Health Plan Weekly

In Move Other Payers May Copy, Blue Shield of California Will Cover Genetic Testing for Ill Children

April 9, 2020

In a first-in-the-nation move, Blue Shield of California has agreed to cover rapid and ultra-rapid Whole Genome Sequencing for critically ill infants and children in intensive care who have unexplained medical conditions. The agreement — which will use testing at Rady Children’s Institute for Genomic Medicine, a center of excellence in genetic testing — likely will spur additional insurers to add coverage for this diagnostic technology, observers say.

By Jane Anderson

In a first-in-the-nation move, Blue Shield of California has agreed to cover rapid and ultra-rapid Whole Genome Sequencing for critically ill infants and children in intensive care who have unexplained medical conditions. The agreement — which will use testing at Rady Children’s Institute for Genomic Medicine, a center of excellence in genetic testing — likely will spur additional insurers to add coverage for this diagnostic technology, observers say.

“I think the way the health plans are going to go about implementing this is exactly what you’re seeing in this case — they’re going to pick a center of excellence,” says Ashraf Shehata, KPMG national sector leader for health care and life sciences. “I think they’re going to put some bumper guards around how they could go forward with these approvals. And I think in addition to that, you’re going to see their medical policies probably begin to adapt a bit more to accept the outputs that are coming from these types of tests.”

The decision by Blue Shield of California is important and “continues the trend we’re seeing for other genetic tests where the increased availability of evidence on clinical and economic outcomes leads to changes in coverage policies,” says Kathryn Phillips, Ph.D., professor of health economics and health services research at the University of California-San Francisco.

“As with other genetic tests, it will be important to continue to examine the trade-offs between the benefits and costs associated with testing and the impact of increased coverage on access to care, test utilization and costs,” Phillips tells AIS Health.

Kristin Ciriello Pothier, principal at KPMG, says that payers already cover whole genome sequencing for oncology diagnostics. “As we flip it over to newborn babies, it’s the same technique, and with more speed required, which the newest sequencing technologies can deliver,” she says.

COVID-19 Pandemic Could Drive Up Premiums, Accelerate Consolidations

April 8, 2020

Many of the nation’s largest health insurers have now waived patient cost sharing and prior authorization requirements for treatment of COVID-19, the disease caused by the novel coronavirus. Experts praise payers for making the change, but say the moves could have negative financial impacts for some firms.

The changes will be welcome news for members stricken with the virus and the caregivers treating them. Ashraf Shehata, KPMG national sector leader for health care and life sciences, says payers are doing their best to act responsibly during the crisis.

By Peter Johnson

Many of the nation’s largest health insurers have now waived patient cost sharing and prior authorization requirements for treatment of COVID-19, the disease caused by the novel coronavirus. Experts praise payers for making the change, but say the moves could have negative financial impacts for some firms.

The changes will be welcome news for members stricken with the virus and the caregivers treating them. Ashraf Shehata, KPMG national sector leader for health care and life sciences, says payers are doing their best to act responsibly during the crisis.

However, insurers will need to come up with a way to pay for the cost sharing waivers and, more importantly, the increased care utilization that COVID-19 has made inevitable. Shehata says the costs are difficult to project, and a full assessment of the financial impact of the pandemic will take years.

Michael Abrams, a co-founder of health care consultancy Numerof & Associates, says higher premiums are a certainty, particularly as people across the economy lose income.

“Insurers faced with higher claims numbers will need to adjust their premiums in the future to try and recoup the money they will have to pay out now,” Abrams says. “People without benefits will need to go to Medicaid or the individual market to get coverage. That’s going to saddle those programs with unanticipated claims. Higher Medicaid and individual market premiums will be the result.”

Both Abrams and Shehata say that utilization for routine medical procedures will drop during the pandemic.

“We haven’t really fully realized the impact of shutting off a lot of the outpatient and elective surgeries yet. So the expectation is we might see positive claims experience, which might help offset some of the COVID impact in the short term. In the long term, we’ll start to see some of that impact of the delay [in routine care],” Shehata says.

Abrams adds the crisis could accelerate payer-provider consolidation. “To the extent that you have some vertical consolidation, provider organizations are often limited in capital reserves. But that’s exactly what insurers have to bring to the party. That is a convenient marriage,” he says.

How Will the COVID-19 Outbreak Change How Payers, Providers Interact?

April 7, 2020

Besides all the other ways it’s changing American life, the COVID-19 pandemic is sure to have a major impact on how the health care industry does business going forward, equities analysts said March 31 during the 24th Wall Street Comes to Washington Health Care Roundtable.

In the short term, the all-consuming nature of the public health crisis is very likely to pause health care providers’ and payers’ work on alternative payment models, said Matthew Borsch, a managing director at BMO Capital Markets. Executive attention is needed to hammer out arrangements that base provider pay on better health care quality and lower costs, he pointed out, and “efforts are being refocused right now.”

By Leslie Small

Besides all the other ways it’s changing American life, the COVID-19 pandemic is sure to have a major impact on how the health care industry does business going forward, equities analysts said March 31 during the 24th Wall Street Comes to Washington Health Care Roundtable.

In the short term, the all-consuming nature of the public health crisis is very likely to pause health care providers’ and payers’ work on alternative payment models, said Matthew Borsch, a managing director at BMO Capital Markets. Executive attention is needed to hammer out arrangements that base provider pay on better health care quality and lower costs, he pointed out, and “efforts are being refocused right now.”

