1. Trends and Innovations in Health Insurance
Krista Drobac, Partner, Sirona Strategies
November 3, 2017
AAFP State Legislative Conference – Healthcare 2.0
2. Agenda
Healthcare costs are driving large-scale changes in the insurance market
New Directions in Insurance M&A
New Market Entrants
New Ways to Shop for Insurance
New Insurance Design
4. Rising Insurance Premiums Reflect Rising Cost
Average annual premiums for
employer-sponsored family health
coverage reached almost $19,000 this
year, a 19 percent increase since 2012.
Premiums in the individual
marketplaces have grown by over 100
percent since 2013.
Cost increases are driving consumer
frustration, and propelling calls for
greater choice and lower-cost
insurance options.
5. High Costs Driving Market Change
High out of pocket costs for
healthcare mean that consumers
are more price sensitive – to
insurance choices, to out of pocket
expenses, and to healthcare goods
and services, like over-the-counter
and prescription drugs.
This price sensitivity, as well as
other changes in the market, have
led to a number of mergers and
acquisitions among insurance
companies, as well as a number of
new entrants and changing
business models.
6. Insurance Mergers – Health System Integration
Health systems and providers are increasingly taking advantage of new
value-based payment models by offering health plans
Integration allows providers to better manage their
networks and improve care coordination.
As of 2014, 106 providers are vertically integrated
with a health plan.
Much of the growth is in the Medicaid and Medicare
Advantage markets. As of 2016, 20 percent of all MA
enrollees were enrolled in a provider-led health
plan.
7. Aetna & CVS
If approved, the merger would
combine the companies’ health
insurance, pharmacy benefit
management, pharmacy, and
health clinic services,
establishing a highly integrated
organization.
The news comes in the wake of
news that Amazon is moving
into the pharmacy business.
It remains to be seen whether
the merger could produce
efficiencies and lower
healthcare costs.
CVS Health is reportedly in talks to purchase
Aetna for more than $66 billion
8. New Market Entrants
Offer health plans but
main focus on utilizing
patient medical data
Each focuses on a
specific population –
Clover for MA patients,
Nuna for Medicaid
patients, and Oscar for
the individual market
Use data and technology
to identify gaps in care
and evaluate health care
issues
For example, when a
patient fails to pick up a
prescription, a Clover
representative calls the
client and, if it makes
sense, dispatches a
Clover nurse practitioner
or other specialist for a
home visit
9. Private Insurance Exchanges
Private exchanges are health insurance
marketplaces for larger employer groups.
Employers give their workers a defined
contribution to buy coverage from 1 or several
participating insurers.
Walgreens is one of the largest employers to use
private exchanges. Almost ¾ of its 200,000
eligible employees have chosen a bronze or silver
plan.
Aon Hewitt is prominent in the private exchange
space. In 2016, 55 employers with more than 1
million employees and dependents participated
in Aon Hewitt’s Active Health exchange, a
significant increase from 33 employers with
850,000 employees in 2015.
10. Changes in Insurance Design – HDHPs & HSAs
Health savings accounts give consumers more
control over their healthcare choices and
spending, thus driving down total costs.
They are triple-tax advantaged investment
tools: consumers can save, accrue interest, &
withdraw funds – all tax-free.
Consumers are only eligible for an HSA if they
are enrolled in a high-deductible health plan
(HDHP), or a health plan with a deductible
greater than $1,300 (2,600 for a family).
20 Million
- The number of Americans with a health savings account
11. Each of the ACA repeal and
replacement bills included HSA
provisions seeking to undo some of
the changes that the ACA made to HSA
policy, like increasing the allowable
contribution threshold, allowing HSA
savings to be used for OTC purchases,
and enabling catch-up payments.
However many in Congress seek to go
further to make HSAs easier to use and
to ensure that HSA policies
accommodate consumer needs, as
well as medical advances and benefit
trends.
A new bipartisan and bicameral bill, to
be released next month, is expected to
include several additional reforms,
including coverage of services and
medications for chronic disease
prevention, and wellness prevention.
Changes in Insurance Design – HDHPs and HSAs
Note - 49 percent of Americans receive insurance through an employer with an additional 7 percent enrolling through the individual market.
This enrollment is expected to be much higher now.
Total enrollment in hospital-based plans will be even higher by 2017. Numerous health systems, including UnityPoint Health in Iowa and some in North Carolina, have started new Medicare Advantage plans. Advocate Health Care and NorthShore University HealthSystem, two large Chicago-area systems, will offer a new health insurance product if the Federal Trade Commission blesses their pending merger.
Medicaid represents the largest line of business for provider health plans. Roughly 57% of members were on Medicaid in 2014, compared with 32% in employer commercial plans, according to McKinsey. In 2010, half of people in provider-owned plans were in Medicaid, and 43% were in commercial. Like other insurers, most growth has been steered toward government-funded programs such as Medicaid, Medicare Advantage and the new individual exchange business.
Oscar Health, Nuna, Clover Health
https://www.cbinsights.com/research/oscar-health-insurance-strategy-teardown-expert-intelligence/
https://www.axios.com/individual-market-will-thrive-oscar-2501833939.html
Note that many consumers are choosing HDHPs because the premiums are low. However, they are also exposed to higher deductible costs than other consumers, and may choose to skimp on certain types of coverage.
Greater flexibility to offer first-dollar coverage of health services at an onsite employee clinic and retail health clinic;
Permitting employers to offer direct primary care alongside an HSA;
Clarification that “excepted benefits,” which are non-major medical benefits like telehealth and second opinion services, do not jeopardize a beneficiary’s eligibility to contribute to an HSA;
Correcting the definition of "dependents" to include adult children, domestic partners, and non-traditional dependents;
Greater flexibility to offer first-dollar coverage of services and medications for chronic disease prevention;
Permitting the use of HSA dollars toward wellness benefits, including exercise and other expenses associated with the sole purpose of participating in physical activity;