Experienced leaders of provider-sponsored plans highlighted some factors that helped them survive in recent years—and that may help them navigate the next stage of healthcare reform.

May 25—Provider-sponsored health plans do not yet know the outcome of the ongoing federal healthcare reform debate, but they expect it to lead to decreased federal funding and to hospital closures.

Plans expect many of the people they cover to become uninsured as federal funding is reduced.

For instance, Fidelis Care, which started as a provider-sponsored plan and now offers the largest Medicaid plan in New York state, expects 150,000 of the insurer’s 1.5 million enrollees to lose coverage—among 300,000 projected to lose coverage statewide under the American Health Care Act (AHCA).

The AHCA “scares the hell out of me,” Rev. Patrick Frawley, CEO of Fidelis, said May 25 at Citi’s annual not-for-profit healthcare investor conference. “We’re here to stay, so we’ll figure out a way and try to work with our state partners and provider partners to figure out a way. But it is going to be extremely challenging.”

The Congressional Budget Office issued a projection this week that the version of the AHCA that passed the House of Representatives in April would increase the number of uninsured in the next 10 years by 23 million. That reduction includes currently uninsured people who would be expected to enroll in coverage in coming years due to the individual mandate and other provisions of the Affordable Care Act (ACA).

The AHCA’s federal-funding cuts—including $834 billion in Medicaid funding over 10 years—likely would impact many health systems.

“Taking money out of health care the way they are talking about taking it out, given some of the issues we’re facing, is going to have consequences,” said John Wray, senior vice president for delivery system collaboration at Cigna. “While I don’t disagree that we’re going to be there to take care of people, there may be fewer hospitals, there may be fewer doctors in some areas because health systems are going to have to react.”

The share of rural hospitals with negative operating margins increased from 35 percent four years ago to 41 percent in 2016, according to an analysis by iVantage Health Analytics. Eighty rural hospitals have closed since the ACA was enacted in 2010, according to an analysis by the Sheps Center at the University of North Carolina.

Some of the biggest financial impacts may occur for hospitals and health systems in the 31 states that expanded Medicaid eligibility under the ACA, with investors saying they may be more hesitant to invest in those organizations if the AHCA is enacted.

Important Steps

For insurers and providers, a critical response to the AHCA is to increase their integration and collaboration, Wray said.

Collaboration is key “so that we can bring about a better value proposition, a better quality level, more affordability, and better access to care for people who need it,” Wray said. “Because of all the uncertainty that is out there right now from a legislative and from a regulatory perspective, there’s one thing I’m pretty confident in saying: There’s not going to be a whole lot more money coming into the system to pay for this stuff.”

That reduced funding will require more health plan and provider innovations to improve quality and access.

Insurers expected the move to value-based payment to accelerate as federal healthcare spending tightens.

Value-based takes on new meaning in a potentially new environment because we can be more efficient and we can be smarter about it,” Frawley said.

He lamented that most providers have settled for taking on upside-only models in response to New York state’s mandate that a growing share of Medicaid spending move into value-based care.

“I’ve heard a few [conference] presentations yesterday say, ‘We don’t want to take risk, we’re not interested in an insurance plan, we’re going to look at a value-based relationship,’” Frawley said.

Another ACA development this week was the Trump administration's decision to seek a 90-day delay in deciding how to proceed with an appeal of the House lawsuit challenging ACA subsidies.

Keys to Success

Many plans have left the ACA marketplaces due to steep losses over the last three years.

Jim Hinton, president and CEO of Baylor Scott & White Health, said the organization’s ACA marketplace plan in Texas and the marketplace plan of his former employer, Presbyterian Healthcare Services in New Mexico, both had steep losses.

“There’s a lot about the ACA that created an additional administrative burden—the essential health benefits, which provided benefits people didn’t always want to pay for it and that whole dance with brokers and with individuals,” Hinton said. “Coverage is a good thing; as an industry we should always be pro-coverage because it is the right thing to do. But how it gets financed and the variation from state to state is something we have to keep in mind.”

The AHCA would allow states to obtain waivers from coverage requirements for some benefits currently mandated under federal rules and would allow rate setting based on health status, both of which the CBO expected would reduce premiums overall.

Frawley said the success of Fidelis’s marketplace plans stemmed from its use of Medicaid managed care plans as a basis from which to expand.

“Have we made a lot of money on the exchange? No. But we’ve paid into the risk pool, and we gave premium rebates in the first year,” Frawley said. Fidelis is the largest marketplace plan in New York.

Unlike fellow national health insurers that have fled the ACA marketplaces, Cigna has cautiously expanded its participation, which Wray cited as a key decision. The insurer’s marketplace plans are not yet profitable, but it is adding about 100,000 enrollments this year to its 2016 total of 168,000, executives said on a February investor call.

A key factor for provider-sponsored plans is having at least 400,000 total covered lives in all plan types combined, according to American Hospital Association (AHA) research.

Such numbers provide “the scale to drive down back-end administrative costs,” said Hinton, who is chairman of an AHA executive roundtable for provider-sponsored plans.

Health systems considering launching health plans also need to conduct a “brutal” assessment of whether their organization is focused on population health or whether it is still geared toward driving volume to its hospitals, he said.

Wray, who previously helped oversee provider-sponsored plans in Medicare Advantage, Medicaid, and the commercial market, cited the importance of investing the needed capital and expertise.

“If you really want to do it most effectively, you’re going to have to invest a ton of capital and you’re going to have to invest a lot in terms of management expertise because there are many nuanced lines of business,” Wray said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Thursday, May 25, 2017