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Market forces are converging, giving momentum to provider-sponsored health plans.
While payer-provider integrations are not new-Kaiser, Intermountain and Geisinger have been around for decades-the number of providers looking to become insurers is much higher than years past.
RickertAccording to PwC Health Research Institute, 50% of U.S. health systems have applied-or intend to apply-for an insurance license. In just the last year, 26 new provider-sponsored plans (PSPs) were added and PSP enrollment increased 10% from 2014 to 2015, according to the 2016 Atlantic Information Services, Inc. (AIS) Directory of Plans. Today, PSPs make up 14% of the health insurance market. Predictions for future growth range from a conservative estimate of 12% to a more aggressive increase of 18% according to an analysis by AIS.
The recent explosion of and interest in PSPs is part of a larger trend happening in the health insurance market as the healthcare value chain is being re-engineered by powerful drivers. These factors, many of which have been building steam for a long time, were brought front and center as result of the passage of the Affordable Care Act (ACA). Changes resulting from the ACA will continue to make PSPs and other payer-provider collaborations attractive to health systems, insurers and consumers alike.
There are four main drivers behind this greater vertical integration of the healthcare value chain:
1. Downward pressure on cost
With this year’s national healthcare tab expected to surpass $10,000 per person for the first time, it is not surprising that more reimbursement is being tied to quality and outcomes. There is greater interest among payers to fund provider efforts to take on longitudinal management of care and to experiment with outcome-based models. Consumers today are also more likely to accept narrow networks because of their concerns about rising healthcare spending.
2. An increasingly sick and aging population
By 2030, one in five Americans will be over age 65, nearly double the 12% in 2000, according to a 2013 special report from the CDC. With two-thirds of all people over age 65 experiencing multiple chronic conditions, disease management is taking center stage. PSPs, which have access to both the clinical and insurer data, are well-positioned to help patients manage ongoing health issues. The PSP also can establish thoughtful member health monitoring systems to allow timely healthcare intervention, which reduces the need for urgent care, thus lowering costs and providing better health outcomes.
3. Surging consumerism
Online retail giants have raised consumer expectations for quick and easy transactions that can be conducted 24/7 from a computer or handheld device. Millennials in particular have even higher expectations as digital consumers than prior generations. Furthermore, studies show that healthcare consumers are most satisfied with their healthcare and experience when the network of healthcare and health insurance organizations are integrated. According to a recent J.D. Power survey, integrated plans have an average overall satisfaction score of 746, which is 63 points higher than that for non-integrated plans. And since consumers are more likely to trust their medical provider than their health insurer, according to a 2015 Deloitte report, the strong trust factor can extend to the PSP.
4. New transformative technologies
The arrival of new entrants and transformative advances in technology have made data sharing between all stakeholders easier. Interestingly, however, what consumers want most from health insurer technology is not what you might expect. Instead of bells and whistles, they want basic functionality like out-of-pocket cost estimators, online and mobile access to health records, as well as greater payer-provider collaboration. One of the great advantages of PSPs is that they aren’t as encumbered as traditional insurers by legacy technology systems and are therefore free to implement the technologies that best meet their needs.
As a result of these four core forces, membership in today’s PSPs will likely grow, as will the number of PSPs entering the market to meet the needs of today’s healthcare consumers. PSPs are showing that greater integration can improve the quality of care, and reduce costs, while still providing a good consumer experience to members. It’s not clear yet how large the PSP insurers will become, but they will no doubt continue to play an increasingly important role in the future.
Jonathan Rickert, CEO of Array Health, cofounded the company in 2006, with the vision of simplifying the process of buying health insurance and bringing an ecommerce experience to healthcare.