Is short-term limited duration insurance a viable option in a broken system?
As mentioned in Part 1, short-term limited duration insurance (STLDI) is “health coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract … taking into account renewals or extensions.” STLDI provides gap protection during health insurance coverage transitions (e.g., job loss or change).
Since 2016, federal regulations have updated STLDI coverage terms from 12 months to three months to three years. Proposed Biden regulations would again reduce the term (four months), but not eliminate the questions: Is STLDI a viable longer-term alternative to ACA coverage and should consumers be allowed to decide?
Even oversight agencies are uncertain. In May 2022, the General Accounting Office (GAO) reported these three conclusions:
Data limitations hinder understanding of the role short-term plans played [including] during the COVID-19 pandemic.
Views varied widely about the value of short-term plans to consumers and as compared to individual health insurance coverage.
Additional data would enhance understanding of the role of short-term plans and help states oversee insurer market conduct.
The National Association of Insurance Commissioners (NAIC) is also at a loss, noting: “State insurance regulators know little about the size of the market for STDLI because the plans are generally not required to report data on enrollment.”
There are also conflicting pictures of the three industry pain points highlighted in Part 1:
Affordability. STLDI premiums can be 54-91% lower than ACA-compliant Marketplace plans (GAO).
Access. Affordability supports access to STLDI benefits, which do include mental health, substance abuse, and prescription drugs in most states (GAO).
The GAO notes a contrast to each. Lower STLDI premiums may “not reflect the full cost to the consumer,” with one study showing a $24,000 cost difference for heart attack treatment under an STLDI versus ACA plan. In addition, the same data that showed most states offer STLDI plans with more comprehensive benefits showed that only a small percentage of plans overall do so. And while claim approvals may be comparable, STLDI coverage requires underwriting while ACA plans cover all pre-existing conditions.
Insurance and its core functions
The core function of health insurance is to protect consumers from unexpected, high medical costs. Conversely, the core function of public, for-profit insurers — like UnitedHealthcare, CVS Health/Aetna, and Cigna — is to maximize value and generate profit for shareholders and owners. The two functions are often in conflict, and U.S. healthcare policy and coverage design — before and after the Affordable Care Act — are part of the problem.
In 2008, The Innovator's Prescription emphasized the combination of Health Savings Accounts (HSAs) with high-deductible health plans (HDHP) as "one of the most important reforms to be made in health care.” This construct “unbundles” comprehensive healthcare coverage into two parts — a defined contribution (pot of money) to pay for pre-deductible care and defined benefits to pay for addition costs and care.
The theory was that upfront personal spending would curb unnecessary medical utilization and encourage prevention. While HSA-HDHP uptake has grown, it has failed to curb rising healthcare costs. In addition, consumer cost-shares have increased, leading to deferred care or medical debt.
"If cost sharing is large enough to have a meaningful impact on medical spending, it interferes with the primary function of health insurance, which is to protect people against the risk of having to pay large medical expenses."
So note the authors of the latest proposal for healthcare reform, We've Got You Covered: Rebooting American Health Care. Citing the "deep-seated rot in US health insurance coverage," Liran Einav and Amy Finkelstein propose auto-enrolled free basic coverage for all Americans paired with separate optional insurance customized and paid for by consumers — a twist on the defined contribution-defined benefit model.
Which is closer to these models: STLDI or Marketplace plans? Short-term plans don’t include free basic services, but they do combine defined benefits with defined contributions when paired with an indemnity (cash) plan. Likely consumers are healthy individuals without pre-existing conditions who don’t need most EHBs — until they do. Marketplace plans don’t offer free basic coverage either but their required EHBs and free preventive services come closer, offering more affordable and comprehensive defined benefits than pre-ACA healthcare.
An interesting gap remains for both coverage types: STLDI plans are not HSA eligible, nor are many Marketplace HDHPs that don’t also meet MOOP requirements.
