Commercial insurance data for the third quarter of 2014 shows an ongoing rise in healthcare service utilization in the individual market and utilization rates dropping in the group market.
One of the great mysteries of federally driven healthcare reform and value-oriented changes in commercial health plans is unraveling.
National Association of Insurance Commissioners data collected from state insurance departments across the country is providing insight about the impact these historic changes are having on medical service utilization rates.
In the third quarter of 2014, healthcare service utilization spiked in the individual insurance market, but declined significantly in the group market, according to an analysis of NAIC's commercial insurance data conducted by the Princeton, NJ-based Robert Wood Johnson Foundation.
"It shows two trends that are really significant," Katherine Hempstead, team director and senior program officer at RWJF, told me last week.
Utilization Gaps
Hempstead analyzed NAIC data for the third quarter of 2014, which shows a 9.5% year-over-year increase in ambulatory care utilization in the individual insurance market and a 4% decline for ambulatory care utilization in the group market.
The utilization pattern gap is even wider for hospital admissions, with year-over-year admission rates spiking by nearly one-third in the individual market and falling 7% in the group market.
Hempstead noted a couple of caveats about the NAIC statistics, particularly for the group market. She says the data does not include every state, most notably California, and also excludes self-insured employers.
Hempstead says medical underwriting reforms under the Patient Protection and Affordable Care Act, such as disallowing pre-existing conditions as a factor in health plan eligibility, have transformed the individual market.
"In the non-group market, you find a big change in the population linked to medical underwriting. It will be interesting to see whether there is a leveling off of utilization. It's not a surprise that health costs are going to rise in the individual market because a lot of sick people couldn't get insurance before the ACA."
She also noted there could be "pent up demand" for medical services among low-income people who delayed receiving necessary care until obtaining healthcare coverage through the PPACA-spawned exchanges and expansion of Medicaid to more adults in two dozen states.
Assessing the decline in healthcare service utilization rates in the group insurance market is tricky. There was a 5% decrease in group market enrollment in the third quarter of last year. "With the group market, you have a combination of different care management and migration, so it's difficult to determine how the group market is playing out," Hempstead says.
Widespread benefit design changes and increased cost sharing with patients are exerting downward pressure on healthcare utilization rates for all health plan beneficiaries. "All insured populations are under different care management, which is driving down utilization."
The healthcare researcher says commercial payers and benefit managers at large businesses should find the NAIC group market utilization data heartening. "There have been a number of studies now that show when people have more responsibility for healthcare they are more sensitive to the price of care and use less care. Providers are also being incentivized to have their patients use care differently [such as by using more cost-effective settings]."
Insights from the NAIC healthcare utilization data are "sobering," Hempstead says.
'A Wild Ride'
"This definitely has implications for premiums. The primary factor pushing premiums upward is [that] the ACA allowed more people into the non-group market who are low-income, and you can expect people with lower incomes to be less healthy." The next key trend to watch, she says, is whether the downward pressures on utilization in the group market can be replicated in the individual market.
"The same factors are at work as in the group market: high-deductible plans and provider-side innovations like ACOs that incentivize providers to give care more efficiently. The individual market is experiencing the same benefit design and care management techniques as the group market. Right now, we're on a wild ride."
With a pinch of economic logic added to the mix, extrapolating from Hempstead's analysis to predict long-term healthcare utilization trends in the commercial insurance market generates a bright forecast.
In the group market, there are indications that strong downward pressure on healthcare utilization rates will continue. From the health-plan and self-insured-employer perspectives, efforts have just begun to deploy benefit design changes, narrow networks, and cost sharing to promote better health outcomes while simultaneously containing costs.
From the consumer perspective, tremendous potential remains to lower utilization rates through care delivery innovations such as retail clinics and urgent care centers that match a patient's medical condition to the most cost-effective setting.
In the individual market, Hempstead and others have already raised the key utilization question: Will there be a leveling off?
As long as value-based healthcare industry reforms continue and employers keep squeezing value out of their health plans, an eventual utilization slowdown in the individual market is likely.
Low-income people who have gained health coverage through the PPACA exchanges and Medicaid expansion are almost undoubtedly in poor health relative to their more affluent fellow citizens.
In the logic of healthcare reform, the early utilization spike in the post-PPACA individual insurance market should level off over time. As more low-income Americans gain affordable access to medical services, the overall health of this population should improve. In addition, as Hempstead noted, the individual market is experiencing the same benefit design and cost sharing changes that have driven down utilization rates in the group market.
Payment and delivery reform is taking the healthcare industry on a wild ride, and the destination is starting to come into view.
Christopher Cheney is the CMO editor at HealthLeaders.