June 2, 2016

Alternatives to Traditional Insurance:  Aligning the Accrual of Benefits

The healthcare delivery system is undergoing tremendous change because of pressures to increase access, reduce costs and improve outcomes.  New and innovative approaches to how care is being delivered are emerging and the shift to population health, along with an emphasis in engaging patients in self-management activities, are all contributing to the transformation of healthcare in the United States.

doctor with patients

An important stakeholder of the healthcare delivery system is the insurance industry and other payors of healthcare services.  Since the Accountable Care Act was passed, we have also seen change in payment models to accommodate the envisioned healthcare delivery system.  But, there are new signs that payment models are being transformed, and some might even be considered disruptive.

Recent articles present two new models and the implications for traditional insurance companies are clear.  A Hospitals and Health Networks article highlights the growth in hospital-sponsored accountable care organizations sold on Private Insurance Exchanges. Hospitals are once again entering the insurance space, but this time they see the Accountable Care Marketplaces as an opportunity to improve their management of risk.  The article presents four reasons why private exchanges will grow.

  1. Medical plan savings and their extension to the employer
  2. Employers moving away from the defined benefit approach to defining their contributions
  3. Avoidance of the Cadillac Tax that will potentially affect 1/3 of employers in 2018
  4. Benefit of workers being more engaged consumers and making better choices

The second article, in Modern Healthcare, describes how venture capitalists are investing in new approaches to the provision of insurance.  These innovative startups are either technology-based clinical companies with an emphasis on consumer-friendly technology and data or technology companies buying, selling and managing health insurance.  In both cases, they are leveraging the new health insurance marketplaces and appealing to employers and consumers who are dissatisfied with the dominant insurers.

Historically, benefits haven’t always accrued to those who are responsible for implementing improvements.  For an example, hospitals that reduce their length of stay will see their per-diem revenue decrease, rather than being rewarded for their efforts.  At the same time, the insurer realizes a reduction in their costs.  Some risk sharing initiatives have attempted to adjust for this mis-alignment, but they don’t go far enough to take the industry to a new level of efficiency and effectiveness.

These new models do seem to be an attempt to re-align the accrual of benefits by offering providers, employers and patients more control and choice.  What is clear is that both private insurance exchanges and start-up “insurance” companies could possibly extend the transformation and disruption of healthcare to the insurance industry.  What does seem certain is that there is an insurance evolution underway and it will likely bring the relationship between payors and providers and payors and consumers closer together.

If you are interested in further reading we have also covered the topic of private exchanges and how health insurance marketplaces are evolving.

Author: Digital Health Team
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