Options continue to be important. As the GAO notes, “if relatively healthy individuals choose short-term plans instead of PPACA-compliant plans, this could result in higher premiums for PPACA-compliant plans and higher federal subsidies.”
A three-year versus three-month STLDI term will not make or break the Marketplace at current enrollment levels. But two other factors could: the end of expanded subsidies and mandated no-cost preventive care for Marketplace plans. Congress must renew those subsidies for them to continue past 2025 and the Fifth Circuit Court of Appeals must overturn a currently stayed District Court Opinion to preserve select no-cost preventive care mandates. Oral arguments begin in less than a month (March 4).
Beyond federal regulations, states continue to do their part to close gaps and make coverage more affordable. Idaho, for example, offers an STLDI option with enhanced coverage that meets the benchmark for essential health benefits. Post-enactment, overall STLDI enrollment increased nearly 20% (GAO).
The larger issue is that the golden age of medicine still needs a golden age of coverage — one that protects both consumer and market health.
The regulatory tug of war over short-term limited duration insurance.
Short-term limited duration insurance (STLDI) is "health coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract … taking into account renewals or extensions" (federal regulatory definition). Introduced in 1997, STLDI provides gap protection during health insurance coverage transitions (e.g., job loss or change). It still does but the rules keep changing.
Proponents argue that STLDI provides valuable protective coverage. Opponents agree, unless consumers choose STLDI as a longer-term coverage option — at which point, it becomes "junk insurance." Labeled as such throughout the new Biden regulation footnotes, STLDI lacks the federal coverage mandates of Marketplace plans: 10 Essential Health Benefits (EHB) and their out-of-pocket maximums (MOOP), free preventive services, and guaranteed issue.
Conversely, STLDI is often much cheaper and the benefits it may exclude aren't benefits that every consumer needs. This includes healthy, younger and/or childless individuals with no pre-existing conditions who may not require most preventive services, many of which apply only to older and/or specific high-risk populations.
This is not to make a case for or against STLDI as a longer-term coverage option. But rather, poses a question: Should consumers have less choice when healthcare still struggles to deliver on its core functions:
Access. As of early 2023, 7.7% of Americans remain uninsured (HHS).
Affordability. Rising costs have delayed health care, worsened outcomes, and increased medical debt — including for the insured (Commonwealth Fund).
Reliability. As of 2022, wait times for new patient appointments averaged 26 days across 15 metropolitan areas (Washington Post).
These are the products of patchwork U.S. healthcare policy — forged from crisis response and coverage gap plugs versus a unified approach that serves human health above political interests. STLDI sits at the nexus. With new rules yet again pending, it deserves a closer look.
The federal tug of war
STLDI plans are largely state regulated, including whether they can be sold at all. The only aspects of STLDI governed by federal regulations are its core definition and policy term durations. The latter is where the battle is raging:
The Biden rule, proposed in July 2023, has received nearly 16,000 public comments with final publication scheduled for April 2024.
A risk to the risk pool
Before 2016, a policy term of up to 12 months had been in place for STLDI for nearly two decades. Since 2016, federal regulations governing STLDI have been updated three times.
Why this tug of war? Easy: The Marketplace.
Authorized by the Affordable Care Act (ACA), Marketplace plans offer coverage with no medical underwriting, required access to 10 EHBs, free designated preventive services, and premium tax credits (PTC, or subsidies) that reduce costs for those who qualify.
The 2016 STLDI regulations noted: "Because short-term, limited-duration insurance is exempt from certain consumer protections, the Departments [Treasury, Labor, and HHS] are concerned that these policies may have significant limitations, such as lifetime and annual dollar limits on essential health benefits (EHB) and pre-existing condition exclusions, and therefore may not provide meaningful health coverage."
The proposed 2023 regulations make a similar argument. But the Democratic Administration regs said something else: "[B]ecause these policies can be medically underwritten based on health status, healthier individuals may be targeted for this type of coverage, thus adversely impacting the risk pool for Affordable Care Act-compliant coverage."
