There are numerous ways to organize a health insurance comapny. One of the easier ways to classify how an insurance company operates is to map out how much an insurance company acts like a a mini-National Health Service. Each organizational model has its own value proposition and comparative advantage, but this country is moving from one end of the organizational spectrum to a more highly integrated organizational spectrum.
The National Committee on Quality Assurance is the gold standard of public facing certification and credentialing of a variety of health care entities including insurance plans. Their 2013-2014 Top-20 Health Plans in the County list have providers all along the business organizational spectrum, so organizational structure does not prohibit very high quality plans. However there is a disproportionate number of plans that are mini-NHS or soft NHS, so these organizational models seem to provide very high quality insurance at reasonable prices.
On one end of this spectrum are pure insurance companies like Aetna and Cigna. These companies write policies, analyze risk and collect premiums. Their business advantage is that they are damn good at being insurance companies. At the other end of the spectrum is Kaiser of Northern California where their members are effectively buying into a single payer system as Kaiser owns both the facilities and the physician groups. A similar example would be the Veteran’s Administration health care system where the VA owns the buildings and employs the docs and only its members can use its facilities and docs.
The VA and Kaiser Northern California are strict mini-NHS. There is complete integration of both the provider side of the business and the payer side of the business. The value proposition is that the complete integration of health care and wellness provision allows for incentives to be aligned properly at the organizational level. Doctor’s are not referring patients out for testing at a facility that the doctor has a stake in. They are referring patients for testing because they think a test will provide valuable information instead of a contribution to Sally’s orthodontia. Doctors are not putting their income at stake if they recommend that a patient be moved to hospice instead of an ICU, care managers are not penalized for convening teams that save signficant sums of money and improves member health or quality of life. Furthermore, a fully integrated payer-provider system with captured members allows for far more efficient data collection and data sharing so electronic medical records are very high value added features as members can be comprehensively tracked to examine adverse interactions as well as seeing what did not work in the past.
That is the strict fully integrated payer-provider model. There are very few organizations that are anchored on the far end of the integration spectrum. I don’t think many organizations will want to do so as the capital costs of building both a provider network and a membership network that can cover the fixed costs are massive. The more common integrated payer-provider model is someplace like Geissenger in Central Pennsylvania. They are a payer-provider model which owns and operates a significant number of community and advanced care hospitals, a large number of doctors are employed by them. However insured members are allowed to go to other hospitals and doctors (although they may be paying more out of pocket, (I’m not sure)) and people who are covered by other health plans are allowed to use Geissenger hospitals, facilities and employed doctors. This model does not rely on either massive populations or captured populations like the Kaiser/VA model nor does it need quite as much capital for the build-out. The advantages are a weaker form of incentive management and data is still very big and very powerful. It is possible for providers to get more money by overprescribing or steering procedures to non-Geissenger owned facilities.
It is a model that is expanding right now as large hospital systems are being asked to take on population risk management functions due to the proliferation of Accountable Care Organizations. Risk management is an insurance industry core competency, so it makes sense that if a hospital is being tasked to manage risk, it is minor leap into becoming an insurance company.
Accountable Care Organizations are also pushing a more restricted form of the integrated provider-payer model to hospital groups that don’t want to take on full population risk management functions but wants to keep some risk management. These providers are setting up limited home host insurance companies. Home Host is a situation where employers offer their employees an insurance product that covers most services only at the employer owned facilities and providers. High end specialty care is often contracted out to the regional specialty hospitals/facilities but the first 80% or more of care is highly restricted. Home Host arrangements can often be a stepping stone for a hospital chain that wants to become an integrated payer-provider as it has a captive and fairly predictable membership base to learn how to be an insurance company.
After the Home Host arrangement, quite a few insurance companies will own some facilities such as labs or home health agencies but they don’t touch hospitals or public facing providers. This allows for some minimal integration of services but primarily serves as a decent revenue center for the insurance company. Finally, there are the plans that are just insurance plans and only touch the clinical side for knowledge related purposes.
Soonergrunt
Another great, informative post. Thanks, Richard. I always look forward to your postings, because like Kay’s, I know I’m going to be smarter after reading.
HinTN
Excellent wonkery. Thank you again.
raven
What they said.
Gin & Tonic
Agree that you consistently provide excellent information. However, I can’t help wondering about the effect on care practices of the increasing consolidation of hospital groups under the “Catholic” umbrella. I believe Kay has written about this, but if, as you say, ” large hospital systems are being asked to take on population risk management functions” I sincerely hope that they can take on those functions in a value-neutral way, and not the Timmy Dolan way.
