All eyes are on the hullaballoo created by the challenges at Healthcare.gov and several of the states’ public insurance exchanges. Yet all the while, like in a magic show, attention has been diverted from the real action going on elsewhere. Quietly and in a relatively drama-free way, the private health insurance exchanges are busily taking over the world of insurance and, in my opinion, portend a radical set of changes in how our health insurance system operates.
Several years back, a number of companies began building private health insurance exchanges to initially help companies offload the incredible burden of retiree benefits. Companies such as Extend Health (now owned by Towers Watson), Senior Educators (now owned by Aon), and several others provided a way for large employers to get themselves out of the business (and balance sheet liability) of providing group benefits for retirees, instead providing them with money to purchase their own individual health policies through then small, now large companies. The private exchanges went about the business of building websites that work, call centers that buzz and a wide array of insurance product offerings at various prices. Now, several years later, hundreds of thousands and possibly millions of individuals are out there shopping their little hearts out, choosing their own plans, and dealing with the consequences of high deductibles and the like.
These various private exchanges are now poised and ready to begin serving active employees in 2014 as guaranteed issue (the requirement that all can be insured and no one turned away) goes into effect as a result of the Affordable Care Act. And lest you think this is a small marketplace, you are wrong. In 2008 there were about 120 million total employed workers and just over half of these worked for companies of 500 employees and above (39 million worked for companies with 5000 employees or more). In other words, we are talking about nearly half of American adults and that doesn’t even include the dependents they bring along into their insurance plan.
Interestingly, such large US employers as Walgreens and Petco and DineEquity (parent company of Applebee’s Neighborhood Grill & Bar® and IHOP® restaurants) are all-in on the private exchange program, committing to transfer all of their employees from group plans to the exchange to purchase individual plans come January 2014. The exchanges of Towers, Aon, Mercer, Buck Consultants and a plethora of others are alive and well and open for business at exactly the time when employers are trying to figure out how fast they can reasonably get out of the middle of health insurance administration and run for the hills.
Continue reading “While Healthcare.gov Struggles, A Different Story Plays Out On The Private Exchanges”
Filed Under: Tech, THCB, The Business of Health Care
Tagged: Employers, Extend Health, Health Insurance Exchanges, Lisa Suennen, Private Exchanges, The ACA, Wal Mart, Walgreens
Nov 3, 2013
I have been absent from the blogosphere for about two months. The fact is, there just isn’t all that much new to write about. Healthcare spending growth continues to moderate, but not by enough to stave off forecasts of doom for Medicare and Medicaid. Nor can employers begin to shift money from health benefits back into wages. But wheels are turning. Health networks are expanding as providers prepare to offer ACOs and/or increase their bargaining clout. A handful of states are poised to start up exchanges with the feds ready to take the reins in the laggard states. Aon/Hewitt is about ready to launch a private sector exchange. We will start to learn whether exchanges save or destroy private health insurance.
The Affordable Care Act has had many detractors but at least it has disrupted the status quo. We needed to see fundamental changes in how we pay for and deliver healthcare services and the ACA has delivered. But ACA has brought us a very particular set of changes. Time will tell if we have chosen the right path.
Even as the industry changes the way it does business, one critical aspect of change is missing. The faces are all the same. The same large systems that dominated the fee for service world seem poised to dominate the shared savings world, and the same insurers that dominated the traditional employer-based insurance market stand ready to dominate exchanges. Value might be created when old businesses play by new rules, but even more value is created when new players are free to enter and perhaps even break the rules.
Entry is the engine that drives economic progress. Entrants bring new technologies to manufacturing and new service models to sales. Threatened by entry, incumbents strive to innovate and improve customer service. This is as true in high tech industries as it is in the service economy. Research confirms that entry is ubiquitous – in a typical manufacturing industry, fully one third of established firms are replaced by entrants within five years. Though the data is not as readily available, turnover in the service sector is likely even higher.
Continue reading “Unleashing the Innovation Monster”
Filed Under: OP-ED, THCB
Tagged: Anti-kickback laws, Aon/Hewitt, Certificate of Need, David Dranove, economic progress, EHR, Innovation, Regulation, The ACA, Wal Mart
Jan 16, 2013
After a seemingly endless presidential campaign, we’re just days away from the Nov. 6 election. And to be sure, health care issues remain at the forefront.
