If, as many pundits are predicting, the Supreme Court invalidates the individual mandate portion of the Affordable Care Act, the private market will likely be much quicker to implement draconian reactions than will Congress. That's a big problem, because Congress, which doesn't seem to be able to get anything of substance done these days, would be expected to fix the problem of guaranteed issue (that is, no excluding people for pre-existing conditions) coupled with the lack of a mandate.
Among the many cascading effects of such a ruling, the most immediate might be a huge increase in premiums, if insurers choose to remain in the market at all.
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"If you don't [fix that problem], overnight you'll immediately see premiums just go out of sight," says Paul Keckley, executive director of the Deloitte Center for Health Solutions.
That's because the only way the commercial market can accept the terms of the ACA, given the risk, is if there is a strong individual mandate. That is, if you increase the base of the insurance "pyramid" with large numbers of young, mostly healthy people, you can take more risk for people with substantial health problems at the top of the pyramid.
If the rest of the law is upheld, that means insurers can't make increases of more than 10% without federal approval, and can't charge a co-pay or deductible for preventive health. That might be a recipe for bankruptcies and major dislocations in insurance coverage, among other consequences, absent major and quick Congressional changes.
The first of those changes might happen sooner than you may think, and Congress has been anything but fast-moving in recent years.
"[Insurers] will say they can't operate under these terms," says Keckley. "They'll say that unless you let them dramatically increase premiums to cover this new level of risk, they're not in your market."
Some saw this coming with waivers HSS has granted under the medical loss ratio provision of the law. HHS gave waivers to states such as Maine, where, pre-ACA, there was a 70% threshold for MLR.
The health insurance industry, despite focus on quarterly earnings at the big national companies, has always looked at a very complex set of variables around the risk they're taking on not just for the immediate future, but for years to come. The insurance model is based on years from now. By definition, insurance is betting against risk. It's not just year-t- year risk, but multi-year risk, and if there is no mandate, all bets are off, says Keckley.
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Healthcare is rich in data. Yet healthcare lags in using data analytics to learn about the people it serves and to improve its operations and bottom line. Leaders are overcoming structural and cultural hurdles to involve many end users—executives, managers, and clinicians—as well as analysts.
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"It's popular to beat up on the industry, but you have to imagine: What if we didn't have it?" he says.
And insurers do have other opportunities.
"They're looking globally, monetizing their data, expanding wellness and healthy living, and looking at other countries where they truly are managing population health," he says. "At least the seven big national insurers are leveraging their bets against a variety of scenarios and they won't operate in markets where they can't at least break even."
Another risk of a period of uncertainty?given that Congress may be unable to act very quickly?is that commercial health plans will more aggressively negotiate with hospitals and will push much more risk on them than they've seen so far.
"I'm not talking about accountable care and medical homes," Keckley says. "Those are interesting, but in the near term, they don't impact hospital revenues that much. Bundled payments and value-based purchasing do, and I think you'll see insurance companies walk in the door with some very aggressive, risk-based bundled payment proposals for hospitals."
Keckley says he can envision insurance companies quickly expanding the four approaches to bundled payments outlined in the ACA. He sees as many as 15 bundles as possible. Conflict with medical staff has always been over money and clinical autonomy, but if all of this uncertainty results in accelerated bundled payments, then physicians and hospitals will fight over standards of care, how to divide the money, and who's responsible for various outcomes.
"If this comes unglued, you'll have mass uncertainty, the insurance plans will focus on the only real issue, which is costs, and they will come at the hospital on bundled payments: Fast, furious, expanded, and the hospitals are going to be on their heels unless they have prepared a good response," says Keckley.
This concept of managed uncertainty is not new to most businesses, but healthcare's current business model requires big capital bets around clinical innovation coupled with a regulated revenue environment that's very short-term focused. Uncertainty plays havoc with those bets.
It's time to plot how you'll respond to various scenarios.
"I have eight different scenarios I'm running with different inputs," Keckley says, with variables including what's likely to happen if the mandate goes away to what happens if exchanges are operating or not, he says.
"What you want is board members and managers to understand the inputs into those scenarios, and then to make some educated bets on what's likely, but not place the bet yet."
So when should you place those bets, if uncertainty continues to rule the healthcare strategy discussion?
If anything has been made clear over the past several years of wrangling over healthcare costs and quality, it's that you can't expect Congress or the courts to solve the problem for you.
"I heard (former HHS secretary) Mike Leavitt say we have entered into an era of dispassionate healthcare, where it's about business and survival, it's not about loyalty or reputation," Keckley says. "And I think he's spot-on. That's where we've gone."
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Philip Betbeze is the senior leadership editor at HealthLeaders.