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 a new era. In an earlier post, I quoted Aetna CEO Mark Bertolini as saying he wants to create a business model that makes sense under the new rules and regulations. In a recent speech Bertolini explained, “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.”
Starting with Aetna, this analysis 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.
A different innovative approach to responding to health care reform is Highmark’s merger with West Penn Allegheny Health System (WPAHS). When first announced in June 2011, the idea inspired Hoover’s health care industry team to create the following headline: “Bizarre Pittsburgh proposal: will Highmark – West Penn merger work?” () A year later in June 2012 Moody’s rating service cited dropping patient volumes and continued operating losses at WPAHS in reaching the conclusion that the $475 million infusion of Highmark funds will not be enough to save the struggling health care system; Moody’s still rates $737 million of WPAHS debt as junk bonds.
One wonders if new Highmark CEO William Winkenwereder, Jr., MD will continue to support the merger plans.
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.”
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.
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.
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. The company is also expanding their Medicare Advantage position in Texas and Arkansas.
In addition to the consumer oriented ad campaigns, Humana has a new program that rewards members for losing weight or quitting smoking with points that can be redeemed for hotel reservations, electronics and clothing.
The insurer has also completed the acquisition of Arcadian Management Services, a Medicare Advantage health maintenance organization
“>are not that eager to O.K. every expense,” said Professor Regina Herzlinger of Harvard Business School.
“>in the retail space everybody can hear the consumer scream.”
“Their future is going to depend on their ability to demonstrate value to patients and to employers. No one any longer questions the fact that health care is unaffordable and that <a href=”(http://www.nytimes.com/2012/06/22/us/politics/insurance-companies-are-trying-to-soften-their-image.html?pagewanted=all)”>the current way we are doing business isn’t working.”
Kent Bottles, MD, is past-Vice President and Chief Medical Officer of Iowa Health System (a $2 billionhealth care organization with 23 hospitals). He was responsible for the day-to-day operations of a large education and research organization in Michigan prior to his work with in Iowa with IHS. Kent posts frequently at his blog, Kent Bottles Private Views.