Are Health Insurance Companies Going the Way of the Dinosaur?

Do you remember where you were two years ago on March 25, 2010? I was on the “T” in Boston listening to my iPod while attacking some 2,000 plus pages of new law on my lap with a highlighter. Two days earlier, President Obama had signed health care reform into law, and I was burning the midnight oil evaluating the changes the U.S. House of Representatives reconciliation bill made to the original law to prepare my comments for interviews starting at 7:00 a.m. the next morning.

Due in great part to the incredible political gymnastics that had preceded the passage of the law, there had been immense doubt and controversy that health care reform would come to be law. As a result, it was a moment in time those of us health care “junkies” can recall with vivid clarity. The formal passage of sweeping health care reform, however polarizing or complex it may be, was arguably the single largest event in the history of health care law. I knew on that train, and in these last two years, that the health care industry would change in ways we could not anticipate, because whether the law is amended or reversed entirely, the populous and the politicians had finally raised their hands in tandem to demand change.

There were a number of sections of the law that my highlighter was drawn to, but what struck me most was the impact to insurance companies. The law added regulations to the health care insurance industry in countless ways, dictating everything from spending allocations, to pre-existing condition exclusion criteria, to limiting the percent by which insurance companies could increase rates without proper external review. I could not envision then what the law would do to the health insurance market, but today we see change happening everywhere, everyday.

The New York Times published an op-ed piece in January, “The End of Health Insurance Companies” in which the authors predict that health insurance companies will soon cease to exist in their current form. While I doubt that health insurance companies will become extinct, it is clear that the market is evolving.

Even before the enactment of health care reform, there was striking evidence that the self-insured market for employers was booming as a way to respond to skyrocketing premiums. For those of us who have employer-based health insurance through a company that is self-insured, the name of the insurance company on your insurance card is merely the conduit through which your medical care and bills run. Your employer assumes the financial risk and designs coverage accordingly.

No more one-size-fits-all solutions

We no longer live in a world where the Blue Cross Blue Shield PPO is a one-size-fits-all solution synonymous with “Cadillac Plan” coverage, because every employer can set up their PPO their own way. Providers have also been assuming financial risk for their patient populations by enrolling in insurance risk contracts. Health care reform just ups the ante with increased regulatory scrutiny, payment reform and care redesign through initiatives such as Bundled Payments for Care Improvement and Accountable Care Organizations (ACOs).

With the introduction of 32 Pioneer ACOs and many more formal and informal ACOs working with Medicare and commercial payers to assume greater fiduciary responsibility for their patient populations, a second insurance evolution is underway. As a patient, if you are attributed to an ACO, regardless of where you receive care, that ACO is responsible for the total cost of your care. They are charged with the daunting triple aim to provide better care, better health at a reduced cost. Some ACOs and large health care systems, like Steward Health Care in Greater Boston and California-based Kaiser Permanente, have or are exploring becoming an insurance provider themselves. They have to assume risk anyway, so why wouldn’t ACOs and well-integrated systems seek to expand their reach beyond health care delivery to health care insurance?

Innovative, and typically large payers, like United Healthcare and Aetna, have been savvy in expanding their business models and adding capacity to less regulated areas of the market, such as data analytics and wellness programs. As former HMOs, they know quite a bit about managing patient cost and identifying high cost/high risk patients, so why not expand their brand and provide a much-needed service to the industry?

Whether health insurance companies become extinct, either because they cannot sustain under new regulatory pressures or because they become replaced by new entities, remains to be seen. It is certain, however, that we have a long way to go on this journey, and insurers, providers, and employers alike will need to be innovators and agents for change. The train has left the station, and health care is reforming and transforming.