Kristine
Agreed–I don’t post many comments, but I always make sure to read your posts.
aimai
Thank you so very much for this post. I had understood, or known, some of this but I had never really thought about the “captured” demographic of Kaiser or the VA or how that shapes the options for treatment or the shift from managing a pool of customers a la insurance company from just being a drop in health care provider who has to run a stable of staff to deal with the insurance companies.
I think I am correct in saying that in the VA model the taxpayer plays the role of the “young invincibles” and the mandate–that is they are, paying into a system which is primarily used by injured and aged people who would otherwise not be able to cover their own premiums?
CaseyL
I work for a dental insurer, and your articles are giving me valuable, interesting insight into how my industry works.
Major metropolitan areas can support multiple insurers following one or the other of the models you describe (in Seattle, we have Group Health, an HMO of the mini-NHS sort; plus Regence/Premera; plus the UWMC and Providence systems, each of which is engulfing entire hospital systems).
My impression is that, within a major metropolitan area, patients have good choices even with consolidation. Outside of the major metropolitan areas, the reverse is true: consolidation restricts what are already narrow choices.
Assuming that the models you describe can offer improved patient results as well as cost control (a big assumption right there!), do you have any sense of the minimum population size and/or mean-income point at which a municipality is capable of sustaining multiple systems?
rikyrah
House Republicans’ unique appreciation for ‘expertise’
10/23/13 08:01 AM
By Steve Benen
From time to time, Republican officials will seek out advice from those who are a little … what’s the word … unusual.
For example, earlier this year, the Republican National Committee invited far-right provocateur David Horowitz, author of books such as “Killing Whitey,” to help the party “broaden the GOP’s appeal with voters.” His lack of credibility on the subject didn’t seem to bother party leaders. Similarly, around the same time, House Republicans sought out Dick Cheney for guidance on foreign policy, untroubled by his track record, too.
There is, of course, nothing wrong with seeking out experts for advice – indeed, it’s generally a good idea – but the key is identifying reliable, trustworthy authorities who can help others better understand complex issues and add value to a serious conversation.
It you missed Rachel’s opening segment last night – and my oh my do I hope you saw this one – there’s fresh evidence that Republicans’ appreciation for expertise is a little, shall we saw, skewed.
http://www.msnbc.com/rachel-maddow-show/the-house-gops-unique-approach-experts
rikyrah
Predictions are hard, especially about the future
10/22/13 02:30 PM
By Steve Benen
Yogi Berra is believed to have once said, “Predictions are hard, especially about the future.” When it comes to the Affordable Care Act, Republicans can no doubt relate to the sentiment.
Clearly, recent website problems have become a big story, and understandably so, but Republicans can’t exactly claim this as an I-told-you-so moment. For one thing, they never predicted website glitches. For another, the glitches will be fixed and aren’t related to the underlying system.
But it’s when we look at the GOP’s actual predictions that conservative critics run into trouble.
For example, Jonathan Chait recently noted that “Obamacare” critics spent three years insisting that premiums in the state health exchanges would cost consumers more money, and that optimistic projections were folly. The opposite turned out to be true. Republicans have responded to questions about their erroneous predictions by changing the subject.
Similarly, the right was certain that the Affordable Care Act would hurt the economy, in part by undermining full-time employment and forcing more workers into part-time jobs. Oops.
http://www.msnbc.com/rachel-maddow-show/gops-health-care-predictions-come-short
Lee
I have a question that I thought of a couple of days ago. I hoping you would post something soon so I could ask.
For a health insurance company would it be viable to just say to their providers “We’ll pay Medicaid/care + X%”?
rikyrah
I was an ObamaCare guinea pig
By Sally Kohn/
Published October 21, 2013/
FoxNews.com
I signed up. I saved. And so will millions of Americans.
Honestly, I couldn’t wait to sign up for ObamaCare — not because I talk about it on television, but because I’m tired of being ripped off by my insurance company.
I live in New York State — which for several decades has had the highest individual insurance premiums in the nation.
For the past three years, since leaving a job at a non-profit organization and then exhausting my COBRA, I have relied on the individual insurance market to get coverage for myself, my partner and our daughter.
Three years ago when I was shopping for insurance, there weren’t that many options to choose from. And the plan I ended up with is expensive and, to put it bluntly, crappy.
