance this year.
  • More than 1 in 5 are dissatisfied with their plan.
  • Nearly one-third said they were unhappy with the value for cost of their plan.
  • 27 percent were unhappy with customer support services
  • 9 percent were unhappy with the lack of quality network doctors and hospitals

So what the heck are Vitals’ trio of Reluctants, Premiums and Defaulters?

Vitals classifies Reluctants as age 30-44 with no dependents and household income under $25k, who are satisfied with their plan provider network but not the plan value. Vitals says “the Reluctant doesn’t want to buy insurance and isn’t satisfied with their plan – if they even have one. They’re more likely to have an HMO to keep costs down, but still say they’re not getting a good value for cost. Over 1 in 4 will switch their health plan during open enrollment this year. Their main gripe: Cost. They index higher for cost increases over the past year and report being surprised more by health care costs this year, compared to last year.”

Vitals classifies Premiums as age 45-60 with dependents and household income over $100k, who also are happiest with the network and unhappiest with plan value. Vitals tells us “the Premium is most likely to have Cadillac-like coverage for their health care. They index higher for employer-provided health care and PPO-type plans, which offer the most flexibility. Premium shoppers are most likely to say they’re happy with their health insurance – only 5 percent will switch during open enrollment! And they uniformly agree they have adequate access to medical care.”

Finally, Vitals classifies Defaulters as any age adult (but often age 60+) with no dependents and household income of $50 - $99k. They define the Defaulter as someone “on cruise control and typically doesn’t review or change their plan from year to year.”