ACOs remain a focus, primarily as shared savings
The value-based payer model incentivizes providers to improve health outcomes by reimbursing payments based on patient outcomes and value delivered, not on the services and resources expended. This transformation aims to reduce healthcare costs owing to unnecessary variation, medical error and readmissions on the part of the provider.
Accountable care organizations (ACOs) are present in 55 percent of local healthcare markets; recent estimates suggest that more than 14 percent of patients receive their care from a provider that is part of an ACO. State Medicaid agencies and private insurers have also developed ACO models. Despite the growth in adoption of ACO models, there is a general lack of understanding in the structure of contracts and payment models.
Understanding today’s market
According to the American Journal of Managed Care, private payer ACO contracts were most often shared savings models (69 percent), as opposed to global budget or capitated models. Other important findings include:
- Most ACOs had only one ACO contract, and about half of them had a contract with a private payer.
- A large majority of private contracts made shared savings contingent upon quality performance (79 percent).
- Private ACO contracts had greater numbers of participating providers, which translates into significantly more full-time primary care physicians and specialists.
- Organizations with private ACO contracts were more likely to have experience with pay-for-performance initiatives than organizations with only public ACO contracts.
All of this points to an upward trend of private exchanges aimed at providing better care at lower prices. The Affordable Care Act has benefited private insurance companies with the enrollment of millions of new members. From 2010 to 2014, the revenues of these insurers, which control a major market share of the private health insurance industry, increased 45 percent to approximately $375 billion while operating profit increased 65% to $21 billion.
This exponential increase also brought a fair share of challenges, more specifically an increased Medicaid consumer base and fierce competition in online exchanges. Additionally, expected increases in medical costs would lead to deterioration of the medical care ratio. Considering government pressure via the U.S. Health Care Reform Act to keep medical losses to a minimum, restrict premiums for patients with pre-existing conditions and the extra burden of the excise tax by the ACA, companies face a big task in reducing expenses.
Top private market payers
The new landscape has allowed many payers to emerge as key players. We’ve analyzed the market, and identified the following ten payers as important market players in the private sector.
1United Health Group: The group covers more than 70 million health policies for Americans and their businesses but recently reported $720 million in losses on exchange-compliant insurance policies in 2015, far more than the $482 million in profits from all other business. It was the only top health plan to lose membership with 36.8 million medical members. It has decided to adopt a new strategy and restrict selling Obamacare from a wide range of states to just a few.
2Humana: The company scores well with credit rating agencies and its individual Medicare Advantage plan is expected to gain 100,000 to 120,000 members while its prescription-drug plan is adding 300,000 to 330,000 customers. The changing face of the insurance market has also pushed insurers to consolidate. Humana may be acquired by another big player in Aetna, which would increase its medical membership to 33 million.
3Centene: With an expanded, multi-national base, Centene focuses on providing programs that cater to the under and un-insured populations in the United States. Despite an increase in enrollment, it faces issues in margins in Medicare business. A big bonus is the inclusion of Health Net, which helps the company to adapt in a changing healthcare landscape and focus primarily on Medicaid and Medicare Advantage.
4Aetna: The company has honed a productive ACO strategy with over 200 deals that serve close to 60 percent of the population. Recently, its membership grew to 23.7 million and it presently holds maximum market share in the U.S. market. Despite challenges, it expects to earn $7.5 billion in premiums by 2018.
5Cigna: Cigna aims to benefit consumers through collaborative programming aimed at providing quality care at lower costs. The company has been increasing membership base and expects a global medical consumer growth of 4% but also faces pressure from Medicare Advantage on lowering rates and medical costs.
6Molina Health: Following an industry trend, the company has expanded geographic reach through acquisitions such as Health Information Management, Abri Health Plan and Community Health Solutions of America. It has a strong base in California owing to its offered certified Qualified Health Plans (QHPs) on the California Health Benefit Exchange and selection by Covered California.
7Anthem Blue Cross Blue Shield: Anthem is seeking the acquisition of Cigna. Corp, a move that will solidify its position and help expand scale and diversification. Medical enrollment at the company grew 2.9% to 38.6 million at the end of 2015, operating revenue is projected at $80.0–$81.0 billion and it continues to expect operating cash flow to exceed $3 billion in 2016. The strong Blue Cross Blue Shield (BCBS) license has been the foundation of this success owing to the membership migration strategy, which allows the company to successfully retain customers.
8Wellcare Plans: Wellcare provides managed care services for government sponsored plans, specifically in three segments: Medicaid health plans, Medicare health plans and Medicare PDPs. Enrollment in the Medicaid health plan increased 11% (as of March 2014) and it benefited WellCare by another 12% after the government proposed raising payments next year for private insurers that provide Medicare coverage.
9Kaiser Permanente: The California-based company gained a 27% increase in membership after adding half a million new members in the first year of insurance expansion under the ACA. The company even worked to reduce exchange health plan rates in 2015, which had led to lower enrollment rates back in 2014.
10Assurant Healthcare: The news here is the company’s plan to exit the health insurance market in 2016, though it has adopted new strategies to try to soften any financial impact. Namely the implementation of new mobile programs and some cost cutting initiatives are hoped to improve profitability in the second half of 2016.
Managing private payer relationships
There is a lot to track to ensure that ACOs are getting the most out of these private payer relationships. Consider investing in a care extender or case managers to help manage these relationships and track your revenue cycle and claims processes.
There are also many effective health IT tools that can help identify patient risk and provider efficiencies to help bend the cost curve in favor of the ACO. Critically evaluate what solutions are available to ensure you make the right choice for ACO success.