Currently, I pay $965 per month for family coverage that includes:
• a whopping $7,000 deductible;
• $36,000 out-of-pocket max per year;
• an annual coverage limit of $2,000,000;
• a $35 co-pay for doctor’s visits ($55 for specialists); and
• a $15 co-pay for generic prescriptions.
……………………………..
READ THE ARTICLE TO SEE HOW MUCH SHE SAVED
http://www.foxnews.com/opinion/2013/10/21/was-obamacare-guinea-pig/
rikyrah
@PoliticalTicker
Administration to kick off effort to encourage enrollment http://wp.me/p4HKM-1dtX
JPL
Richard, I also love your posts and learn so much. Several of the comments are so well thought out, too.
hoodie
Where are big university medical systems going in all of this? The medical services around here are increasingly dominated by them.
rikyrah
Poll: ObamaCare approval ticking up
By Mario Trujillo – 10/23/13 07:11 AM ET
Public support for the healthcare law ticked up slightly in a Gallup poll released Wednesday, the second survey in a week to record the trend.
Gallup found 45 percent of the public approve of the law, a 4-percentage-point gain since it last recorded the number in August. A majority, 50 percent, continues to disapprove of the law.
Read more: http://thehill.com/blogs/healthwatch/health-reform-implementation/330047-poll-shows-obamacare-approval-ticking-up-#ixzz2iYFZmAaR
Follow us: @thehill on Twitter | TheHill on Facebook
rikyrah
How Obamacare Will Save The Federal Government $190 Billion
By Igor Volsky on October 23, 2013 at 6:00 am
Lower than projected premiums under the Affordable Care Act will save the federal government $190 billion over 10 years and increase the law’s deficit reduction by 174 percent to almost $300 billion, a new analysis from the Center for American Progress has found. The report, from Topher Spiro and Jonathan Gruber, bolsters President Obama’s claims on Monday that despite the ongoing technical problems surrounding HealthCare.gov, “the product of the Affordable Care Act for people without health insurance is quality health insurance that’s affordable.”
In fact, the emergence of new insurers and increased competition within the law’s marketplaces has lowered premiums below Congressional Budget Office (CBO) projections from March of 2012. While the nonpartisan office estimated that the average second-lowest-cost individual silver plan premiums would cost $4,700 in 2014, the actual average premium turned out to be $3,936 or “16 percent lower than projected.” The savings are significant because the law pegs its tax credits to the cost of the second-lowest silver plan. “If premiums for that plan are lower, then the cost of tax credits will also be lower,” the report argues. Here is why:
http://thinkprogress.org/health/2013/10/23/2821251/obamacare-save-federal-government-190-billion/
Gin & Tonic
@rikyrah: One of my bugaboos here. Yogi Berra “is believed to have said” that only by the lazy or tone-deaf. The canonical form of that quote, attributed to a wide variety of people over the years, is “it is difficult to make predictions, especially about the future.” Is there anyone familiar with the English language who has ever listened to Yogi Berra actually speak, who can honestly believe he would or could have said that? It does not sound like Yogi Berra at all. Attirbuting it to him is as lazy and sloppy as the “Eskimos have 100 words for snow” canard.
rikyrah
STUDY: Steadfast GOP Refusal To Expand Medicaid Leaves 5 Million Poor Americans Without Health Care
By Sy Mukherjee on October 16, 2013 at 12:33 pm
Republican governors refusing generous federal funding to expand Medicaid under Obamacare will leave over five million low-income Americans without basic health benefits, according to a new study by the Kaiser Family Foundation (KFF).
Since the Supreme Court ruled Obamacare’s Medicaid expansion to be optional last summer, just 25 states and the District of Columbia have proceeded to implement expansion. Another 22 states have refused, while a handful still remain undecided. Unfortunately, poor Americans living in states that aren’t expanding Medicaid likely won’t be able to afford health insurance at all.
Current Medicaid eligibility rules vary by state, and most set an extremely high standard for Americans who want to enroll in the program — reserving it for low-income children, their parents, the elderly, and the disabled. Poor working adults who don’t have children don’t qualify for Medicaid in many states, no matter how little money they make. Furthermore, because Obamacare originally intended every state to expand Medicaid, there aren’t any subsidies available for very poor Americans to buy private insurance through statewide marketplaces. That federal assistance is only available to Americans earning between 100 percent and 399 percent of the Federal Poverty Level (FPL).
