Health Plan Weekly

Both Payers, Providers Have Reasons to Resist Revealing Negotiated Prices

March 21, 2019

The Trump administration is considering requiring health care providers to disclose the prices they charge different health insurers for services — an idea meant to promote transparency and consumerism that experts say could also have the effect of complicating payer and provider rate negotiations.

By Leslie Small

The Trump administration is considering requiring health care providers to disclose the prices they charge different health insurers for services — an idea meant to promote transparency and consumerism that experts say could also have the effect of complicating payer and provider rate negotiations.

If the administration’s idea becomes a reality, hospital rates could face downward pressure as less favorable contracts with certain payers become public knowledge, thus incentivizing payers to renegotiate for lower rates, according to Wall Street analyst Ana Gupte. But on the flip side, “certain hospitals could demand higher rates if they find that a crosstown rival is receiving higher reimbursement” from a payer, which may be problematic for insurers, she wrote in a note to investors.

Ultimately, such a policy could “increase average rates or eliminate some of the lower rates that exist in the market,” Caroline Pearson, a senior fellow at NORC at the University of Chicago, tells AIS Health.

But would having more consistent rates that insurers pay for health care services truly be a bad thing?

“There’s certainly reason to think that we should have somewhat less variation in the rates, in [that] you actually sort of want to discourage monopolistic behavior and so you would like to give smaller health plans the benefit of having more competitive rates,” Pearson says. Thus, smaller insurers might benefit from greater rate transparency — but possibly at the expense of their larger peers.

In the end, both payers and providers would likely lobby against any proposed rule that shines a light on negotiated prices for health care services, Gupte wrote, reasoning that “we believe there is risk to both sides if these contracts were made public.”

Cambia, BCBS North Carolina’s New Deal Could Set a Trend

March 19, 2019

In an era of U.S. health care consolidation, what two major Blues insurers describe as their “strategic affiliation,” announced March 12, would bring together dominant regional not-for-profits with combined net revenue of $16 billion and more than 6 million covered lives. Industry experts tell AIS Health this deal between Cambia Health Solutions and Blue Cross and Blue Shield of North Carolina to create a stronger presence could start the ball rolling, possibly serving as a model for more strategic partnerships among Blues organizations.

By Judy Packer-Tursman and Jane Anderson

In an era of U.S. health care consolidation, what two major Blues insurers describe as their “strategic affiliation,” announced March 12, would bring together dominant regional not-for-profits with combined net revenue of $16 billion and more than 6 million covered lives. Industry experts tell AIS Health this deal between Cambia Health Solutions and Blue Cross and Blue Shield of North Carolina to create a stronger presence could start the ball rolling, possibly serving as a model for more strategic partnerships among Blues organizations.

“I wouldn’t be surprised to see more combinations, more consolidation among Blues because I think many insurers, not just Blues, are looking to grow and gain economies of scale and efficiencies,” says attorney David Kaufman, a partner at Laurus Law Group LLC and former general counsel of Blue Cross Blue Shield of Illinois, a unit of Health Care Service Corp.

The two Blues organizations are quick to point out the parameters of their deal, which insurance regulators still must approve. It would involve merged operations and administrative functions, but their respective health plans and provider networks would continue to operate independently.

“Now that we’re getting into this next wave, consolidations as we know them are different,” says Ashraf Shehata, a principal in KPMG’s health care life sciences advisory practice and the firm’s Global Healthcare Center of Excellence. Instead of jumping into a merger directly, plans are testing the water first with strategic affiliations, he says.

Shehata says strategic affiliations work differently from mergers. Mergers operate by identifying where the two merging organizations have duplicate functions, and combining those functions, he says, but a strategic integration starts by identifying areas of synergy, while “you defer the merger talk until later.”

Fallon Health Reports Solid Financial Results with Aim to Adapt and Grow

March 14, 2019

Fallon Health in Massachusetts recently reported solid fourth quarter and full-year 2018 financial results, crediting its strategic investments in government programs and careful management of expenses as helping it continue to adapt and grow in its niche as a community health plan.

Fallon is experiencing growth in its Medicare Advantage (MA) line of business, and in Medicaid has enrolled nearly 100,000 members in its accountable care organizations under a reform initiative launched by MassHealth almost exactly a year ago.

By Judy Packer-Tursman

Fallon Health in Massachusetts recently reported solid fourth quarter and full-year 2018 financial results, crediting its strategic investments in government programs and careful management of expenses as helping it continue to adapt and grow in its niche as a community health plan.