George Hill, a managing director at Deutsche Bank, added that the pandemic will also influence rate negotiations between payers and providers.

“This crisis…is going to give the hospitals the artillery to go back and demand higher prices [and] say that they’ve been put under too much pressure for too long, that the infrastructure was not readily available when it was needed,” he said.

“You’re going to see high-acuity providers try to build a wall around the prices that they charge and the value that they think that they provide,” Hill predicted. “And as we come out of a crisis like this, it’s going to be hard for payer organizations — whether we’re talking about the government or whether we’re talking about commercial payers — to push back.”

On the plus side, changes that occur during the current crisis will probably accelerate innovation in the health care sector, said Ricky Goldwasser, a managing director at Morgan Stanley.

“We have to think about some of the news that came out of CMS, where nurse practitioners can now write prescriptions,” she said. “I think that we’re going to see a real…leap forward in some of the trends that we were looking for that otherwise would have taken five years to a decade.”

Health Plan Premiums Are Likely to Increase As COVID-19 Costs Emerge

April 2, 2020

In recent days, actuaries and economists have begun to estimate how much it will cost to care for those stricken by COVID-19, the disease caused by the novel coronavirus. Since the crisis is still at an early stage, and medical data collection and analysis is limited, those estimates have a wide range.

Covered California estimated in a March 22 report that the total cost of COVID-19 coverage for the national commercial market could range from $34 billion to $251 billion in 2020. FAIR Health in a March 25 report estimated a possible range of $362 billion to $1.449 trillion in charges for hospitalized patients and $139 billion to $558 billion in allowed amounts.

By Peter Johnson

In recent days, actuaries and economists have begun to estimate how much it will cost to care for those stricken by COVID-19, the disease caused by the novel coronavirus. Since the crisis is still at an early stage, and medical data collection and analysis is limited, those estimates have a wide range.

Covered California estimated in a March 22 report that the total cost of COVID-19 coverage for the national commercial market could range from $34 billion to $251 billion in 2020. FAIR Health in a March 25 report estimated a possible range of $362 billion to $1.449 trillion in charges for hospitalized patients and $139 billion to $558 billion in allowed amounts.

Given those figures, an increase in premiums seems inevitable. The Covered California report projected national premium increases for individual and employer plans in a range of 4% to 40% in 2021. Willis Towers Watson estimated in a March 26 report that self-funded employer plans could see their benefit costs increase by as much as 7%.

The distribution and extent of coronavirus infections is a critical factor in determining how much the medical response will cost. According to a March 25 Commonwealth Fund report, 44% of the U.S. population may be at elevated risk from COVID-19 due to age or chronic illness.

“We also see how it’s playing out differently in different cities. New York, right now, is really bearing the brunt of this. Other areas seem to have increases in the incidence as well. So particularly in those areas, the question is whether treatment and utilization of services is going to be constrained by the lack of hospital beds,” says Cori Uccello, a senior health fellow with the American Academy of Actuaries.

In areas where there are fewer clinicians and intensive care facilities, treatment could cost more on a per-patient basis, particularly if the population is at elevated risk.

The ongoing public policy and public health response will play a central role in the ultimate expense. If hospitals need to operate at or above capacity for several months, the cost of care could grow beyond present levels, according to the Covered California report.

Diversified Insurers May Have Advantage Amid COVID-19 Pandemic

March 31, 2020

As the COVID-19 crisis continues to ramp up in the United States, projections about how it will affect various business sectors — including managed care — are evolving rapidly. But one concept that industry analysts seem to agree on is that health insurers with diversified business models may be better equipped to weather the storm.

To Peter Manoogian, principal at the health care consultancy ZS Associates, a main reason for the value of diversification comes from simple math. During the last financial crisis in the mid-2000s, about 5 million people shifted out of the employer-sponsored plan market when they lost their jobs, says Manoogian.

By Leslie Small

As the COVID-19 crisis continues to ramp up in the United States, projections about how it will affect various business sectors — including managed care — are evolving rapidly. But one concept that industry analysts seem to agree on is that health insurers with diversified business models may be better equipped to weather the storm.

To Peter Manoogian, principal at the health care consultancy ZS Associates, a main reason for the value of diversification comes from simple math. During the last financial crisis in the mid-2000s, about 5 million people shifted out of the employer-sponsored plan market when they lost their jobs, says Manoogian. Now, all signs point to the fact that the coming economic crisis will be even worse, so odds are that considerably more than 5 million people will move from the employer-plan market to the Affordable Care Act exchanges or Medicaid.

“So if I’m a health plan and I’m thinking about my business strategy, it would certainly behoove me now more than ever to be really diversified in the lines of business that I offer,” Manoogian says.

Ralph Giacobbe, a health care sector analyst for Citi Research, remarked during a March 24 webinar about COVID-19 that managed care companies look quite different than they did during the last economic crisis.

“I think we also have to recognize [that there are] much more diversified business models from where we were even just five, seven, 10 years ago for a lot of these companies — that helps dampen some of the impact from potentially higher unemployment rates,” he said.

“Netting it all out, we essentially see [the COVID-19 crisis as] neutral for the sector — perhaps aside from Humana, which does have a little bit more of a disproportionate exposure to the elderly population given its MA [Medicare Advantage] business mix,” Giacobbe said.

Although health insurers might see challenges in the coming months, both S&P Global Ratings and A.M. Best said in recent reports that their outlook for the sector remains “stable.”