Therefore, without the expansion, a sizable portion of the working poor will simply be out of luck when it comes to their health coverage. Since they’ll make too much money to qualify for their state’s Medicaid program, but too little to qualify for federal subsidies, they will fall into a coverage gap:
http://thinkprogress.org/health/2013/10/16/2787881/kaiser-study-medicaid-expansion/
rikyrah
Democrats rally around health-care law
By Aaron Blake
October 23 at 8:07 am
Despite a series of problems with the Web site for President Obama’s new health care exchanges, support for the law is up slightly.
A new Gallup poll shows support has increased four points since August, thanks to a rise in support from Democrats.
http://www.washingtonpost.com/blogs/post-politics/wp/2013/10/23/democrats-rally-around-health-care-law/?wprss=rss_election-2012&clsrd
rikyrah
@60th_Street
I know people love to sneer at us O-Bots, but, honestly, I have never had this much fun supporting a politician. Never gonna stop. Ever.
japa21
@Lee: In general insurance companies, particularly those at the Aetna-Cigna end of the spectrum reimburse providers one of 2 ways.
The less common is a strict percent of charges. There are some areas of the country, particularly some Midwestern states, where that is pretty much the only way providers will contract.
The other way for non-facility providers, is usually a percent of Medicare. Again it depends on the area of the country. In some areas providers will accept 100-110% of Medicare. In others it has to be close to 200% of Medicare. Also, some specialty providers, i.e. neurosurgeons and orthopaedic surgeons will get a higher percent than other providers.
The amount an insurance company will reimburse is, to some degree, related to the percent of the market they control. The more insured people they have, the more bargaining power they have and the less they pay. BC/BS is the biggie in most areas and reimburses the least, but providers make it up in volume.
Hospitals are generally paid at a fixed rate. This gets very convolyuted, but it means basically there is a reimbursement either on a per diem basis or a case rate, using Medicares DRG classifications, where the hospital is paid the same no matter how long the patient stays.
Elizabelle
@rikyrah:
From Rikyrah’s link, and note this is trending on FOX NEWS’s Opinions page this morning:
I was an ObamaCare guinea pig
News like that will get out.
Elizabelle
PS: please note that Sally Kohn used the New York state Obamacare interface.
Don’t know how a Virginian or Oklahoman or Missourian would have fared.
maximiliano furtive, formerly known as dr. bloor
Insurance companies have traditionally been very good at managing risk to their bottom lines, because once the shit hits the fan with respect to denied care or under treatment, they’re “just the insurance company” and the doctor is on the hook.
I love your posts, but resent the undercurrent of incompetency and greed that is often implied in your comments about “overprescription” or excessive treatment by doctors. Much of it has to do with being trained to do everything you can for any given patient, and a good deal of it has to do with managing both the financial and clinical risks involved in any given case. Insurance companies love to preach “partnering” with their panel providers right up until the subpoena arrives for a malpractice suit, and then they’re nowhere to be found.
Felonius Monk
@Elizabelle:
Perhaps as stories like this multiply and get repeated over and over, those Virginians, Oklahomans, and Missourians will think very carefully about who they vote for in their state and local elections.
Lee
@japa21:
Cool thanks
kindness
@Lee:
That is what is currently in effect and known as Senior Advantage at Kaiser. Not sure what other companies call it. Essentially the Insurer agrees to take over the care of Medicare/Medicaid members for a fee that is slightly higher than that which Medicare/Medicaid provides for now. And while this is an advantage to many, politically it ends up getting the short end of the stick. I say that because citizens and politicians point to those insurance companies and suggest they are ‘feeding at the trough’ or imply they are costing the government more and that it is improper to do so. Well they do cost the government more because of that X% extra. I can see both sides myself. Medicare reimbursement rates suck so many companies won’t take it. Hence the need for the X% extra. Is it right? Yes and no. Are there alternatives? Not really, not when you are dealing with Medicare eligible people as the amounts that are paid for services are capped even to outside physicians & hospitals at Medicare rates.
mai naem
The states that chose not to expand medicaid still have an opportunity to do it later. Arizona didn’t take Medicaid till 1978, under Bruce Babbitt. And that was under their own system which is similar to Tenncare. I think the feds will let these stupid states who do it later, do it with no penalty but I think they should have some kind of penalty.
