Healthcare payers continue to raise rates on exchanges as the American Medical Association warns of lower competition between insurers as payers look for innovative ways to cut costs and improve outcomes. As hospitals continue to struggle with falling Medicare payments, we take a look at some top stories on the healthcare payer front.
Modern Healthcare paints a bleak picture for the continuing gap between Medicare patient costs and payments. David Ramsey, CEO of Charleston Area Medical Center, the state’s largest hospital, and many of his C-suite peers, “are grappling with that fact that Medicare margins are in a free fall. In 2015, the aggregate margin hit a negative 7.1% across hospitals, according to the Medicare Payment Advisory Commission; margins are expected sink to a negative 10% this year.” The hospital plans to cut 300 jobs by the end of 2017 to deal with the situation.
The article cites reasons behind the “chasm” between Medicare coverage and cost of care including:
- Federal mandates to deploy expensive health information technology systems under the meaningful use program
- A 2 percent across-the-board cut to provider Medicare payments under the Budget Control Act of 2011
- Reductions in Medicare disproportionate-share hospital payments and the move to alternative payment models
Healthcare Drive, explaining why “Why payers are flocking to the Medicare Advantage (MA) market” in a recent article, states that “Payers see MA as a stable market. That’s evident in the fact that MA premiums are expected to decrease by 6% next year. Insurance companies like stability. Insurers increase premiums by double digits when there isn’t stability, which is the case with the ACA exchanges.”
But Fierce Healthcare details the results of a study by Leavitt Partners, where the conclusion was that “premiums were the highest in markets that lacked competition among both MA payers and hospitals.” The bottom line is “if all Medicare Advantage beneficiaries were in markets at least as competitive as the average market today, the white paper noted, they would pay nearly $200 million less in annual premiums.”
Echoing and expanding on the Leavitt Partners study, the American Medical Association (AMA) continues to warn about consolidation of healthcare payers: “High market concentration tends to lower competition among commercial health insurers. These markets become ripe for the exercise of health insurer market power, which harms patients by raising premiums above competitive levels.”
The AMA warning continues on “the prospect of future consolidation in the health insurance industry” with a recommendation that this “should be viewed in the context of the lack of competition that already exists in most health insurance markets.” According to the AMA’s latest study:
- A significant absence of health insurer competition was found in 69 percent of metropolitan areas. These markets are rated “highly concentrated” based on federal guidelines used to assess the degree of competition in a market.
- In 43 percent (169) of metropolitan areas, a single health insurer had at least a 50 percent share of the commercial health insurance market, compared to 40 percent (156) in 2014.
Healthcare Payers Embrace Innovation and Tackle Addiction Issues
Meanwhile, HealthPayer Intelligence is onto some integration innovation. “Integrating medical and pharmacy benefits gives payers more visibility into member activities, which can cut costs and improve outcomes,” they report. Referencing a recent study by Cigna<