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Expect 7 million new insurance card holders in 2014

Posted by on Aug 8, 2013 in Health Insurance Marketplaces, Healthcare Reform | 0 comments

The administration has announced its estimate of the first year enrollment on the health insurance marketplaces as 7 million. That’s 7 million out of 52 million Americans currently not holding any form of health insurance. Given that some estimates are that 19 million of the 52 million are eligible for some level of premium subsidy, 7 million seems a bit light.

Perhaps this is a game of setting low expectations in the hope that reality will be much better.



Hospitals innocently cannibalize profitable contracts

Posted by on Jul 22, 2013 in Health Insurance Marketplaces, Healthcare Reform, Managed Care, Value-based contracts | 0 comments

We are beginning to see evidence in our practice of a pernicious new trend by health insurance plans. Plans are passively inserting language into their “Exchange” related product offers to health care providers, which would permit them to sell “other” non-Exchange related products as part of their new network offering. Hence, health care providers signing this new participation agreement at what is often a reduced price for the benefit of Exchange related enrollees will find themselves promoting a cannibalization of their current commercial health insurance relationships.

Why are the health plans doing this? By continuing to sell their commercial health care networks at a traditional price point, but delivering the care through a much cheaper network the health plans reap a substantial increase in profit.

Why are providers doing this? We are finding that the providers are doing it unwittingly. This is worth big dollars, and it will take time to for hospitals to figure out what’s happening and in the meanwhile the health plan profits. The easy fix is to reject the addition of that language in any health plan offering linked to the new health insurance marketplace.

Regardless, even by rejecting such tactics, in virtually every example and situation, providers risk some level of cannibalization of their current commercial health plan business and should be analyzing, projecting and preparing for this eventuality given participation in new Exchange networks.

Author Dan McAfee is Managing Director of The Godbey Group. Since 1999 The Godbey Group has been helping hospitals and healthcare systems negotiate attractive managed care and value-based contracts.


Is growth now a dirty word in healthcare?

Posted by on Jul 17, 2013 in Growth, Health Insurance Marketplaces, Healthcare Reform, Managed Care, MarketShare Strategy, Value-based contracts | 0 comments

With all the emphasis in healthcare reform on cost-cutting and reducing utilization, has the idea of growth become a dirty word? Recently Dr. Donald Berwyck spoke to HFMA and challenged the nation’s hospital chief financial officers to take control and root out waste. A parade of politicians and policymakers have spent the last two years talking about the need to cut the nation’s budget for healthcare.

Of course they’re correct as far as it goes. What’s missing is an emphasis on generating legitimate revenue to sustain our healthcare delivery system. We still need to take care of sick people even as we move to do a better job of keeping the majority healthy throughout their lifetimes. Growing and expanding your market is one thing, but raising rates to generate more revenue is no longer the answer to bottom line pressure.

With open enrollment on the new health insurance marketplaces only weeks away, it is still important for hospitals to ensure that their contracts with health plans at least cover the direct cost of care for patients. In the long run this is the only way that providers can sustain their offering to take care of patients in the new healthcare reform world. Now covering direct costs means an organization has a firm handle on the direct cost of providing each service or procedure that they provide. Surprisingly a number of hospitals’ accounting systems don’t really make it easy for them to have discrete cost accounting for individual services. That has suddenly become a table stakes issue.

Beyond that, the future stability of hospitals has to move beyond mere cost-cutting. No industry can survive long if it’s only strategy is cost reduction. At some point an organization and an industry must find ways to generate revenue sufficient to sustain their service offerings. So it’s not a choice between cost-cutting and revenue-generating growth because in today’s world the hospital needs to be skilled in both.

Godbey FF9933_53-medAuthor Neil Godbey is the President of The Godbey Group, Irving Texas. Since 1999 The Godbey Group has been helping hospitals and healthcare systems negotiate attractive managed care and value-based contracts.


Just do the math.

Posted by on Jul 2, 2013 in Health Insurance Marketplaces, Healthcare Reform, Managed Care, Value-based contracts | 0 comments

Just do the math.

