Skip to main content

How ACOs Are Slowing Healthcare Costs

 |  By jfellows@healthleadersmedia.com  
   December 12, 2012

Coauthors of a Commonwealth Fund survey studying health insurance costs from 2003-2011 say premiums and deductibles are increasing at an unsustainable rate, but recent slowdowns over the last two years are encouraging and may be able to continue if more organizations adopt an Accountable Care Organization model.

That news is the report's big takeaway for insurance companies. For consumers, the report starkly points out what they likely already knew: Health insurance is more expensive today than it was in the early 2000s.

The private nonprofit health research foundation's newest report, titled State Trends in Premiums and Deductibles, 2003–2011: Eroding Protection and Rising Costs Underscore Need for Action, shows that over the last eight years, employer-sponsored private health insurance premiums for family coverage rose 62%, three times faster than wages, says Cathy Schoen, the Commonwealth fund's senior vice president for policy, research, and evaluation.

"By 2011, the total annual cost of family plans sponsored by private employers averaged over $15,000/year with the majority of states above $14,000. Even in the five lowest cost states, family plans now are in the $12,500 to over $13,000 range. And, I might add, this is about equal to the total annual wages of a worker working full-time at minimum wage. It's just not affordable without employer health."

Deductibles for single or family plans also increased at both small (less than 50 employees) and large (more than 50 employees) firms. The study shows deductibles for single and family plans more than doubled since 2003, though the increase was slightly lower at large companies.

For example, an employee with a single person plan working at a small firm had an average annual deductible of $703 in 2003; it's now $1,561. At a large firm, the current average annual deductible for a single person is about $500 less at $1,010. Eight years ago, that figure was only $452.

Schoen and Commonwealth Fund President, Karen Davis, both pointed to this year's historically low rate of growth in premium costs—just 4% as proof the Patient Protection and Affordable Care Act (PPACA) is working.

"In 2014, when the health insurance exchanges are set up with standardized plans that will allow comparison shopping, we can expect to see more savings for consumers," says Davis.

"The [PPACA] has been tested by the Supreme Court and the American electorate, and we can now move forward without hesitation to speedily implement the law to ensure everyone access [to] high quality, affordable, and secure healthcare."

According to Davis and Schoen, "moving forward" means more ACOs that are similar to the models that are either up and running or will be soon.

"What we are just starting to see is a response among private insurers to start to say 'no,' and bring in new ways of paying that would hold care systems accountable for the total cost of care with long term contracts," says Schoen.

"This is happening in Massachusetts with Blue Cross Blue Shield. We've also seen the state of Michigan, the Blue Cross plan there has started to really think of paying for... higher increases if there's a return in better outcomes and higher quality care."

In another sign that ACOs are catching onto the private insurers, look no further than Florida. There, just yesterday, it was announced the state's Blue Cross Blue Shield Company will partner with Naples, FL-based NCH Healthcare System for what is being called one of the first commercial ACOs in the state. Under the new Florida Blue ACO, about 4 million patients will get to participate.

An earlier 2012 report from Oliver Wyman estimated as many as 15 million patients in the commercial market are already receiving care through an ACO that was initially established under Medicare.

The consulting firm's analysis argued that organizations using an ACO to serve Medicare patients will eventually have to roll the model out to its non-Medicare population because "virtually any provider that moves to a value-based contract with its most significant payer—Medicare—will  eventually need to move all of its patients to value."

Schoen concurs, saying using a value-based model for just one segment of the healthcare population doesn't make sense. "We all get care locally and we need to be thinking about more accountable care systems as well as more accountable health insurance companies," says Schoen. "We need the various payers to be on the same page in the marketplace."

Jacqueline Fellows is a contributing writer at HealthLeaders Media.

Tagged Under:


Get the latest on healthcare leadership in your inbox.