The 2018 Trump regulations acknowledged that longer terms for STLDI coverage — which costs less than many Marketplace plans, then and now — could "siphon off healthier individuals" and "have an impact on the risk pools for individual health insurance coverage, thereby raising premiums for such coverage."
The Trump rules, however, also cited the then-failures of the Marketplace, the lack of evidence "that short-term, limited-duration insurance policies have not historically or are unlikely to cover hospitalization and emergency services" and "the critical need for coverage options that are more affordable."
In 2018, enrollment was less than 12 million with one-quarter of enrollees having just one insurer to choose from (KFF). Large insurers like Aetna had left and only recently returned. Six years, one pandemic, and one administration later, the 2024 Marketplace has attracted a record-breaking 20+ million enrollees.
In contrast, less than 2.9 million Americans were enrolled in STLDI plans as of 2020 (2023 Commonwealth Fund report). After STLDI term lengths were extended, STLDI enrollment did grow and largely from Marketplace defection but by only one-fifth of the 1.5 million figure projected by the Congressional Budget Office.
Does long-term STLDI pose a real risk to the Marketplace? Not even the oversight agencies know entirely. Part 2 of this feature will explore those statistics and what's next for STLDI.
Health plan efforts featured among the 5 key trends, insights, and predictions that will mark the year.
U.S. maternal mortality doubled between 1999-2019, with the Centers for Disease Control and Prevention estimating that up to 80% of these deaths are preventable. These devastating statistics are from the 2024 report A Troubling Reality, a Hopeful Future from ProgenyHealth, LLC, a tech-enabled women's healthcare company focused on Maternity and NICU Care Management.
Payers are one group targeting better outcomes. The report features maternal health interventions from four health plans: Aetna Better Health of Florida, Community Health Choice, Western Sky Community Care of New Mexico Health Care Service Corporation (HCSC).
Susan Torroella, ProgenyHealth CEO, provided exclusive quotes on payer roles and on all five multi-stakeholder trends from the report, including:
Stronger Health Plan Interventions
A Promising Shift in Healthcare Research
Bettering Maternal and Infant Care through AI and Machine Learning
The Rise of Virtual Prenatal and Postpartum Healthcare
New Definitions of Risk
Trend: Maternal health outcomes are benefitting from stronger health plan interventions
As noted in the ProgenyHealth report: “While progress toward equitable, accessible maternal and infant healthcare has been slow, it continues to be steady — and these innovative new avenues for improvement show that plans are committed to reversing these alarming trends.”
ProgenyHealth’s CEO agrees: “In our experience, payers want to make a difference. They understand that they are uniquely positioned to drive collaboration among partners who can positively impact maternal and infant health.”
Focus areas include:
Stay-at-home-but-stay-in-touch prenatal care
Postpartum care
Associated mental health care for women who develop anxiety and depression after delivery (10% and 20%, respectively)
Home care links to the ProgenyHealth report Trend #4: The Rise of Virtual Prenatal and Postpartum Healthcare. CEO Torroella says: “Technology and digital tools are changing the playing field for women who live in maternity deserts. Remote patient monitoring devices, virtual healthcare, and mobile apps can help close gaps during the prenatal and postpartum stages.”
All focus areas will require increased payer reimbursement including from Medicaid programs. Many have extended postpartum coverage for up to a full year after birth. The ProgenyHealth report notes that “commercial plans are taking notice—and devising their own solutions to the maternal and infant health emergency.”
What four health plans are doing
The ProgenyHealth report features these examples:
Aetna Better Health of Florida — An initiative to reduce the rising c-section births associated with higher infant mortality. Aetna has partnered with ProgenyHealth to deliver an integrated Maternity & NICU Care Management program for health plan members.
