Abstract

Wall Street Is Optimistic About Health Insurance Industry, Expects More M&A in 2021

January 5, 2021

Equities analysts are bullish on the health insurance industry in 2021, despite the challenges caused by the COVID-19 pandemic. Wall Street also expects more mergers and acquisitions will take place in 2021 than the previous year.

“Prior to 2020, the industry had already posted several years of record earnings, leading to higher absolute and risk-adjusted capitalization levels, trends that full-year results are likely to further support,” wrote AM Best analyst Doniella Pliss in the firm’s 2021 outlook for health insurers. “In addition, amid a severe level of economic uncertainty, the industry accumulated substantial cash balances, leading to stronger liquidity metrics. These factors make the industry well prepared to withstand the anticipated challenges and further uncertainties of 2021.”

By Peter Johnson

Equities analysts are bullish on the health insurance industry in 2021, despite the challenges caused by the COVID-19 pandemic. Wall Street also expects more mergers and acquisitions will take place in 2021 than the previous year.

“Prior to 2020, the industry had already posted several years of record earnings, leading to higher absolute and risk-adjusted capitalization levels, trends that full-year results are likely to further support,” wrote AM Best analyst Doniella Pliss in the firm’s 2021 outlook for health insurers. “In addition, amid a severe level of economic uncertainty, the industry accumulated substantial cash balances, leading to stronger liquidity metrics. These factors make the industry well prepared to withstand the anticipated challenges and further uncertainties of 2021.”

“Many of our rated issuers have grown their scale significantly over recent years, taken market share and added capabilities. The evolution of business profiles is credit positive,” wrote Moody’s Investors Service analyst Marc Pinto.

“We expect insurers to continue to acquire non-regulated health service businesses to deepen vertical integration, but large transformative deals are unlikely,” Pinto explained. “Smaller, tuck-in insurance acquisitions to improve geographic diversification or under-scaled businesses are more likely. We expect leverage to improve in the absence of outsized M&A.”

Analysts also projected a more stable political and regulatory environment with the departure of the Trump administration, and they observed that a split Congress is unlikely to pass major health care reform legislation. Further, they expect that the Supreme Court will not strike down the Affordable Care Act in its pending decision on California v. Texas.

However, analysts emphasized that the pandemic is far from over, and no one can say for certain what level of care utilization to expect. When utilization dropped in the second quarter of 2020, carriers’ earnings spiked dramatically. A similar, if smaller, phenomenon could take place early in 2021.

“We expect the COVID pandemic to linger into 2021 with more sluggish utilization in [the first half of the year],” wrote Citi analyst Ralph Giacobbe in his 2021 health care outlook. However, he predicted that the second half of the year was “more likely to show accelerating utilization/spending as individuals gain comfort as we get broader administration of the vaccine.”

Despite New Approvals, Plans Still Favor Generics for Epilepsy

January 4, 2021

Pharmaceutical treatment for different types of epilepsy generally still relies on tried-and-true generics, despite recent efforts by drug manufacturers to introduce new branded medications into the mix, PBM insiders say.

Xcopri (cenobamate tablets), manufactured by SK Biopharmaceuticals Co., Ltd.’s subsidiary SK Life Science, Inc., launched in May for the treatment of partial-onset seizures. However, many plans haven’t jumped to add Xcopri to their formularies, says Mesfin Tegenu, R.Ph., president of PerformRx.

By Jane Anderson

Pharmaceutical treatment for different types of epilepsy generally still relies on tried-and-true generics, despite recent efforts by drug manufacturers to introduce new branded medications into the mix, PBM insiders say.

Xcopri (cenobamate tablets), manufactured by SK Biopharmaceuticals Co., Ltd.’s subsidiary SK Life Science, Inc., launched in May for the treatment of partial-onset seizures. However, many plans haven’t jumped to add Xcopri to their formularies, says Mesfin Tegenu, R.Ph., president of PerformRx.

“Some plans have opted to take a cautious approach and leave the medication as non-formulary to start,” Tegenu says. “It is difficult to tell the impact of this new drug launch on the treatment of epilepsy. However, Xcopri trials demonstrated high efficacy in partial onset seizures and refractory epilepsy, lending it a strong clinical profile. One could reasonably suspect a high impact on the epilepsy treatment paradigm.”

