Author: Tory Wolff

Recon takes an analytical look behind select developments in healthcare

Rise of self-insurance in smaller groups: opportunity and threat

Summary  Self-insurance is growing among smaller groups (including those sized 50-250) From a competitive point of view, it will be hard for insurers holding attractive groups in risk products to respond given the enormous profit cannibalization of converting from risk to an ASO offering But they will need to find some solution: risk products today are expensive for many groups given continuing low levels of utilization; “peanut-butter” share nationals at the forefront of these products (Cigna and now Aetna) won’t have cannibalization worries to stop them from pushing the model

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Major health plan Q1 earnings: Profit surprise in commercial risk; multiple reasons why business prospects look good

Public health insurers startled the market with earnings ~25% above consensus expectations. A key driver was lower-than-expected utilization (particularly in the under 65 commercial lives) which kept medical costs down. Management teams offered two theories in the analyst calls: bad weather and the beginning-of-the-year reset of consumer directed (CD) deductibles; neither is compelling: A lot of discretionary care has already been squeezed out of the system by the bad economy; it is hard to imagine that bad weather would drive out a lot more. Also the utilization decline was concentrated

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ACO profitability: Reasons for optimism

Summary A new article in the NEJM suggests ACO economics will be unattractive because of the costly upfront investment and low probability of shared savings payments. However, the results of the Medicare Physician Group Demonstration project show good earnings potential for providers (average >$5K per physician). Further: best-practice sharing, emerging narrow networks and scalability of ACO capabilities are likely to significantly enhance ACO economics for providers. It is likely that the most adept providers will be the ones forming ACOs; given delivery system capacity constraints, however, providers opting out of

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Primary care capacity and the looming Medicaid surge: Medicaid-focused providers must be part of the answer

Summary A new study from Center for Studying Health System Change suggests that new Medicaid eligibles under reform will have trouble getting access because most primary care are not accepting new Medicaid patients. Our view: The study does not take into account the role of focus in Medicaid which makes a big difference: Providers earning more than 25% of revenues from Medicaid are much more willing to take on all or most new patients. In fact, among the providers most likely to care for Medicaid eligibles, the willingness to accept

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Revolution in Roanoke? Perspectives on the Aetna-Carilion deal

Summary  The line between health plan and provider continues to evolve: the Aetna-Carilion deal exemplifies providers backward integrating into insurance (and contrasts with other providers exiting commercial insurance business e.g. art part of last year’s Coventry deals) The Aetna-Carilion alliance appears to have compelling, multi-layered business logic and there will surely be more of these sorts of couplings in markets where there is a strong provider brand and a health plan with low share but deep capabilities and ambition. Using the provider brand to sell insurance creates challenges for health

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How can a health plan weather the MLR hit to profitability? Some clues from Coventry

Summary Health plan profits will be down dramatically in 2011 due to MLR rules Providing care management services to providers building out ACOs and medical homes can open new revenue streams outside the MLR constraints System profitability (health plan + provider) can be enhanced if the health plan allows providers to keep more of the savings from ACOs while requiring larger fees for its care management services * * * Could this be part of the plan behind Coventry’s touted close provider relationships and plans to acquire more health plan

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