Community Health Choice (Houston) — A multi-pronged approach to address the Black infant death crisis. In addition, CHC members have access to a ProgenyHealth app for self-enrollment in Maternity Care Management programs in early pregnancy. Nearly 15% of MCM enrollments have come through this “digital front door.”
Western Sky Community Care of New Mexico — A doula network, with services available via 24/7 digital appointments for births, postpartum mental health resources, and many others.
Health Care Service Corporation (HCSC) — The Blues plan has created the Centering Pregnancy program to improve access and expand coverage through mobile health programs in multiple states.
Payer intersections that improve maternal and infant health
Speaking on maternal and infant health, ProgenyHealth CEO Torroella tells HealthLeaders: “No one entity can solve this issue – it will take a team of contributors.”
As an example, Torroella identifies a clear payer-provider intersection point: maternal health co-occurring conditions.
“More women are beginning their pregnancy with pre-existing conditions such as diabetes or high blood pressure, which puts them at higher risk for maternal mortality or morbidity,” says Torroella. “What we’ve seen is that it isn’t just one condition leading them to our program, it’s often multiple conditions that require complex care management. The sooner we can identify those issues and begin working with those women, the better the outcomes.”
10-15% reduction in Length of Stay and up to 50% in readmissions and reduced ER visits
A 90%+ member satisfaction rate
Artificial intelligence and machine learning have played a role.
“As a tech-enabled women’s health company,” says Torroella “our own platform has predictive and prescriptive analytics to aid our clinical teams in decision-making. Still, our most important asset is our people, who use technology to help them make meaningful connections with those we support.”
She adds: “We have made so many advances in healthcare, and yet pregnant women are at greater risk today than their mothers were,” says Torroella. “We simply must do better when it comes to maternal and infant health.”
"We can't be competitors for a lot of this work to move," says Kothari, adding: "If you want to make change, you have to have a seat at the table."
An educator, community organizer, and startup innovator, Shruti Kothari never thought she’d work for a health plan. Today, she can’t say enough about her current employer, Blue Shield of California, and its unique transformation model. As director of Industry Initiatives, Kothari advocates for “co-opetition,” an increasingly collaborative and outward-looking approach by traditional competitors such as health plans
“We could all do more if everyone operated the way we do, with a focus on co-opetition.”
A look inside the Blue Shield model
Kothari states that Blue Shield’s Industry Initiatives is unique, from its funding to its operations. Created by president and CEO Paul Markovich and sponsored by EVP of Transformation Peter Long (HLM story), Industry Initiatives sits in Blue Shield’s Government Affairs division and partners across operational business units to navigate policy if/thens.
Blue Shield allocates separate funding and resources for Industry Initiatives. The team’s focus is improving access, quality, and equity in the healthcare system by advancing key issues including data sharing and payment innovation.
“The design of this is important because bandwidth is often limited, both in dollars and people” says Kothari. “It’s a big deal that the idea started with the CEO and had the support of other senior leaders. Our leadership team has continued to prioritize fostering industry collaboration.”
“Innovation teams are now standard at health plans; that’s not new. But if the ecosystem isn’t formed in a way that helps scale products, services, and technology, it won’t work.”
That ecosystem, as defined by Blue Shield, must include co-opetition and treat healthcare “as one word and two.”
“Healthcare is so fragmented and there are misaligned incentives. My team is really unique in that it's very specifically focused on this problem,” says Kothari. “We’re not competitors when it comes to modernizing healthcare so that patients, families, providers — everybody — can benefit.”
She adds: “More health plans should be leaning into creating a team like this.”
Proof points in payment innovation, data sharing
Kothari notes that Industry Initiatives “has had really good success backed by data on policy barriers and industry misalignment.” Blue Shield president and CEO presented examples at this month’s J.P. Morgan Healthcare Conference. Kothari and Blue Shield representatives provided additional detail, including:
Payment innovation: The Advanced Primary Care Memorandum of Understanding (MOU). The goal is to build a sustainable future for primary care through multi-payer alignment and increased investment aiming to address decades of inadequate resourcing and perverse incentives for primary care in the U.S. healthcare system.