Fallon is experiencing growth in its Medicare Advantage (MA) line of business, and in Medicaid has enrolled nearly 100,000 members in its accountable care organizations under a reform initiative launched by MassHealth almost exactly a year ago.

“Strategically, that’s where we’re putting our focus as a company,” Richard Burke, Fallon’s president and CEO, says of government-sponsored programs, noting “demographic and public policy changes have…allowed us to grow in the government space.”

“It’s clear that there is and will continue to be significant growth in government health lines of business,” especially from baby boomers aging into MA and Medicaid expansion, says Ceci Connolly, president and CEO of the Alliance of Community Health Plans, of which Fallon is a member. “And while every health plan in America knows that, I think that community-based plans that have been mission-driven probably have a jump because it’s part of their portfolio and their commitment to the community.”

In Connolly’s view, community-based plans’ close collaboration with local providers results in “better outcomes, happier consumers and much better value for the health care dollar,” and such plans’ experience “puts them a little further ahead” on risk contracting with providers and drugmakers.

Studies Offer Strategies to Encourage Health Care Price Shopping

March 13, 2019

Two newly published studies help shed light on which strategies insurers and employers should consider if they want to encourage consumers to seek out the lowest price providers.

One study, published in the March edition of Health Affairs, evaluates a program that Health Care Service Corp. introduced in 2017, which offers plan enrollees a cash reward ranging from $25 to $500 when they opt for a lower-price provider of certain health care services.

By Leslie Small

Two newly published studies help shed light on which strategies insurers and employers should consider if they want to encourage consumers to seek out the lowest price providers.

One study, published in the March edition of Health Affairs, evaluates a program that Health Care Service Corp. introduced in 2017, which offers plan enrollees a cash reward ranging from $25 to $500 when they opt for a lower-price provider of certain health care services.

In the program’s first year, researchers found a 2.1% reduction in prices paid for services targeted by the rewards program — offering savings that totaled $2.3 million. It’s worth noting, though, that “the impact on prices varied substantially by service, with the largest reduction in prices for imaging services such as MRIs and ultrasounds (though not for CT scans) and little impact on surgical procedures,” the study points out.

Meanwhile, a different Health Affairs study examined what researchers deemed a not-so-effective strategy to get consumers to price shop: steering them toward high-deductible health plans (HDHPs) that give them more “skin in the game.”

“Our results indicate that most Americans in high-deductible health plans have not engaged in the five consumer behaviors we examined,” the study says. Those include saving for future health care services, discussing costs with a provider, comparing prices, comparing quality and trying to negotiate a price.

To change this, the study authors suggest that health plans could develop programs to help HDHP enrollees learn to communicate effectively with providers about costs of services and negotiate prices.

Anthem, UnitedHealth Could Be Contenders to Buy Struggling Magellan

March 12, 2019

Magellan Health Inc. — a company with behavioral health, Medicaid managed care and PBM assets — is striving to turn its business around after a challenging 2018 that has stirred speculation it’s primed for a sale.

In fact, on Feb. 22 the hedge fund Starboard Value — which owns approximately 9.8% of Magellan shares — sent an open letter to the company’s shareholders suggesting new candidates for its board of directors and urging Magellan management to explore selling all or part of the company.

By Leslie Small

Magellan Health Inc. — a company with behavioral health, Medicaid managed care and PBM assets — is striving to turn its business around after a challenging 2018 that has stirred speculation it’s primed for a sale.

In fact, on Feb. 22 the hedge fund Starboard Value — which owns approximately 9.8% of Magellan shares — sent an open letter to the company’s shareholders suggesting new candidates for its board of directors and urging Magellan management to explore selling all or part of the company.

If Magellan does end up getting sold, certain aspects of its business could greatly benefit whichever managed care company ends up being the highest bidder, industry experts say.

“[Magellan] has a unique mix of assets,” Jefferies analyst David Styblo wrote in a Feb. 20 research note, pointing out that “the insurance business includes some Managed Medicaid as well as radiology and behavioral benefits.” Magellan’s PBM, meanwhile, “could be sold as standalone,” which “could be interesting for companies wanting to enhance their medical pharmacy and clinical management capabilities,” Styblo wrote.

As for which companies might buy all or part of Magellan, Leerink analyst Ana Gupte advised investors that Anthem, Inc. and UnitedHealth Group could be the most likely strategic buyers, “in light of their synergies with Medicaid in Complete Care, and the PBM across IngenioRx and OptumRx.” Another possibility is that a private-equity firm could purchase Magellan, Gupte added.