The CMS estimates that holders of health insurance cards will increase by 9.6% or 30 million people in 2014. Some of this increase, they explain, is the result of economic recovery and increased employment in firms that offer their employees health benefits. Most of it is expected to come from the 7-13 million new enrollees buying health insurance through subsidies or mandated on the insurance marketplaces (exchanges.)

On the face of it a 9.6% increase in insurance card holders looks like good news to the provider community, especially for hospitals who depend on insurance payors for their profitability. But there are two very real concerns about this increase. The first is that the commercial health plans expecting to participate in the marketplace plans are contracting with providers at deep discounts from their commercial plan rates. Most of these discounts requested are between 10-40% off of some managed-care discounts already in place with the health plans. There goes the profitability of those patients to the providers.

The other concern is a bit more complex so stick with me. Each health plan is licensed by a state insurance agency which requires that the plan provide an adequate network of physicians and hospitals to meet the demand of enrollees. On paper these new plan offerings will meet such a test. But no one knows exactly where the enrollees live who will pick a plan on the health marketplace.

This is bound to lead to a mismatch of supply and demand for provider services. And that even assumes that an individual plan has in fact an adequate number of providers. A few very successful plans will be overwhelmed by consumer choice and a number of others will be underwhelmed. The result is likely to be a continuing demand for primary care services in our nation’s hospital ERs.

Add this form of success in enrolling 7-13 million new insured on the health exchanges to the 20-30 million who continue to be uninsured and you have an ongoing nightmare in the hospital emergency room near you. Cost of care and wait times will not improve as we had hoped under healthcare reform.

Everything starts to change in 2014. Hospitals and physicians need to be ready.

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Author Neil Godbey is President of The Godbey Group, Irving, Texas. The Godbey Group specializes in negotiating managed care and value-based contracts for healthcare providers.

Commercial ACO’s are Value-Based Contracts

Posted by on Jun 17, 2013 in ACOs, Value-based contracts | 0 comments

The press reports that more than 450 accountable care organizations have been launched as of today. Looking beyond the number one finds that a majority of these announcements are actually for Commercial ACOs, That is a contract between a national health plan and a local provider organization. Calling such contractual arrangements a Commercial ACO leads to public confusion them with Medicare ACOs.

The law governing Medicare ACOs requires a separate corporate entity with a governing board reflecting ownership stakes by physicians as well as hospitals. Commercial ACOs have no organizational requirements. Medicare ACOs must be recognized by the Center for Medicare services in order to qualify for the Medicare shared savings program. Shared savings represent the bonus for performance under dozens of financial, quality, and process measures that go into effect for all willing organizations across the nation in January 2015. Medicare shared savings programs are worth tens of millions of dollars to providers.

So-called Commercial ACOs are really just value based contracts that bind providers to a set of performance criteria established by the health plans. In fact a couple of commercially ACOs have announced that they are product specific like the Cancer ACO and Cardiac ACO–really just product carveout contracts. Each plan establishes its own unique criteria and performance standards so that providers find themselves stretching to satisfy a plethora of unrelated standards. Since the health plans alone possess the population health data to know what is reasonable and unreasonable to expect in clinical performance.

As with any other contract to provide health services, providers should enter into value-based agreements with great care and diligence. With so much of the providers’ revenue at risk under standards that only the health plan has adequate data to forecast, providers need access to the health plan data for which they are being held accountable. Failure to obtain timely and accurate data from health plans for Commercial ACO arrangements is already the biggest complaint about Commercial ACOs.

So when they say Commercial ACO, think value-based contract.

Neil Godbey is the President of The Godbey Group, Irving Texas. The Godbey Group helps hospitals and healthcare systems negotiate attractive managed care and value-based contracts.

Insurance brokers have an important role on and off the new Health Insurance Marketplaces

Posted by on Jun 7, 2013 in ACOs, Health Insurance Marketplaces, Healthcare Reform, Managed Care, Value-based contracts | 0 comments

Recently I attended an online education program for insurance brokers participating in the new health insurance marketplaces. The session was designed to help brokers who will be assisting uninsured purchase their first healthcare insurance on the new marketplaces. This session was part of a larger series sponsored by a national health insurance plan for its brokers.

According to this health plan 52 million Americans will be eligible to purchase health insurance on the new marketplaces during open enrollment commencing October 1, 2013. By their estimate about half the total will actually explore purchasing healthcare insurance on the new marketplace. Interestingly they estimate that 60% of that half or 19 million will qualify for some level of premium subsidy.