Six health plans signed a MOU making public commitments to achieve this goal and support small and independent practices with transformation resources. Up to 30 practices will participate in a pilot program. Participating health plans will use a common set of incentives, investments, and resources to facilitate delivery of advanced primary care that is high-quality, equitable, and comprehensive.
Data sharing: Statewide data exchange. The goal is to support modernizing California’s health data sharing infrastructure by supporting implementation of a robust statewide data exchange that enables the timely sharing and utilization of health and social data.
To achieve these goals, Blue Shield “takes risk at a different level for progression” says Kothari.
“We are committed to shaking up the status quo in healthcare. Being first to market with a payment model intended to invest in primary care is one example of that. We believe it's a risk worth taking, and that it will produce better quality and lower cost care.”
“But being first to market with any model as fundamentally different as ours is not guaranteed to be successful,” she adds.
“You can be at the intersection of a lot of things and still be a leader”
Kothari knows healthcare transformation. An educator and community mobilizer, she has been recognized by Business Insiders 30 under 40 and is founder of Women of Community, an organization committed to placing more Women of Color in healthcare leadership. Kothari is co-founder of the start-up Crown Society and has worked in venture capital.
In all these circles, Kothari knows what it feels like when you don’t look like anyone else. In addition, both of her grandmothers and her mother were in arranged marriages. The intersectionality of race, gender, class, and other areas is important to her.
“I know the feeling of being the marginalized person at the intersection of a lot of different things,” says Kothari. Growing up in rural America in Wisconsin as a daughter of immigrants, having seen the women in my family and what a privilege it is to have the freedom to go to school, go get a career, reach a different city, and try a new job.”
But there are still too few examples. Kothari cites a McKinsey report noting that 28% of the healthcare C-suite are white women, while only 4% are women of color (2022 data).
“Women of color don’t even put themselves up for leadership roles because they don’t see themselves in other leaders, because of intersectionality, because of all of the other responsibilities they are managing — including at home — and because of imposter syndrome.”
She has seen the same in the venture world.
“That’s where I started to see the dynamics of who gets funded and who doesn’t. Do you look like me? Have you had the same experiences as me? Then I trust you and I'm going to give you money to fund your company. The people who are getting left out are the people like me —people of color, women of color, even just women in general.”
But things are changing.
“There's been a movement to increase funding with us, which has been amazing,” says Kothari. “If you want to make change, you have to have a seat at the table.”
Despite a startup’s unique ability to launch not only its product but its business model from the ground up, many spend years learning the same lesson: all roads lead to payers. At the end of the day, digital therapeutics (DTx) innovation is reliant on healthcare’s most entrenched framework: reimbursement.
These issues were explored in a webinar from the Digital Therapeutics Alliance (DTA) and ClearView Healthcare Partners. The webinar featured Freespira, which has developed an FDA-cleared digital therapeutic for post-traumatic stress disorder (PTSD), panic disorder, and panic attack. The webinar followed DTA’s full case study white paper and its members-only DTx Commercialization Product Launch Playbook.
Here are four insights from that webinar and case study.
Follow the dollar, find the end customer
Startups use product journey maps to maximize market access and reimbursement pathways. The end user and end customer may differ but, in the end, the customer is who pays. Companies must also ensure that their pricing models align with that customer.
Like many DTx companies, Freespira’s initial go-to-market strategies can be summarized as EBP: Everybody But Payer. All approaches for its panic attack DTx failed, per President Simon Thomas and for different reasons, before the company landed on health plans:
Self-pay patients: Failed approach because patients often present with physical symptoms to their primary care physician.
Providers: Failed due to lack of economic alignment and inability to scale.