Felonius Monk
Richard. I’m interested in your perspective on this:
Health co-ops, created to foster competition and lower insurance costs, are in danger
sparrow
I had to wait in line about 15 minutes today at the Comcast store, and they had CNN on. I think they need to rename it “Republican Propoganda Network” because for the entire time they just ran congressional republicans saying outright lies about Obamacare. Totally unchallenged and unquestioned. “This law will make insurance more expensive!” “Obamacare will kill people!”… Ridiculous and shameful and honestly I fear for our democracy with this media.
JoyfulA
I wonder if Geissinger isn’t more of a Home Host model. About 4 or 5 years ago, I was in a focus group of self-insured people regarding Geissinger health insurance.
Geissinger operates mainly in the lightly populated area of Central Pennsylvania, north of the urban-suburban complex of Harrisburg, Lancaster, and York that runs south to the Maryland (Mason-Dixon) line. None of the hospitals they own is closer than 40 to 50 miles north.Their closest contract hospital to me was Hershey Penn State Medical Center, about 25 miles away.
Their assumption seemed to be that if people in a small town almost in the middle of nowhere would go that far for medical services (which would be their closest medical services), then more urban insureds would, too, in their travels passing several hospitals and many, many medical practices. (The biggest local hospital, an amalgam of three former hospitals, is now building a new hospital, complete with emergency room, that is nearly walking distance to me, adjacent to an existing testing facility and two medical office buildings in a technology park.)
Geissinger recently announced a relationship short of owning it with the local Catholic hospital. I, too, worry that Geissinger will comply with Catholic strictures. A friend of mine (whose wife was 40 with some health concerns) was, to his surprise, denied a vasectomy at the Catholic hospital.
NonyNony
@Felonius Monk:
Some will, but the ones open to shifting their opinion on things like that are not the same ones who turn out in droves to vote. The ones who turn out to vote will probably assume it’s all a conspiracy by Democrats to give “red states” crappy insurance while “blue states” like New York and California reap the benefits.
Fair Economist
Any studies on the relative effectiveness and costs of the different models?
Elizabelle
@sparrow:
Yup.
And the problem is, people don’t get that they’re getting Fox Lite.
(My Indiana aunt, who hates Obama fervently from the get go, is a CNN devotee.)
Hungry Joe
We’re no. 17!
… of 484, that is: Kaiser of SoCal. Been in the system for four years now, and we like it. It’s large and efficient — and impersonal on the macro level. But the doctors and nurses have been great, and they seem to like working there. Over the years I’ve heard some horror stories, and no doubt some are at least in part true; you hear stuff like that about every health-care system. But this “complete integration of both the provider side of the business and the payer side of the business” really seems to work. Sure makes it easy on us — all we have to do is fork over relatively low co-pays; there are no worries about whether or not our insurance will cover this or that.
Richard Mayhew
@Fair Economist: Nothing that I have immediate access to — looking at NCQA, they like insurers that are falling closer to the mini-NHS model rather than an insurance model. Century Foundation has several reports out there, but I don’t have peer reviewed material at the tip of my fingers at the moment.
Richard Mayhew
@JoyfulA: No, Geissenger is classic integrated payer-provider with open access to facilities and patients.
Paul
Richard, thank you for your excellent series of posts. I have a minor question – not sure if you are familiar with the Scott and White system in central Texas, but if you are, would you say that they fit the mold of integrated payer-provider like a la Geissenger?
Mnemosyne
@Hungry Joe:
I used to be with Kaiser and I do miss them, because it was just EASY — you showed up, you paid your co-pay, and you saw the doctor. No additional fees, no “out of network” crap. The only reason I left was that I had a couple of non-generic drugs that I had to pay full retail price for (I didn’t even get a discount — they were cheaper at Costco than at the Kaiser pharmacy).
Kaiser is great for ordinary and maintenance kinds of things, especially diabetes care and other chronic conditions. Where they tend to fall down is if you end up with a rare or unusual condition, because they may not have the experienced specialist you need for something unusual.
@kindness:
Because Kaiser is a “closed HMO,” it makes sense that they would offer Medicare Advantage — it allows current Kaiser patients to continue to see the doctors they’re familiar with who are familiar with their history. Otherwise, the patients would have to leave Kaiser and find a whole new set of doctors to access their Medicare benefits. So it doesn’t bother me as much as it does for, say, Cigna to have a Medicare Advantage plan.
Mnemosyne
GAH! Can I please be freed from moderation for mentioning the type of department that dispenses prescriptions? KTHXBAI.
Richard Mayhew
@Mnemosyne: done
Richard Mayhew
@Paul: I know almost nothing about that company — sorry.