July 20, 2016
In the era of Obamacare, the move by employers to self-insure the healthcare they offer employees is accelerating. This trend is creating tremendous opportunities for innovation in healthcare. The MacIver Institute has expounded on the benefits of Wisconsin making a similar change.
The following column by John Torinus touches on the subject and elaborates on the opportunities for innovation that self-insured systems offer employers. Centered around the topic of “Value Healthcare,” the column originally appears at JohnTorinus.com:
As ObamaCare sputters its way to an uncertain future, a new business model called Value Healthcare continues to emerge.
Self-insured private payers, entrepreneurs, lean hospital systems and the big dog payer, Medicare, are the main drivers toward a revamped delivery model for health care in America.
It is not completely understood that it is “game over” in the stampede by private companies who are going self-insured. The big health insurers have been removed from group coverage in the private sector. Four of five companies over 200 employees now self-insure. They “underwrite” their own risk of covering care.
That massive change in the payer firmament opens the doors for all manner of entrepreneurial innovation. Here are two examples among many:
- One new Milwaukee company, Access HealthNet, now offers 850 “bundled prices” to self-insured employers. The all-in price of those standard episodes of care are always in the bottom quintile of a price range of 400% top to bottom. For instance, a joint replacement can be sourced for $26,000 to $28,000 in southeastern Wisconsin, compared to average prices in the market of about $47,000.The value price is below $20,000 in other markets.
- A Waukesha startup, Intellivisit, (disclosure: my early stage fund is an investor) is offering virtual diagnoses to patients of providers for $40 or less. A powerful artificial intelligence engine assesses symptoms and feeds likely diagnoses to advanced nurses or doctors for a final determination of what to do for the patient. It’s telemedicine on steroids. Costs and prices per visit drop, and quality improves with better diagnosis.
Huge savings should flow as these companies gain market acceptance. That is Value Healthcare.
Best-practice private companies are already delivering coverage for less than $15,000 for a family, compared to the national average of more than $26,000.
Meanwhile, ObamaCare (ACA) gets a “C” grade at best. Here are some of the mixed results:
- Premiums for individual policies are jumping at unsustainable double-digit rates on the ACA exchanges in many states. The federal subsidies are often not enough to offset the inflation in premium prices.
- Families with those exchange policies are getting hammered when they need high-priced procedures that hit their high deductibles and co-insurance. How many families can shell out $6000 for a hip replacement?
- Major health insurers are fleeing the exchanges, because they lose money when coverage mandates abound and issue is guaranteed to all comers.
- Two-thirds of the cooperative insurers created under ACA have gone bust, costing taxpayers billions and proving that government supported businesses seldom work.
- Access has indeed improved under ObamaCare, but nowhere near as sharply as its authors intended. There were some 46 million uninsured Americans ten years ago before ACA. Today’s estimate is still high at 33 million. It’s a partial victory at best.
- Medicaid, the primary method for covering more poor people under ACA, is crowding out other strategic priorities at the state level, like spending on education, public safety and the environment. That is so even though Medicaid reimburses health care providers at rates that would put them out of business. They make it up by raising premiums to private payers. Medicaid managers have not adopted the major reforms that have helped companies and the nation reduce the rate of inflation in health costs.
Medicare, on the other hand, is making moves toward Value Healthcare. Ironically, local governments and school districts have led the way to the new business model for the delivery of care.
Medicare managers, for instance, are installing bundled prices for procedures, and they are starting to pay for performance by hospital corporations. That’s a big jump from paying for volumes of procedures. (Manufacturers dropped piece rates 40 years ago.)
Once the presidential campaigns are history (it can’t it come soon enough), there is room in the political debate for hope and change on amending ObamaCare, whichever party wins, along the lines of Value Healthcare.