Self-insured employers: Failed, at least initially, because the Freespira pricing model and employer payment model (per-member-per-month, or PMPM) didn’t align. Employers’ desire to administer the DTx through their third-party administrator (TPA).
Thomas noted that the TPA model remains a challenge.
Two paths to payer market access
Even when Freespira realized it needed to target health plans and their focus on payment ROI, the company took two payer paths: partner directly with the health plan or indirectly through providers.
The provider approach delivers medical education to a health plan’s network. The health plan approach uses claims data to identify and make direct outreach to patients, including treatment subgroups. This includes working with multiple health plan teams. “We had the insight of working with case managers and payer sales channels.
There is also the “start and span” approach — going to market with one payer type before expanding to others. Freespira started with Medicaid, per Vice President of Marketing Sarah Koenig, moving to Medicare, then commercial. Koenig adds that each has unique commercialization considerations (e.g., Medicare’s marketing guidelines).
While president Thomas notes that payers are growing savvy beyond ROI, hurdles remain.
“Right now, the regulatory environment is pretty challenging. Health plans [are] not super savvy about regulatory pathways for DTx,” noted the Freespira exec.
Patients are still pivotal
“Given digital tools’ emerging role as a therapeutic approach, the point at which a digital therapeutic should be introduced to the patient often varies depending on the therapeutic area being pursued, and perspectives may differ across stakeholders.” This from the DTA-ClearView Healthcare Partners case study white paper, which adds that “a successful launch approach should account for adoption at multiple points in the patient journey, while zeroing in on the point at which patients are most likely to benefit from a new, innovative intervention.”
Freespira’s Koenig noted that while claims help identify target populations by diagnosis, starting with symptoms may be a better way to start discussions with patients.
“It’s about receptivity. It’s better to talk to them about their sleep, anger, avoidance, or unhealthy coping versus ‘Hey, let’s talk about your PTSD.’”
The white paper adds that the mental health patient journey “is often nonlinear — PTSD patients may experience symptom onset immediately after an incident or years later, while also delaying seeking treatment due to avoidance and feelings of shame.”
How the DTx playbook differs from pharma — but not the rest of the industry
There are multiple conversion points on the DTx journey from product-market fit to patient uptake, provider acceptance, and payer reimbursement. DTA’s commercialization playbook includes eight functional areas to help “standardize commercialization considerations for product launch and scale”: Marketing, Field Force & Commercial Ops, Medical Affairs, Patient Advocacy, Market Access, PR & Government Affairs, Distribution & Patient Services, and Compliance.
“By utilizing these tactics, companies will continue to increase disease awareness while driving acceptance of digital therapeutics and the underlying mechanisms by which these products work to treat disease. This will allow physicians to clearly understand how DTx can complement and enhance existing treatment approaches rather than further complicate them.”
Freespira’s Koenig recommends that DTx developers:
focus on 1-2 things the product can deliver;
apply short- and long-term marketing approaches;
hire sales and marketing teams that know how to work with payers; and
deploy marketing analytics at every commercialization stage.
The white paper adds: “By utilizing these tactics, companies will continue to increase disease awareness while driving acceptance of digital therapeutics and the underlying mechanisms by which these products work to treat disease. This will allow physicians to clearly understand how DTx can complement and enhance existing treatment approaches rather than further complicate them.”
Koenig added that Freespira “didn’t go with the traditional pharma playbook — education on patient condition awareness — and called focusing on “who’s writing the check an evolved commercialization approach.” That might be the case for DTx but it’s hardly true for healthcare in general. Even then, success isn’t guaranteed. Pear Therapeutics had an FDA-cleared app for substance and opioid use disorders and insomnia and Medicaid contracts with multiple states.
It still went bankrupt, blaming payers on its way to auction.
How the partnership can help drive benefits and services toward need and what it means for healthcare.
Driving better outcomes just took on new meaning.