Both Barack Obama and Mitt Romney have tried to claim the high ground as Medicare’s number one defender. In his latest column, the New York Times’ Paul Krugman argues that next week’s vote “is, to an important degree, really about Medicaid.” And writing on Bloomberg View, columnist Ezra Klein takes an even broader stance, concluding that “this election is all about health care.”
But health care isn’t all about the election, despite politics’ seeming ability to draw every sector into its gravitational pull.
In fact, many of the most significant stories in health care from the past two months haven’t come from the campaign trail — where candidates have mostly rehashed their existing policies — but from the private sector, as employers and providers have made aggressive, and sometimes unexpected, deals and changes. Reforms that will continue regardless of who’s sitting in the Oval Office next year.
Here are some of those stories.
Top Employers Move to Defined Contribution
As previously discussed in “Road to Reform,” Sears Holdings and Darden Restaurants have made plans to shift away from their current “defined benefits” — where they choose a set of health insurance benefits on behalf of their workers — and roll out “defined contribution” instead.
Under that model, firms pay a fixed amount for employees’ health benefits and allow workers to choose their coverage from an online marketplace, such as the Affordable Care Act’s health insurance exchanges or the emerging number of privately run exchanges.
In theory, the model would slow employers’ health costs while allowing employees to have more control over their own health care spending. And Sears and Darden’s announcements aren’t wholly unexpected, given that many employers have signaled their interest in making a similar shift.
But given the long-entrenched employer-sponsored health coverage model, some employers needed to be the first movers before the rest would be ready to follow.
Will they? That will be a major industry issue to watch across the next months.
Continue reading “How Health Care Changed While You Were Watching the Election”
Filed Under: THCB, The Business of Health Care
Tagged: 2012 Election, Advisory Board Company, Alternative Quality Contract, Barack Obama, BCBS of Massachusetts, bundled payments, California HealthCare Foundation, California Healthline, Chas Roades, Dan Diamond, Darden Restaurants, employee benefits, Employers, Ezra Klein, Health Care Reform, Massachusetts, Medicare, Mitt Romney, Partners Healthcare, Paul Krugman, Sears Holdings, The ACA, Wal Mart
Nov 1, 2012
Walmart’s sheer size makes almost any of their initiatives newsworthy. That said, despite being a lightning rod for criticism on employee benefits and health care, they have introduced initiatives with far-reaching impacts. Their generic drug program began in September 2006 – more than 300 prescription drugs for $4/month or $10 for a 90-day supply – and was widely emulated, disrupting retail drug markets and generating immense social benefit. Imagine the difference it made to a lower middle class diabetic who had been paying more than $120 per month for medications, and suddenly could get them for about $24.
Yesterday Walmart announced that “enrolled associates” – covered workers and their family members – needing heart, spine or transplant surgeries could receive care with no out-of-pocket cost at 6 prominent health systems around the country: Mayo Clinics (Rochester, MN and Jacksonville, FL); Cleveland Clinic (Cleveland, OH); Geisinger Clinic (Danville, PA); Mercy Hospital Springfield (Springfield, MO); Scott & White Memorial Hospital (Temple, TX); and Virginia Mason Medical Center (Seattle, WA).
Walmart’s Center of Excellence (COE) program builds on its own and other organizations’ pioneering efforts with similar programs. Walmart developed a relationship with Mayo Clinics in 2007 for transplant and lung volume reduction surgeries. In March 2010, Lowes reached a similar arrangement with Cleveland Clinic for heart surgeries and, last December, Pepsico announced a global pricing deal with Johns Hopkins for cardiac and joint replacement surgeries.
Continue reading “Walmart Moves Health Care Forward Again”
Filed Under: THCB
Tagged: Brian Klepper, Center of Excellence, employer-sponsored health insurance, transplant surgeries, Wal Mart
Oct 18, 2012
Can Wal-Mart provide us with health care as efficiently as it furnishes us with paper towels?
According to a Kaiser Health News report:
Wal-Mart — the nation’s largest retailer and biggest private employer — now wants to dominate a growing part of the health care market, offering a range of medical services from basic prevention to management of chronic conditions like diabetes and heart disease, according to a document obtained by NPR and Kaiser Health News.
But then the next day, according to Kaiser, the company started backtracking:
The only thing the company would say for certain is: “we are not building a national, integrated, low-cost primary care health care platform,” according to the statement from to John Agwunobi, senior vice president and president of Wal-Mart U.S. Health & Wellness.
I’ll get to what Wal-Mart might be thinking in a minute. First questions first: Can Wal-Mart provide care that is of higher quality and lower cost than conventional provision? If so, how?