This obviously represents an enormous new market for insurance brokers. Brokers will earn commission on the sale of health plans through the new health exchanges. Commissions will be set by the states that operates insurance marketplaces directly themselves. Where the federal government operates health insurance marketplaces, they have chosen to default to the health plans to set their own commission rates for Mbrokers.

This national health plan has chosen to participate in only 10 states during open enrollment. In all 10 states they will appear in the online offering but in five of the 10 they will also have off-line sales through local brokers. The off-line sales represent an unexpected opportunity to reach the uninsured.

Health plan rates are expected to rise in the new environment. This health plan projected an average 30% increase across the country. But this average is comprised of states where the increase may approach 50% combined with a few states where current rates will be decreased by as much as 10%.

While the initial open enrollment has been extended through March 31, 2014, in later years the period will be limited to Oct 15 through December 15. The only exceptions to this rule will be triggered by marriage, birth, or changing employers. The COBRA law remains in force and provides an opportunity for those losing their jobs an opportunity to continue employer sponsored health benefits at their own expense.

The Administration’s stated goal for the first open enrollment is 7 million new insured. We shall see.

 

Neil Godbey is the President of The Godbey Group, Irving Texas. The Godbey Group helps hospitals and healthcare systems negotiate attractive managed care and value-based contracts.

How Health Insurance Exchanges will Change Your World

Posted by on May 6, 2013 in Health Insurance Marketplaces, Healthcare Reform | 0 comments

What will influence a buyer’s decision to purchase health insurance from an online health insurance exchange?

 

The first reason, of course, is the legal mandate for personal health insurance (effective January, 2014) required by the Affordable Care Act.

 

A second small group of fully insured will migrate quickly to the exchanges because groups under 50 cannot be underwritten. The price to buy your current health plan will be cost prohibitive as the insurance companies escalate the premiums to eliminate any potential risk for themselves.

 

The third will be employers that did not previously provide health insurance to their employees. They will now be required to provide health insurance, even for employees who were once called part-time.

 

The fourth group are the under insured, or those that have extremely high deductibles and co-pays. They will migrate to the exchanges due to the lower out-of-pocket options. This group will likely comprise the majority of individuals who will make up the exchange population.

 

So, as a healthcare provider, have you calculated the migration to the insurance exchange in your community and the impact on your financial well-being as a physician practice, ancillary vendor or hospital?

 

The next considerations are the benefit levels. This is a convenient way to describe the amount of out-of-pocket that will be required of the member. Bronze plans with 60% co-pay, Silver plans with 30% co-pay, Gold plans with 20% co-pay and Platinum plans with 10% co-pay. The actual premiums will reflect the plan exposure by the amount of out-of-pocket differentials. A number of studies are suggesting a strong migration to the Silver and Gold level plans is likely.

 

I believe that the purchase volumes will be strongest at the Bronze level for the healthy nonuser and the individual who cannot afford the premiums on lower deductible plans.

 

The same can be said for the opposite end. The Platinum level will have the second highest concentration of members reflective of adverse selection – sicker people that know they will certainly get their money’s worth at higher levels of utilization.

 

Your equation for future profitability should include the population shift and utilization potential.

 

Members will have an insurance card and they’re going to use it. What are you going to do to get paid for your services?

 

Over the course of the last few months, our clients have been receiving requests from the major carriers across the country, primarily Blue Cross Blue Shield, for price reductions from 20% to 35% below current PPO and HMO rates. Many of you will be looking at rates below Medicare and some at rates below cost.

 

My crystal ball suggests that the insurance companies are trying to move as much market into the exchanges as possible. They are attempting to achieve attractive premium rates to capture enrollment. Their second consideration is that utilization is such an unknown they are also attempting to reduce their risk by lowering reimbursement to providers.

 

Use the following three elements to model your financial forecast for the future under health insurance exchanges:

1)    Project the population move to the exchange

2)    Model the co-pays and deductibles that you will be required to collect

3)    Calculate the reimbursement impact.

 

I suggested you bracket all of these elements with a range to have a broader view of the high and low potential impact of different scenarios.