Looking at Healthcare Through Payer Lenses

Payers, as with the rest of the healthcare industry, have a lot on their plate right now. Healthcare reform, via the Affordable Care Act (ACA) continues its march forward despite legal and political uncertainty. Struggling to define the payer role in Accountable Care Organizations (ACOs), understanding the impact of Health Insurance Exchanges (HIXs) on their business (McKinsey survey results likely have many payers wondering how to market to what may be an enormous uptick in individual purchasers of coverage – something that most are ill-prepared for), and how to better engage consumers/members in proactively managing their health are a few of the top issues that were addressed at the AHIP Institute last week.

But when one sits back and reflects on the AHIP Institute – all of the sessions, all the discussions, the chatter in the halls, underlying messages within the message, the exhibit hall – it boils down to three key themes that this sector of the healthcare industry is grappling with, which much like the three stages of meaningful use, build upon one another:

  • Establishing Trust
  • Engagement
  • Collaboration

Establishing Trust
Health insurers have a major image problem and they know it. Providers don’t trust them, consumers don’t trust them and who knows, maybe even their spouses don’t trust them. Without that trust it is extremely difficult for payers to engage providers and members at a deeper level to improve overall population health and lower their risk exposure (MLR=medical loss ratio).

With the passage of the ACA, payers are now looking at the prospect of at least 30M more members (a significant portion Medicaid) joining their ranks. The 30M estimate could easily be tripled if McKinsey’s research (see above link) is indeed accurate. This creates a two-fold challenge for payers:

  1. How to market to these potential new members through a state-sponsored and run HIX. Payers do not know how to market to a market of one as they are more accustomed to marketing to employers or through brokers to reach that end consumer. Payers need to develop strategies that will assist them in attracting new members through these exchanges and one would imagine that ideally, a payer would prefer to attract the healthiest consumers on the HIX to join their ranks, again to lower MLRs. Successful marketing begins with establishing trust in a given brand and with a consumer trust ranking for payersthat is towards the bottom, payers have a long road ahead of them.
  2. How to ensure that these new members receive appropriate care when they need it and not have them turn to the local, and the far more expensive, Emergency Room (ER). Many of these new members are unaccustomed to having a primary care physician and have typically gone to the local clinic or ER for care. Ensuring that these new members receive effective, value-based care will require close collaboration (and education) not only with the new member, but more importantly, the care community in which that new member resides. Payers will need to establish a higher level of trust than they have today with that care community, be they ACOs, Patient Centered Medical Homes (PCMH), clinics, you name it to develop value-based care models. With a gapping shortage in primary care, that will only be exacerbated with ACA, very creative approaches are needed to develop these new care models and trust is often a foundational element to the creative process.

If and when trust is established, the next stage is engagement and for payers it appears that such engagement is sporadic at best. Sure, there are many examples where payers have established partnerships with provider organizations, but it has not been easy. As stated in Part One of this series, Blue Shield of California worked closely with Catholic Healthcare West to establish an ACO model that worked for both parties. This effort took four long years to accomplish which makes one wonder: if Kaiser-Permanente wasn’t beating up both parties in the market, would this ACO even exist?

Payers need this type of deeper engagement with providers to develop new models of care but do they have the time, do they have four years for each significant ACO they wish to establish in a given community/region? With 2014 a short 2.5 years away, one would have to logically conclude: No, there is not enough time. Payers will certainly take lessons learned from initial efforts, but definitely need to accelerate engagement of the provider community. But where is that engagement? While there were representatives of provider groups in attendance at AHIP Institute, AHIP’s failure to put such representatives on the stage to talk of their experiences and what they, the provider community seeks from payers is shocking almost to the point of disbelief.

Not sure if the payers are anymore successful on the member side but with an increasing number of future members being individuals, payers need to seriously rethink their consumer engagement strategies, which today rank dead last of major industries surveyed. Yes, most payers have a PHR offering for their members. Yes, most payers are seeking to engage members via calls to those with a condition. But is any of this gaining traction, engaging consumers/members in a meaningful way to help payers reign  in ever rising healthcare costs? Sure doesn’t look like it and payers will never make it to Stage 3 if they do not get members and providers engaged.

Collaboration is the final Stage 3 for payers. It is the nirvana of deep and meaningful collaboration between all stakeholders to improve healthcare delivery in the US – a new delivery model that reigns in costs, equitably distributes risk, and ensures accountability. This is a very elusive goal that the payer sector, which AHIP represents, is not even close to achieving today.