In most cases, though, generics are the first-line treatments for many forms of the disorder, according to Tegenu. Many of the drugs used to treat epilepsy are covered without restriction by plans.

Prime Therapeutics LLC treats Xcopri as a non-preferred brand, says April Kunze, senior director of clinical formulary development and trend management strategy for the PBM. Premera Blue Cross’ Medicare Advantage formularies, Cigna Corp.’s national preferred formulary and HealthPartners’ commercial formularies impose quantity limits on Xcopri, according to their plan documents.

“Treatment is based on the type of epilepsy diagnosed, and labeled and off-label indications of the individual products. There is a fair amount of overlap as many drugs share multiple indications. However, many newer agents are narrowly indicated,” Tegenu says.

In November 2018, GW Pharmaceuticals launched its product Epidiolex (cannabidiol), a much-anticipated new drug for two rare forms of childhood epilepsy. In August, the FDA expanded indications for Epidiolex to include seizures associated with tuberous sclerosis complex in patients age 1 or older.

“Based on previous positive trial results in TSC patients, Epidiolex may become an important treatment option for patients,” Elizabeth Thiele, M.D., Ph.D., director of the Herscot Center for Tuberous Sclerosis Complex at Massachusetts General Hospital, said in a statement when the FDA widened Epidiolex indications.

For his part, Tegenu expresses some skepticism about the drug. “Epidiolex represents another option for treatment of Lennox-Gastaut and Dravet syndrome,” Tegenu says. “However, its efficacy hasn’t shown significant improvement relative to existing treatments.”

Surprise Medical Billing Comes to An End, Insurers Oppose Arbitration Mechanism

December 30, 2020

After years of failed attempts, Congress has finally come to an agreement on a measure to end the practice of surprise medical billing.

Surprise billing, also known as balance billing, is the practice of charging patients for out-of-network procedures that insurers refuse to pay for in whole or in part. Often, patients incur these balance bills without their knowledge. The new legislation would ban providers from sending such a bill to patients, and would instead require providers to negotiate reimbursement with the patient’s insurer or submit the dispute to a binding arbitration process.

By Peter Johnson

After years of failed attempts, Congress has finally come to an agreement on a measure to end the practice of surprise medical billing.

Surprise billing, also known as balance billing, is the practice of charging patients for out-of-network procedures that insurers refuse to pay for in whole or in part. Often, patients incur these balance bills without their knowledge. The new legislation would ban providers from sending such a bill to patients, and would instead require providers to negotiate reimbursement with the patient’s insurer or submit the dispute to a binding arbitration process.

Providers will have 30 days from the day of the procedure to negotiate a compromise reimbursement amount with payers. If the parties can’t agree, they must submit their preferred reimbursement amounts to an HHS-approved arbitrator, who will pick one of the two amounts.

Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, praised the legislation as “closer to the ideal, consumer-friendly solution” than previous attempts to address the issue.

“It’s very likely that this bill reduces premiums,” says Adler, who has contributed to research that found surprise billing increases health care costs.

Insurance stakeholders are displeased that surprise bills will be resolved through arbitration. Instead of arbitration, America’s Health Insurance Plans had lobbied for out-of-network reimbursement to be tied to a benchmark rate.

Adler thinks that insurers’ objections to arbitration are overblown, and he argues carriers will gain leverage in balance billing negotiations because of the legislation.

“It seems pretty easy for an insurer or a [plan sponsor] company to call a provider’s bluff,” Adler says, citing rules in the bill that he thinks will prevent providers from abusing the arbitration system.

Dan Mendelson, founder of Avalere Health, is more skeptical about the bill’s potential to reduce costs and slow premium inflation, since it will require new administrative costs.

“There is no question that whenever you force more cost into the system, it’s going to be reflected in consumer cost,” Mendelson explains. “So there will be a premium effect. Will people actually be able to differentiate it from the typical rise in costs? No….I do expect that it will have an effect, just from an economics standpoint.”