My answer: Wal-Mart can indeed improve on the current system. But here’s the catch. It can do so only if it continues doing what it and other retail medical outlets are already doing: ignore the third-party payers. Almost everything that’s wrong with our health care system is the direct result of third-party payment; and some of the most striking examples of efficient care are emerging in those parts of the market where third-party payment is either nonexistent or of marginal importance.
So as not to be misunderstood, I am not saying that our problems are being created by health insurance. There is nothing in principle wrong with insurance. The source of our problems is using insurance companies to pay medical bills. It’s insurance companies acting pro emptore — in place of the buyer.
Continue reading “Wal-Mart Care”
Filed Under: THCB
Tagged: Kaiser Health News, primary care, third-party payers, Wal Mart
Nov 14, 2011
Last Wednesday’s headline in the Wall Street Journal may have surprised you. It read: “Wal-Mart Backs Drive to Make Companies Pay for Health Coverage.” The article discussed Wal-Mart’s open support for an employer mandate requiring all but small businesses to provide care for its workers, a stance that other retailers have opposed for obvious reasons.
I’ve been following the story of Wal-Mart and health care reform for the past several years. While some see this move as the company’s way of trying to level the playing field between it and other retailers, it nevertheless has taken several actions over the past decade to make health care more accessible and affordable.
Wal-Mart’s transformation began in 2006, when then CEO Lee Scott shook hands with Andy Stern, the head of the Service Employees International Union. In the past, such a handshake would have been unimaginable. Wal-Mart had earned a reputation for failing to provide its workers with health care, and the SEIU was one its strongest critics.
That changed with rising health care costs. Wal-Mart, like labor, recognized the need to provide affordable health care. The Scott/Stern handshake was a call for affordable care for all Americans by 2012.
This handshake can be seen as a bookend to another handshake decades ago, described by Malcolm Gladwell in a 2006 New Yorker piece. This first handshake was, like this one, between two powerful men representing labor and industry:
“The president of General Motors at the time was Charles E. Wilson, known as Engine Charlie. Wilson was one of the highest-paid corporate executives in America, earning $586,100 (and paying, incidentally, $430,350 in taxes). He was in contract talks with Walter Reuther, the national president of the U.A.W. The two men had already agreed on a cost-of-living allowance. Now Wilson went one step further, and, for the first time, offered every G.M. employee health-care benefits”
Thus, American health care: –employer based, brokered by private insurers, and provided by doctors on a fee-for-service basis. The kind of care that has created the fragmented market that most of are a part of today. The kind that has left 48 million Americans uninsured and millions more underinsured and just one illness away from bankruptcy. The kind of health care that led Wal-Mart the SEIU and the Center for American Progress to write a letter to the White House today in support of change.
As reported in the Journal, Wal-Mart has taken sincere steps to provide health care to its employees. Today, as a result of cutting the time of eligibility in half and increasing choices of plans, 52% of Wal-Mart U.S. employees are covered by the company. That’s compared to 45% of the rest of the retail industry.
Wal-Mart hasn’t just stepped up to increase coverage for its employees–in 2005, it became the first company to offer $5 generic prescriptions–a breakthrough price for people who previously needed to decide between taking their meds or eating dinner.
Wal-Mart has also been in the lead in opening walk-in clinics in its stores. Although the recession seems to have slowed the initial enthusiasm for retail medicine, the idea, in principle, has the potential to offer convenience at a very affordable price for people who have minor ailments like sore throats.
Finally, Wal-Mart has also recently started offering an electronic medical record to doctors. While it remains to be seen whether it will sell, you have to give credit to the big box retailer for taking the initiative.
Whether you like or loath Wal-Mart (and all of us seem to fall into one or the other category), its efforts to shape up American health care shouldn’t go unnoticed. In fact, I would dare “real” health care groups, like the American Medical Association, to show that they can match Wal-Mart’s initiative and drive to improve health care. So far, all we’ve seen from the AMA in the past few weeks has been a lot of lip service trying to assure us that they’re on the side of reform while behind closed doors, the Association’s members are still fighting about its future. And remember, the AMA represents at best 20-30% of doctors in this country, which is one reason why the New York Times’ Nicholas Kristof urged “President Obama, don’t listen to the A.M.A. on this issue. Instead, for starters, call your doctor!”
Filed Under: Uncategorized
Tagged: AMA, Rahul Parikh, Unions, Wal Mart
Jul 6, 2009