While a large portion of the “collaboration problem” can be laid at the feet of this industry sector, in all fairness, payers are not completely to blame. Providers, while by and large well meaning, do have some in their ranks that are less so and unnecessarily drive up costs. On the consumer side, for far too long consumers have not been held responsible for taking better care of themselves. There is very little personal, consumer accountability in today’s healthcare system but that is changing, will need to change if we as a nation wish to truly grapple with the extremely serious issue that we can no longer afford the healthcare system (system used loosely as it is hard to call the US healthcare industry a system) that we have today. As one of the keynote presenters, economist Laura Tyson so eloquently put it:

We do not have a debt problem in the US economy, we have a healthcare problem.

Without deep, meaningful collaboration among all stakeholders the debt problem we face today will seem a mere pittance to what we will face in the future. Payers can play an extremely important role in that collaboration but they have some very hard work yet to do to establish trust in the market and then engagement. Based on what we heard and saw at this year’s AHIP Institute, payers are seriously behind in these efforts and at times almost seem oblivious to just how critical these efforts are to their very survival.

John Moore is an IT Analyst at Chilmark Research, where this post was first published.

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michael turpin

After spending over 25 years as a consultant assisting employers in their frustrated and at times less engaged efforts to manage healthcare costs, I became CEO of an $ 8B region for a major national insurer. On my first day, I received an 8 page manifesto from the head of the local OBGYN society cynically congratulating me for my move to the dark side, returning to me an a $55 reimbursement check for an exam ( endorsed to me so I might take my family out to dinner ), and then proceeded to go on for 10 pages about how… Read more »

Doug Arnold
Doug Arnold

Jonathan, In most states a small number of health insurers (often <5) have a huge monopoly. Most of these insurers have worked to disaggregate providers, dictating contract terms and fees, while garnering large annual rate increases for many years. These are facts, and facts are often uncomfortable, especially for those who benefit from the status quo. In my state, Anthem has kept physician fees flat for many years while getting large rate increases.Many other insureres have done the same, often paying below Medicare and Medicaid. You state, "They do not successfully drive down fees while increasing premium, pocketing the difference… Read more »


You may have not intended to do so, but I think you have mneagad to express the state of mind that a lot of people are in. The sense of wanting to help, but not knowing how or where, is something a lot of us are going through.

Doug Arnold
Doug Arnold

Establishing trust, engagement and collaboration with providers have not been high on most payer’s “to do” list for quite a while now. I find it ironic that AHIP gets their shorts in a bind at the thought of providers aggregating around ACOs, calling for vigorous antitrust enforcement, while the health insurance industry has been exempt from federal antitrust laws since 1947. In most states a few insurers have monoploy power and have worked diligently to disaggreate providers and drive down fees, while regularly seeking double digit increases in premiums. Many insurers give lip service to participating in groups like PCPCC,… Read more »

jonathan halvorson
jonathan halvorson

Doug, there is some confusion in your response. Insurers are concerned about ACOs only to the extend that they will bring higher prices. Period. Do you want that? On this matter the insurer’s interest meshes, as far as I can tell, with the public interest. Why is it in anyone’s interest other than those who are employed by ACOs to keep increasing prices faster than inflation and the growth of GDP? On antitrust, the federal law states that states have the prerogative to set their own antitrust law. If they do not set adequate regulations, the Federal regulations take over.… Read more »

Al Lewis

John, I wholeheartedly agree with your diagnosis but I reluctantly reach a different conclusion. (I say “reluctantly” because ironically I am writing this from Chilmark, and I think you know where I live…) “Deep collaboration” only works if everyone gets something out of it. If all parties are needed for “collaboration” each must be confident of at least “staying whole” or close to it if the collaboration fails, and also making the money on the upside if it works. This, in my humble opinion, is why the Medicare ACO regs are so timid: too many mouths need to be fed.… Read more »

Al Lewis

HI, John, I would wholeheartedly agree with your diagnosis but I’m afraid I would have to disagree that “deep collaboration” is the answer. (I say “I’m afraid” because, as coincidence would have it, I am writing this from Chilmark and it’s a small town.) Thing is, in “collaboration” everyone has to sign off, which means everyone has to get something out of the deal, which limits the savings potential quite considerably. And that’s exactly the problem with ACOs as I see it: Too many mouths to feed. Too many people who simply have the ability to block entire initiatives if… Read more »


Trust? These are the people who rejected clean claims until laws were passed to stop it. The guys who deny payment because someone made a minor mistake on their application. The latest? I recently got a message from Cigna saying that if they do not receive a bill within 90 days, they are not paying. Make them offer standardized lists of services, make it a lot of offerings so there is plenty of choice for consumers, then make them compete based upon price and quality. Then I will begin to trust them.