Payer Execs Say Diversity Programs Must Start at Top

December 29, 2020

Internal equity and diversity programs could be a powerful business strategy for plans that serve under-resourced populations, two experts say. But to make these programs truly effective, organizations must start at the top and embed equity and diversity principles in everything they do, moving beyond a mere “box-checking” mentality, said Sachin Jain, M.D., president and CEO of SCAN Group and SCAN Health Plan.

“We have to lead with new leadership. We have to evolve our cultural dialogue around these topics,” Jain said during a Dec. 8 virtual panel at America’s Health Insurance Plans’ Consumer Experience & Digital Health Forum 2020. “But we also have to recognize that you can’t be a good business in 2020 and not actually be excellent at serving diverse populations. I see that, from the seat that I’m in, as opportunity.”

By Jane Anderson

Internal equity and diversity programs could be a powerful business strategy for plans that serve under-resourced populations, two experts say. But to make these programs truly effective, organizations must start at the top and embed equity and diversity principles in everything they do, moving beyond a mere “box-checking” mentality, said Sachin Jain, M.D., president and CEO of SCAN Group and SCAN Health Plan.

“We have to lead with new leadership. We have to evolve our cultural dialogue around these topics,” Jain said during a Dec. 8 virtual panel at America’s Health Insurance Plans’ Consumer Experience & Digital Health Forum 2020. “But we also have to recognize that you can’t be a good business in 2020 and not actually be excellent at serving diverse populations. I see that, from the seat that I’m in, as opportunity.”

When Jain came on board in June as CEO of SCAN Health Plan, he directed the organization to look at data on racial equity and diversity. “Our African-American employees trust [company] leadership less than our non-African-American employees by about 0.5 on a five-point scale. That’s a big problem,” he said. “On Medicare Advantage star measures, our African-American patients do way worse on pharmacy measures than our white patients. That’s an opportunity for us to get better.”

SCAN’s leaders recognized that they were not “thinking diversely across all of our processes across the organization,” Jain said. To begin remedying that, the health plan recently announced that it hired three new executives and promoted another to support diversity.

Aletha Maybank, M.D., chief health equity officer and group vice president at the American Medical Association Center for Health Equity, said that the AMA is performing many of the same tasks as SCAN Health Plan: “looking at our performance metrics, our policies, our culture of the organization to make sure that we’re embedding equity in this way.”

Most health care leaders understand that they need to promote diversity and equity among their leadership and workforce, Maybank said. But to make significant progress, “every single sector within our institution has to be looked at.”

Organizations first need to educate teams “so that folks actually get this.” Then, those teams can change policies, practices, culture and research, she said.

2020 in Review: PBMs Continue Integration, Face More Regulatory Challenges

December 28, 2020

In 2020, the PBM industry continued to deepen its integration with other industry players, a trend that experts say is likely to continue in coming years. The PBM space has consolidated to the point that five firms — UnitedHealth Group’s OptumRx, CVS Health Corp.’s Caremark, Cigna Corp.’s Express Scripts, Anthem Inc.’s IngenioRx, Humana Inc.’s Humana Pharmacy Solutions, and the Blue Cross and Blue Shield affiliate-owned Prime Therapeutics LLC — manage the lion’s share of the pharmacy benefits offered to U.S. health plan members.

Beyond their deepening integration with the payers that own them, these firms are working to expand their data and direct-to-consumer operations.

By Peter Johnson

In 2020, the PBM industry continued to deepen its integration with other industry players, a trend that experts say is likely to continue in coming years. The PBM space has consolidated to the point that five firms — UnitedHealth Group’s OptumRx, CVS Health Corp.’s Caremark, Cigna Corp.’s Express Scripts, Anthem Inc.’s IngenioRx, Humana Inc.’s Humana Pharmacy Solutions, and the Blue Cross and Blue Shield affiliate-owned Prime Therapeutics LLC — manage the lion’s share of the pharmacy benefits offered to U.S. health plan members.

Beyond their deepening integration with the payers that own them, these firms are working to expand their data and direct-to-consumer operations.

