Health Plans Must Overcome Uncertainty, Get Ahead of Trends for 2018

Health plans face challenges such as an influx of people into Medicare and more pressure to participate in risk-based contracts. The uncertainty that complicated health plan strategies in 2017 will continue this year and could accelerate.

Health plans are facing a different landscape this year than they have known in years past, and they will have to act quickly to get ahead of the forces that could determine success or failure. The loss of the individual insurance mandate penalty is only one factor complicating their business strategies, but it makes addressing the other factors even more urgent.

Uncertainty over what their business world will look like in the near future continues to be the overriding concern.

The loss of the individual mandate will be the most difficult issue for insurers in 2018, says Tom Bizzaro, vice president for health policy and industry relations at First Databank, which provides pharmaceutical data to health plans and providers. It remains to be seen how much the loss will affect enrollment, and any action on healthcare law by Congress could greatly affect the trajectory of health plans, Bizzaro says.

"They can deal with any situation if they know what the rules and regulations are going to be. I am hopeful that even without the individual mandate, citizens will realize the importance of having medical insurance," he says. "I am also hopeful that Congress will act to stabilize the market. I think as with any industry there will be winners and losers in 2018. The insurers that can be the most flexible and reactive to changes in the marketplace will be the most successful."

Health plans shouldn't expect any relief from the uncertainty that plagued them in 2017, says Joe Paduda, principal of Health Strategy Associates, a consulting firm specializing in managed care for workers' compensation and group health.

"The healthcare delivery sector is undergoing massive disruption, with neighborhood hospitals, payer-owned providers, provider-owned payers, and provider consolidation blowing up entrenched business models," he says. "Marry that disruption with the requirement that insurers have to market, operate, and partner differently in each geographic area, and insurers' massive challenges are daunting indeed."

Internally, the big insurers must figure out how to move much faster, allow much more management autonomy, and rapidly respond to—and create—different local healthcare delivery solutions, Paduda says.

"This will be difficult indeed for businesses based on scale, in an industry that does not reward risk-taking," he says. "Externally, Republicans' ongoing effort to wield a meat axe to Medicare and Medicaid will make it difficult for insurers to plan and implement for those markets beyond the next quarter."

For commercial lives, profits are solid and sustainable, Paduda notes. However, the group market is highly competitive, commercial insurers have yet to figure out the individual market, and the stock markets want growth.

"Expect the big three to push ever deeper into integrated delivery systems and managed Medicaid programs," he says.

The continued influx of baby boomers into Medicare Advantage plans is an example of how healthcare payer finances will be challenged this year, says Scott McFarland, president of HealthBI, which provides health information technology platforms for providers. He previously was CEO of the Hawaii Health Systems Corporation (HHSC) and the president of wellness and population health at Cleveland Clinic.

Medicare Advantage enrollment numbers have increased every year for the last seven years and that trend will continue in 2018. The increase in Medicare Advantage participants will be both a boon from the sheer numbers and a challenge because of the aging population with chronic conditions and comorbidities that are expensive to treat, McFarland says.  

Health plans also can expect the continued expansion of risk-based contracts to impact the payer's bottom line, he says.

"CMS is touting more voluntary provider participation in value-based initiatives, but insurers that manage Medicare and Medicaid plans still must prove quality. And they're pushing that risk down to the providers in their networks," McFarland says, noting that an American Medical Group Association survey indicates that 60% of medical group Medicare revenue will come from risk-based contracts by 2019. Payers are  also expanding risk-based contracts into their commercial plans, he notes.

Provider engagement will be the key to making health plans high performers, McFarland says.

"No one else has the direct impact on patient behavior that providers do. Health plans simply won't be able to move the needle on lowering costs while retaining members if providers in their networks aren't engaged, aren't identifying and treating high-risk patients with preventative care, and aren't sustaining any gains," he says. "However, there's been a persistent, big barrier standing in the way: providers lack actionable data to identify high-risk patients at scale and coordinate and track preventative care plans for these patients."

McFarland expects to see a movement this year in which payers share tools and services—free of charge—with providers that give insight into high-risk patient populations and help profitably manage populations with multiple chronic conditions and comorbidities.

"This isn't just a prediction; it builds on an existing trend we've witnessed at HealthBI," he says. "I expect that payers enabling providers with actionable data will continue to gain steam, and in fact, be one of the top objectives for almost all payers in 2018."