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POLICY/HEALTH PLANS: Why Health Plans need to change their business model

A reporter called about the PNHP which is running single payer ads attacking Hillary, Barrack and John Edwards. Why are they doing it? Because they want to make sure those guys don’t give into the insurers. Realistically there will be a role for insurers in any reform scenario, so it has to be the right kind of role. And that means their role has to change, alot!

Why? Look at this quote

"[Senator Clinton’s proposal] would have negative implications for managed care companies, since it would limit their ability to manage risk in their most profitable book of business (individual and small group), likely causing margin compression."

– Morgan Stanley analyst Christine Arnold tellsAIS’s Health Plan Week

That is dead right and also dead necessary. The days of Golden Rule taking over United are not over by any means, but they need to end some time. The health plans have to start to be responsible citizens. That means telling Wall Street to go fish for now. Are you interested, Karen? The long term alternative is not pretty.

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RickPeterjos bjdbev M.D. Recent comment authors
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Rick
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Rick

Christine Arnold is flat out wrong, and I, like jd, wonder what she’s up to because she certainly ought to know better. Right now, the most profitable segment in the for-profit health carrier business (and among the publicly traded firms, there are only 12 left: WellPoint, United (with Sierra pending), Aetna, CIGNA, Humana, Coventry, HealthNet, and the government-services-only quintet of AmeriGroup, HealthSpring, Centene, Molina and WellCare) is not small group and individual, it’s government services — Medicare in general, and Part D and PFFS in particular. In addition, there has been a coordinated trend away from risk-based business and into… Read more »

bev M.D.
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bev M.D.

JD:
I accept your correction of my terminology of “avoidance”. However, I still maintain that a basic change of mindset is necessary if these companies, whatever one wants to call them, are to administer health care in a realistic and patient-centric manner. I honestly don’t think current employees and executives of health “insurance” companies think this way; they need retraining. I hope your first comment is correct, e.g. that the trend will move in the desired direction.

Peter
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Peter

“The health plans have to start to be responsible citizens.” That won’t happen voluntarily. “The main business of the company then becomes (1) payment administration, (2) serving the function of medical cost control in conjunction with the public/government interest, and (3) keeping its members healthier than the actuarial models predict through DM and wellness…” Good definition of single pay jd. Is that the role insurance companies and their investors want or will accept? I don’t think so. “But they still require that sickness happens in order to exist.” Like everyone else in the healthcare business. Not much incentive to reduce… Read more »

jos b
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jos b

jd anticipates that payers in Germany and The Netherlands are transforming themselves into health custodians..as a genuine Dutchman ,I can testify that he got it exactly right . For example, our national waiting lists have evaporated…simply because the payers have figured out that it is cheaper to send a knee surgery patient to Barcelona , accomodate your next of kin in a nice hotel than waiting for a slot in a Dutch hospital.On a more serious note : payers are investing now practively in all kinds of services to keep their risk pool healthy to the delight of our govt… Read more »

jd
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jd

Bev, it is not true that insurance companies are “fundamentally” in the business of avoiding risk. The very thing that gives them existence is risk. That is what an insurer gets paid to do: redistribute risk among a larger group to reduce the risk of any given individual. To say that insurers are fundamentally in the business of avoiding risk is like saying that computer makers are fundamentally in the business of not making computers. Or, it is like saying that life insurance companies are in the business of finding people who can’t die. I do see how it is… Read more »

jd
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jd

I also saw Christine Arnold’s quote and wondered what it is really about. When you look at the effect of universal health care (UHC) on the multipayer model, you have to look at how much business the insurers would gain first of all. At any given moment something like 1/7 of the population lacks insurance. In these UHC models, even if half of this group joined a government-run plan, that leaves 10-20 million who will start paying premiums to an insurance company (or whose employers will). Given that the vast majority of these people will participate in the individual or… Read more »

bev M.D.
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bev M.D.

The phrase “ability to manage risk” says it all. Insurance companies are fundamentally in the business of avoiding risk, which, in health care, means avoiding sick people. This is irreconcilable with providing health care in any model except, hopefully few and isolated, “episodes”. Similar to when your house burns down or your car is damaged in an accident. A small percentage of people will have a house burn down during their lifetime, but everyone will get sick/injured and die during their lifetime. I am not disputing that private companies can provide health care, but they have to do it with… Read more »

Lisa Emrich
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We NEED change in the individual and small group market where the insurers are not bound by uniform (federal) rules of play. Bringing this portion of the insurance industry onto the same playing field as large group/employer-sponsored health coverage would benefit so many citizens.