Ashraf Shehata, national sector leader for health care and life sciences at KPMG, says that a “back to basics” approach for 2021 will be essential for PBMs, especially as their health plan owners navigate the uncertainty generated by the COVID-19 pandemic. However, he notes that the space is still managing the aftereffects of transactions and is looking for more deal-making opportunities.

In that realm, the long-term integration of Express Scripts into Cigna has generated the most noise. Under Cigna, Express Scripts has deepened a horizontal relationship with Prime Therapeutics.

Meanwhile, in November, Amazon.com Inc. made a big splash by unveiling new pharmacy services, including a prescription-discount service for uninsured individuals that taps into Express Scripts’ price-negotiation powers with manufacturers.

Midwestern supermarket chain Hy-Vee, Inc. also launched a PBM in December, while in March, Costco Wholesale Corp. purchased a minority stake in Navitus Health Solutions, a subsidiary of integrated health system SSM Health.

Shehata says that PBMs’ data expertise will be a key line of business going forward, especially as regulators and the new Democratic administration increase scrutiny on the industry.

He suggests that PBMs could expand beyond the traditional role into something more like a data and analytics clearinghouse for the entire health care industry and PBMs need to be aggressive in delivering value directly to consumers as regulatory scrutiny on the industry increases.

“Big data and [artificial intelligence is] going to sit in kind of the combination of the traditional PBM, …the more traditional health claim, and… detailed EHR data,” Shehata explains. “You’ll start to see a whole generation of organizations also bring in EHR data, because it’s much more accessible now.”

BMA, Avalere Report Shows MA Outperformance on Multiple Care Measures

December 23, 2020

A new study from Avalere Health comparing quality outcomes for Medicare Advantage enrollees vs. traditional fee-for-service (FFS) Medicare beneficiaries found that high-need, high-cost populations enrolled in MA had better care experiences for most clinical quality measures and had significantly higher rates of preventive screenings for several measures. While MA didn’t outperform FFS across all measures, the findings suggest that care management in MA results in higher quality of care for this vulnerable population, observed the report.

By Lauren Flynn Kelly

A new study from Avalere Health comparing quality outcomes for Medicare Advantage enrollees vs. traditional fee-for-service (FFS) Medicare beneficiaries found that high-need, high-cost populations enrolled in MA had better care experiences for most clinical quality measures and had significantly higher rates of preventive screenings for several measures. While MA didn’t outperform FFS across all measures, the findings suggest that care management in MA results in higher quality of care for this vulnerable population, observed the report.

Commissioned by Better Medicare Alliance (BMA), the independent analysis compared performance for similar beneficiaries in three categories: preventive screening and therapy services; inpatient and outpatient services; and management of prescription drugs. Avalere used propensity score matching to control for differences between the MA and traditional FFS population and drew from a nationally representative sample of beneficiaries, resulting in a “matched” study population of 1,262,180 in each group.

Avalere then divided beneficiaries into five clinical segments and focused its findings on three groups in particular: individuals who are under 65 and enrolled in Medicare due to a disability, the frail elderly, and those with chronic, complex conditions.

The study found that “high-cost, high-need” beneficiaries had significantly higher rates of preventive screening compared with similar populations in FFS Medicare. For example, 74% of beneficiaries with major complex chronic conditions and 71% of frail elderly in MA received a pneumonia vaccine, while 49% and 48% of similar beneficiaries, respectively, in FFS received the vaccine. But not all differences were that notable: 77% of the overall FFS population received a cholesterol screening, compared with 75% of MA enrollees, and those results varied across the three high-need groups. On the therapy services side, while the overall MA population had higher rates of initiating treatment for substance misuse or dependence, they were less likely to remain engaged with such treatment.

In addition, the study found that high-need, high-cost MA beneficiaries had substantially lower rates of avoidable hospitalizations and readmissions compared to their FFS counterparts. For example, the average rates of avoidable hospitalizations for acute and chronic conditions among those with major complex chronic conditions were 57% and 45%, respectively, below traditional FFS Medicare. Avalere also found that emergency room visits and costs were significantly greater for frail elderly beneficiaries in MA compared to FFS Medicare.