As health insurance leaders converge on San Diego for the annual America's Health Insurance Plans Health Institute this week, they face a potential new competitor—the federal government—that insurers worry could put many of them out of business. But the issues for health insurers go beyond whether the feds grab a greater share of their market; declining membership and perceptions about insurance costs and profits are also acute concerns.
Public insurance
Much of this year's conference focuses on the public option and healthcare reform. Over the past year, AHIP has presented a health reform plan that features an individual mandate to require that all Americans have health insurance, along with a guarantee that health insurers will not reject any prospective member because of a preexisting condition or charge women higher premiums than men for their individual coverage.
Robert Zirkelbach, director of strategic communications at AHIP in Washington, DC, says the insurer group supports a comprehensive healthcare reform package that includes the individual mandate coupled with payment reform that rewards physicians for improving health outcomes rather than paying for volume of service; research to find which treatments work best; and improved health information technology.
"They are all under the broad banner of reform," says Zirkelbach. "We believe we need health reform and we can address all the core concerns by building on what is working in the current healthcare system."
Insurers are afraid that a competing public plan, with lower administrative costs and lower premiums, would coax employer-based insurance members to flee for the public plan and crush private plans in the process.
In response to the public plan, Ian Duncan, FSA, FIA, FCIA, MAAA, president and founder of Solucia Consulting in Farmington, CT, says private insurers should promote the benefits of their offerings. "I would stress the positives that come from the current insurance system. Although nobody likes [the current system], you have the ability to strike individual contracts and strike individual bargains between payers/providers/patients. That would go away under a government system. I don't see anyone standing up and saying what we have is not perfect, but there are some positives to it," says Duncan.
Sam Nussbaum, MD, executive vice president and chief medical officer at WellPoint, Inc., in Indianapolis, says the healthcare industry and policymakers should develop a "meaningful healthcare reform" through such programs as pay for performance, bundled payments, and value-based insurance design.
"There is not one silver bullet here. There are many, many opportunities to improve health outcomes, to reduce costs, and to advance quality. There are many strategies that need to take us to better healthcare for all Americans," says Nussbaum.
Declining health plan membership
The future is cloudy for insurers, but the present isn't so sunny either.
Layoffs and employers cutting employee health benefits have hurt private insurer membership. Duncan says a major health insurer client is losing 1/2% of its membership every month because of the economy and related job loss. That insurer has lost more than 6% of its members in a year.
"A health plan doesn't grow in normal times that much in a year," says Duncan. "The contraction of employment is hurting health plans."
Though more members are being forced out of employer-based plans, private health insurers and employers are not making massive changes to benefits. In fact, employers continue to push ahead with employee wellness programs, which surprises Duncan. "In a situation of reduced budgets, I would expect [employers] to go for that first."
With the new Democratic-controlled White House and Congress, health insurers no longer have the support they enjoyed during the Bush administration. That change in leadership also means that Republican-enacted attempts to control healthcare costs, such as consumer-driven health plans, high-deductible health plans, and health savings accounts, have fallen out of favor. Rather than focus on cost-containment, Democrats view healthcare access as the larger problem, says Devon Herrick, PhD, senior fellow in health care for National Center for Policy Analysis, which is headquartered in Dallas.
"The public health advocates that are advising the administration and members of Congress tend to view cost-sharing as a barrier to access," says Herrick. "The way insurers have been trying to rein in spending and the way the Bush administration and the Republican Congress were trying to empower patients is really not a vision that is shared as much in the current administration and the leadership in Congress."
Herrick doesn't expect Democratic leaders to wipe out HSAs, but they may change regulations surrounding the accounts that would make them less attractive to prospective members.
Changing misconceptions about costs
In light of the health reform debate, health insurers have been vocal about the reasons behind healthcare cost increases. Some activists and policymakers have charged that health insurer overhead is a main reason and they subsequently have been pushing for limits on an insurers' medical loss ratio. But AHIP and the WellPoint Institute of Health Care Knowledge have come out with information that states otherwise.
WellPoint Institute of Health Care Knowledge reported last month that a mere 3 cents of the health dollar goes to insurer profit. Meanwhile, 87 cents of every premium dollar goes to providing medical services, such as physician services, hospital costs, drugs, and other medical services. The other 10% goes to compliance, claims processing, and other administrative costs, according to WellPoint Institute of Health Care Knowledge.
Those findings go against public perceptions. In a survey of WellPoint members between 2005 and 2008, the insurer found that 60% of consumers surveyed thought insurers' profit margins exceeded 20%.
So, if the health costs aren't rising because of health insurers, where is it coming from? WellPoint Institute of Health Care Knowledge suggests five reasons:
- Higher priced technologies and overuse of them
- Reduced provider competition
- Prescription drugs
- Regulation costs
- Cost shifts from Medicaid, Medicare, and the uninsured to private payers, which WellPoint said increases premiums by between 15% and 20%
Nussbaum says the industry should analyze the "20% to 30% of healthcare services" that don't improve health outcomes. That is an area where healthcare could save money and, in turn, cover more people and provide preventive services. Finding that kind of information will lead to healthcare reform, he says.
"For meaningful health care reform to occur, policymakers will need a clear and accurate understanding of the real (vs. perceived) factors that are actually driving the cost increases," wrote WellPoint Institute of Health Care Knowledge.