Ohio has had some interesting news regarding the Exchange participation.
First, Anthem got out at the start of the month.
A big Obamacare shoe just dropped in Ohio.
Health insurer Anthem said Tuesday it will effectively exit its Obamacare individual plan business in Ohio, leaving potentially 18 counties in the Buckeye State with no insurer selling plans in 2018.
Earlier this week, Centene/Ambetter announced it is expanding the number of counties it will cover in Ohio:
Centene’s expansion could help add options for consumers who’ve seen other health plans quit their markets, though the company didn’t give details on its exact plans. The states the company is expanding in are Florida, Georgia, Indiana, Ohio, Texas and Washington.
Finally, this morning, Oscar announced an interesting deal with Cleveland Clinic:
The Cleveland Clinic will enter the individual insurance market later this year through a joint venture with New York-based Oscar Insurance Corp., a health insurance tech startup.
The venture, called Cleveland Clinic | Oscar Health….
My first thought on these three stories is that it is a story of a functional market. Some companies that have trouble making money drop out of a market. Other companies that have been profitable expand. Some companies with excess capital and the belief that they have a good idea take a risk. This is what a normal market looks like if it is vaguely competitive.
Below the fold is my thoughts on Oscar’s play.
Oscar’s partnership with Cleveland Clinic is interesting. Cleveland Clinic has been diversifying for years. This could be framed as a learning step if Cleveland Clinic’s ever wants to become partial integrated delivery network. It would have a third party insurance process vendor enabling a rapid and cheap launch with a low salience training environment. Cleveland Clinic is prestigious and it attracts regional, national and global patients for its highest end services. For Oscar, we have to split their performance between New York (ugly) and elsewhere. The performance elsewhere is plausibly profitable within the next twelve months. If they can replicate their Texas performance in Ohio, then it is a reasonable play.
I have a bunch of insurance nerd questions about the arrangement.
My biggest question is risk adjustment. The Cleveland Clinic is the high end center in the region, so it attracts lots of sick people. There is a single on-Exchange plan sold in Northeast Ohio (Medical Mutual) that has Cleveland Clinic in network. That means Medical Mutual gets most of the sick people. If the new product is priced better than Medical Mutual, the switching costs for sick people are very low. Oscar will get the sick people. But if they are not closely priced to the benchmark, they won’t get many healthy and young people signed up.
Oscar’s experience so far has been that it can enroll young and healthy people with the attendant high risk adjustment outflows. Oscar has been attractive to someone like my younger brother who is the Director of Magic at a tech firm. I am not sure how many people like my brother they will get. Instead they will be very attractive to people like my mother with her plethora of odd and expensive chronic conditions. Every time she goes to Mass General (a peer hospital for Cleveland Clinic), the interns and residents are told to gather round her by the attending as they will see something “educational”. Their covered population will look very different in Ohio which means their risk adjustment experience will be very different.
Once we see relative rates, we can make stronger assumptions but risk adjustment is screaming at me right now.
However, if Oscar’s kung fu is really as good as they have been claiming over the past several years, they should be able to make money on treating high cost individuals less expensively than the risk adjusted revenue. And if that is the case, that is a good thing. If not, they’re just burning VC money and giving away free ice cream on a hot summer day.
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Director of Magic? I obviously should have been born at least a decade later than I was. But seriously, one of the reasons why Blue plans have had such a hard time in public markets (including Medicare Advantage, at least in many markets) is that their strength has been in getting good rates from a wide network, not the best rates from a narrow network, and they have traditionally not engaged in robust (intrusive?) utilization management. So the wide network attracts less healthy people and the lack of utilization management results in higher pmpm spend. I don’t know if that was Anthem’s problem in Ohio, but it would not surprise me to find that was the basic story.
@germy: If we public/private split a la Australia, I’ll take that outcome every day and twice on Sundays.
@germy: Power at any price, even if it comes at the cost of Americans dead from lack of healthcare. The Republican way!
@germy: At what level of delusion does Mitch wish for Senate Rs to succeed passing legislation unwinding the Affordable Care Act?
The man is ever in search of another anchor to carry in his canoe.
Wait, can we italicize anymore with the magic greater than and less than?
@ThresherK: should still be working
@Yutsano: okay…not only was there HTML fail, there was also a message that I was posting too fast? That’s different…
@Barbara: Evidently my brother is very good at what he does. No one in the family actually knows what he does though… so Magic!
@David Anderson: Or Espionage.
@Barbara: Anthem’s Ohio network, at least in my county, was narrow beyond use.
I am presently on an off-Exchange plan, but I cannot think that it will be offered for 2018.
If it is not, I will be forced back onto my employer’s plan as a retiree. It is cheaper: but it is Anthem, so it would involve finding a new PCP, using a hospital two counties away, etc.
Meanwhile, my wife has Medicare Advantage — a plan with no incremental cost over and above the standard Medicare premium — and they just pay everything.
Things that make you go “hmm”.
Isn’t Jared’s brother Joshua Kushner a co-founder of Oscar???
@Frank Wilhoit: Two things:
1. Every carrier went at the exchange based on different assumptions, and sometimes those proved to be wrong. One thing that commercial carriers like Anthem can run into is that providers don’t want to give them good rates for exchange business because they are afraid of cannibalizing the better paid volume from group business. That is, if exchange coverage is good enough, more groups will migrate people to the exchanges and it’s a net loss for the hospital. If that is the local dynamic then the carrier can find it very difficult to put together a broader low cost network, and so either goes with a broader network that isn’t as low cost as they need, or a low cost network that isn’t as broad as it needs to be. I think this happened to United in some places.
2. Regarding Medicare Advantage: there are a lot of plans in Ohio, and in general, MA is a good deal for beneficiaries. The negotiation dynamic for MA is such that non-contract providers have to accept the Medicare rate when they treat any Medicare beneficiary, even if they are covered under Part C. What that means is that for MA, if there are multiple providers in the market, they all pretty much accept a rate that is at or very close to Medicare and network size isn’t that big of an issue. Whereas, with commercial business, including exchanges, the hospital can charge much higher rates if they are out of network and it’s hard to get them to accept discounted rates.
@Barbara: The networks for the Anthem on-Exchange plan and for my former employer’s Anthem plan were identical.
@Frank Wilhoit: Maybe they just don’t do a good job in Ohio. It’s hard to generalize without knowing more about your employer’s plan. A lot of employers or at least self-insured employers have migrated to narrow networks.
@Barbara: You hit the nail on the head. What are your thoughts on where the Anthem members will go? Anthem was pretty high priced so I have to think these members were shopping on network rather than price. Are there other considerations that drove members to Anthem? Where will they go next? Do you see them going to Centene or other low-cost carriers or is there another option similar to Anthem in NW OH?