At this week’s JPMorgan conference, Uber Health and Socially Determined announced an “analytics-first” partnership that pinpoints people in need and uses Uber’s fleet to deliver supplemental benefits such as medical rides, home pharmacy, and food.
“Historically, the onus has been on patients to navigate their own benefits—from figuring out what they’re eligible for, to tracking down those services, to securing reimbursement. We’re turning that model on its head,” said Caitlin Donovan, Global Head of Uber Health.
Donovan’s remarks are from a joint press release with Socially Determined. Its co-founder and CEO Trenor Williams adds: “Uber Health’s knowledge, approach and ubiquitous network provides the perfect partner for our analytics and allows our customers to drive measurable, improved outcomes and member experience.”
Socially Determined is a social risk analytics and solutions company that integrates medical care and social drivers of health (SDOH). Uber Health is a HIPAA-compliant, population health logistics platform that serves more than 3,000 customers. Both companies count payers and providers as customers.
How it works
Uber’s “ubiquitous network” is its drivers, who already deliver people and meals by the millions to their daily destinations. Those same drivers can now help people who lack reliable transportation to not only doctor’s visits but also the grocery and pharmacy.
The Uber Health-Socially Determined partnership can help payers and providers:
identify high-need individuals
connect eligible members with available benefits
increase member and patient engagement, access, and outcomes
reduce healthcare costs
uncover unmet needs in communities across the country
These facets connect the coordination of need, eligibility, and benefits to healthcare’s Triple Aim (better outcomes and patient experience for less cost) and across all lines of business (Medicaid, Medicare Advantage, and commercial).
HealthLeaders reached out to Socially Determined for additional insight, with Williams responding: “For years, our payer and provider customers have utilized our social risk analytics to better understand and address the challenges their members and patients faced every day. And now we’ve developed purpose-built analytic models designed explicitly for Uber Health’s key benefits that immediately help identify those individuals with the greatest need for each benefit.”
One partnership, five trends — and what it means
The Uber Health-Socially Determined collaboration reflects:
the growth of supplemental benefits and members’ ability to use them
the rise of automated benefits validation
the delivery of more care to patients’ doorsteps
the expansion of existing business models to deliver innovative care
the integration of SDOH needs with legacy healthcare
Uber Health’s Donovan adds that the partnership “enables healthcare organizations to take a more strategic, proactive, and impactful approach to patient care, driving better outcomes at scale.”
The partnership also marks the next step in healthcare’s growing use of alternative data — any data external to what a company (e.g., payer, provider) collects on its own and which offers broader source, scope, and value. Socially Determined’s resources include but are not limited to: federal and state data; granular business data ranging from restaurants to retail; and financial information that spans credit ratings, buying behaviors, asset/resource information including home, car, and property ownership.
The growth trajectory
HealthLeaders first covered Socially Determined in 2021, when the company partnered with CareFirst BlueCross BlueShield to improve health equity by providing alternative data for the health plan’s SDOH-driven interventions. At that time, CareFirst had made a $10.5-million, multi-year commitment to address the root causes of diabetes using SDOH and other alternative data sources. A year later in 2022, CareFirst expanded the partnership to launch an “enterprise-wide social risk intelligence strategy.”
“We have made tremendous progress over the past two to three years,” says Williams. “We have great partnerships with Blues Plans, national and regional MCOs, IDNs, and others.”
That partnership now includes Uber Health to deliver disruptive healthcare innovation in its most basic form — a ride and a bag of groceries.
Chavarria is the company's first female chief executive but being ahead of the curve is just how she operates.
HealthLeaders caught up with Sarah Chavarria on her first day as CEO of Delta Dental. This is what she had to say.
"As I step into my role as CEO of Delta Dental, I'm energized about the bright future ahead. We are a purpose-driven organization focused on bringing together oral health with total well-being. The next several years are going to bring opportunities that will enable us to deliver on our purpose to provide access to quality care for our 45 million members. Together, we will ensure our customers, providers and employees remain at the forefront of our business to improve health outcomes."
