Aetna not conceding the private exchange space to the benefits consultants


  • Aetna is stitching its inventory of ACO deals into a national ACO network and will offer them on its proprietary private exchange (PHIX)
  • Linking ACOs and PHIXs is smart because PHIX’s defined contribution feature creates a strong consumer reward for picking a tighter network product
  • Promising a national network of ACOs is bold: ACO deals depend on willing providers and opportunity in local care patterns; in many geographies, the delivery system isn’t ready or interested.
  • If Aetna can create a national network, it should be attractive to major employers (usually wary of adopting strategies available to just a portion of their employees) and differentiate its PHIX vs. those run by the benefits consultants.
  • A national network of high-value providers is an intriguing model that is longing to be built. Aetna’ network has some very high performing systems, but many obvious names are missing. Who is building the “real” national high-value chain for the PHIXs? The benefit consultants will want you on speed dial.
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Insurers and benefits consultants have been tussling over who should own private exchanges (PHIXs). Benefits consultants argue that, by bringing multiple insurers into a marketplace structured to intensify competition, they can offer better value. Insurers’ counter arguments have been vaguer, relying on their greater intimacy with the employer’s healthcare needs and the promise of access to cutting edge products and capabilities held back from the benefit consultant PHIXs.

In the quarterly earnings call a few weeks ago, Mark Bertolini sharpened the Aetna description of that value. He announced plans to roll out two models for Aetna’s proprietary PHIX, the Aetna Marketplace:

  • A model focused on key verticals where Aetna has depth and where the “employee populations have similar risks and similar needs” and could benefit from a similar buying experience, care management and set of network models.
  • A model leveraging Aetna’s ACO partnerships by offering a “national ACO chain” with an option for “those provider systems can sign up individual and small groups” and “potentially disrupting the national account business by making their purchases more local.”

Both points are good ones:

  • The verticals Bertolini cited – healthcare, energy, retail and hospitality — do indeed have unique needs (healthcare employers can be particular how they are themselves positioned in the networks covering their employees; energy often has employees scattered in hard to reach – sometimes international — locations and may place a premium on access, telemedicine options, etc.; retail and hospitality have very different mixes of employees – e.g., shelf stockers vs. management – and complex eligibility processes given varying hours across staff). 
  • The combination of ACOs in supportive narrow networks can deliver lower costs (Aetna talks about ~10% savings) but employees can feel like they are paying the price with constrained choice. Putting ACO products in a defined contribution context, however, allows the employees to make the trade-off and enjoy a good portion of the benefit. (We’ve have been arguing that “PHIX + ACO = :-)” since 2012. Note that we use ACO loosely for provider groups taking on population health accountability and incentives, not the specific Medicare-driven reimbursement model)

In addition, benefit consultant PHIXs won’t be able to match Aetna easily, dependent as they are on the participating insurers’ product portfolio.

  • Few insurers (except the Blues and perhaps United) will be able (or willing to invest) to match Aetna’s depth in its chosen verticals. And the smaller the number of participating suppliers, the weaker will be the competitiveness of the benefit consultant exchanges. 
  • Generally, ACO formation depends on where the willing and able providers are and how many lives the payer can fold into the program. Aetna, however, has set up many of its ACOs in areas where it had weak share and weak rates as part of a strategy of improving its average discount position (see our notes on their early Carilion and Heartland deals). It is by no means clear how quickly other national insurers (or a critical mass of regional competitors) will be able to field an array of ACO-based products with enough geographic breadth to meet national account needs to stock the benefit consultant PHIXs.

Of course, Aetna still has a way to go before they can field a real national ACO chain. By the end of 2013, Aetna says it had 32 ACO deals in place. Today, they have got quite a few more which all together gave them coverage of ~29% of the population:

They claim to have another 200 deals in the pipeline which will give them coverage for 60% of the population. But, they plan to only have a total of 60 completed by the end of 2014 which, presumably, will give it far less than the 60% coverage. That’s a geometrically accelerating pace though, so they may run through today’s pipeline by mid-2016. And 60% may be more than sufficient to attract many national accounts (especially those with few lives in the uncovered 40% of the country).

While Aetna is building a national ACO chain, we would argue that what is really needed is a national high-value chain. There are certainly many high-value systems on Aetna’s porfolio, but also many names missing (one metric: among the 19 delivery systems that are part of the High Value Healthcare Collaborative, it seems only 2 – MaineHealth and Baylor — have a deal in place with Aetna). Perhaps more of the “usual suspect” high-value systems are in Aetna’s pipeline (at least one more of the HVHC membership is: Eastern Maine Health System’s Beacon Health ACO). But Aetna’s ACO strategy has been serving different ends in different geographies. In some regions, it has certainly been about reeling in the highest value systems; in other regions, however, the focus seems to have been more on getting the provider account business or signing a good rate deal for the overall Aetna contract.

A real high-value network will need another architect.

But why should the big, branded high-value systems let Aetna (or any other insurer) define ACO terms and capture the PHIX value of their performance? Surely if they can work together on issues as complex as clinical performance comparisons, quality standards, workflows and costs (evidenced again by the High Value Healthcare Collaborative), they can find a way to work together on a collective PHIX high value product framework. And Aetna’s move will make the opportunity a lot more accessible, first, by introducing the concept to the market, and second, by motivating the benefits consultant channel looking to counter the Aetna threat to their PHIX business.

Perhaps the high value providers themselves should taking the lead.

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