Health Plans: The Other Challenges
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Here's a look at two challenges facing health insurers, and they're not connected to reform.
The year 2009 saw health insurers in the crosshairs in Washington as health reform made its way through the Capitol Hill sausage grinder.
Health insurance executives understandably were focused on Congress and how health reform would affect their businesses, most notably reform that would shift insurers away from a risk-management business by requiring insurers to accept everyone—regardless of preexisting condition.
But while they focus on Washington, insurers face other immediate challenges. Here are issues insurers face in 2010 and how they can overcome them.
Challenge: Recovering from the recession and dealing with more powerful provider networks
The recession has led to layoffs—both of members and health insurance employees.
Juan Davila, senior vice president for network management at BlueShield of California, a nonprofit health plan with 3.4 million members, says unemployment fears have driven elective hospital admissions. Blue Shield of California has seen double-digit increases in those numbers, which Davila says is related to members using their health coverage before they get laid off.
For those who were laid off, the stimulus package helped extend their COBRA coverage, which was both good and bad for health insurers.
The good is that they kept members. The bad is that those covered under COBRA often utilize more services than the premiums they pay.
Reducing those services can be difficult, but there is one possible way to reverse the cost tide—better contracts with providers. Joseph Paduda, principal of Health Strategy Associates, a managed care consulting firm based in Madison, CT, says provider networks have gained strength through consolidation.
Though employers and members are often demanding wide provider networks, Paduda says this move, coupled with more powerful provider networks, is leading to worse contracts for health insurers.
"[Health insurers] haven't thought through that you can either have all providers out there or a cost advantage plan, but you can't have both," says Paduda.
His suggestion for insurers—as competitors try to expand their networks, try the opposite. Paduda says health insurers should approach competing health systems and let them negotiate against one another to have the privilege of picking up an insurers' members as patients.
Paduda says this way of doing business could lead to better deals with providers, but it's quite a different way of doing business—and any health insurer that takes this route will be a trailblazer. Taking an avenue that is untested is not something that businesspeople usually like.
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