Seven healthcare industry trends to watch

One month into 2016, it’s clear that this will be a year of massive change for the managed care industry. Here are seven predictions for some of the key issues that will emerge, intensify, or be resolved by the end of this year.

1. The impact of recent health plan mergers will come into focus.

It is likely that the major payer consolidations will get sorted out this year. The big mergers are already starting to impact contract negotiations between the health plans and providers. As the larger health plan organizations continue to cut operating costs and slow the growth in reimbursement rates, providers will respond by consolidating to form larger and more integrated health systems. Expect the Federal Trade Commission to expand its examination of provider consolidations. Organizations that are consolidating must demonstrate both pre- and post-merger consumer benefit as a result of these affiliations or acquisitions. 

2. Value-based arrangements will gain more momentum.

The industry is still waiting to see if the federal government will make a move on the “Cadillac” Tax, which Congress delayed for two years at the end of 2015. The question is, will Congress eliminate it all together? If they do not eliminate it, we can expect to see further benefit reductions and higher deductibles and coinsurances as employers focus on meeting the cost limits prescribed. The government and employers will continue to develop and implement new ways to bend the cost-curve.  Health plans will double their efforts to create “value” or “high performing” networks that will offer narrower networks in exchange for lower premium and out-of-pocket costs to consumers. This will accelerate provider consolidation, either through mergers, affiliations, or clinically integrated networks as they attempt to offer a broader, yet differentiated, “high performing” network to the market. Once formed, these newly established networks will have to demonstrate value to attract employers and effectively move market share. Positioning your organization as the lowest cost leader in your market will not be enough; quality and patient experience and satisfaction must be met simultaneously.

3. Provider-owned health plans will gain more interest from health systems.

Health systems that are continuing their transformation to clinically integrated networks will face more pressure to have more control of their reimbursement streams and incentive systems.  As such, expect more providers to become interested in owning a health plan or collaborating with other providers who already own a health plan.  In addition, there will likely be a shift in strategy from competing directly with large health plans to a “plan-to-plan” strategy, which will allow the integrated delivery networks (IDNs), clinically integrated networks, and health plans to collaborate more easily. Finally, some recently established provider-owned health plans have struggled, so new entrants will be more selective and cautious as they refine their market and product approach to this strategy. 

4. It will be an important year for health insurance exchange products.

With the Affordable Care Act (ACA) insurance exchange products continuing to grow as we move into 2016, eclipsing the 8.8 million subscriber mark, a critical success factor of this ACA provision relies on insurers continuing to offer these products, despite incurring losses in the initial years.  For instance, UnitedHealthcare Group’s 2015 annual earnings report showed that the insurer lost $720 million from exchange products, but will continue to offer and closely monitor the performance of those products throughout 2016. As a result, health systems should expect a continued increases in high-deductible plans (more bad debt on exchange accounts and a need for ever increasing focus on revenue management), and increased pressure on reimbursement rates as health plans continue to adjust these products to the newly insured’s needs and their own need for profits.

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