When Chavarria says together, she means it. As a former chief people officer—her first role at Delta Dental six years ago—she has facilitated collaboration and built organizational designs as a part of the company's transformation: "I can stand in a room and bring all the right conversations to bear to shape the right vision, the right roadmap, and my connection to employees."
"One of the most critical things for leadership is the ability to listen, to discern, and then to lay out a vision. To learn each of my functions as CEO and really do that deep dive, I didn't want to bring any biases or assumptions that I couldn't validate. I have already moved some things around because I learned that some of our capabilities probably sit better together."
Chavarria began learning those functions three months ago, while Mike Castro was still CEO of Delta Dental. He will continue as chairman of the Board.
"I gave myself that First 100 Days early in the process, while Mike was still here. It's a really important thing that I would recommend no leader ever shortcut," says Chavarria.
"Anytime you have a new CEO, there's this period of bracing for incredible change. Our board and senior leadership team really saw an opportunity to do this as a transition—to deliver on the strategic priorities that Mike has laid an incredible foundation for and to minimize disruption as much as possible."
Chavarria's top three priorities as CEO
Priority 1: Provider partnerships. "First and foremost, I'm really excited that we have made the commitment to partner with our providers—to support them in the incredible work that they do and work with them in new ways. That doesn't always happen between the payer and the provider community, but the providers are the individuals who deliver quality care for patients. What does quality look like? How do we create more access? That's all really critical."
Priority 2: Employee engagement. "I'd be remiss if I didn't talk about all of the work we've done to engage our employees, to rally them around a sense of purpose to deliver access to quality care. That's the business that we're in as much as healthcare."
Priority 3: Patient focus. "We have really put the patient at the center of how we think about our products, how we spend our time, how we think about where we prioritize our technology investments."
Again, Chavarria looks forward and back.
"We had an incredible leader in Mike, who did a fantastic job of strengthening the foundation . . . I am beyond excited to have those pieces connected. Now, I get to help the organization think about those things in a slightly different way," she adds. "To bring some new conversations to the table that we haven't had."
One of those conversations is patient engagement and in a significant but untapped area.
Taking menopause from a whisper to a shout
A couple of years ago, Chavarria notes, Delta Dental was thinking about its strategic priorities and identified caring for aging Americans as one way to put the patient at the center.
But there was more.
"We also conducted a study on menopause and oral health and said, 'Hey, there's some interesting information here.'" That study included startling statistics:
84% of women are not aware that menopause can impact oral health
Few have discussed their menopause concerns with their dentist (2%) or dental hygienist (1%)
77% plan to visit their dentist after learning of the link
(Learn more by reading the study and HealthLeaders' feature on it.)
Chavarria is open about her own experience with menopause and wants people to feel more comfortable talking about it and the related oral health symptoms (e.g., cavities, gum disease). Chavarria and her team have identified multiple opportunities to help deliver better health outcomes:
Support women, providers, and the groups that convene them
Use dental visits to first identify menopause symptoms
Promote integrated care between dentists and primary care providers
Create innovative products
Build engagement between women and all of their healthcare providers
For Chavarria, opportunities in menopause and oral health link can lead to broader healthcare transformation.
Transformation based on nuance and partnership
The ways healthcare puts patients at the center has changed, notes Chavarria.
"The transformation of healthcare at large is in its 20th-plus year. With the Affordable Care Act, we started shifting toward a patient focus and electronic health records to help manage information."
"It takes a long time," she adds. "But now we're nuancing that conversation to better define who the patient is and where are they in life."
Partnership will be key.
"We're now at this beautiful place as a payer, sitting on the other side of healthcare and creating the plans that help patients navigate and get access to the care they need. It's such a great time to partner with other healthcare leaders."
"That's our future," she asserts. "That's our next five years."
Linking the final federal guidelines to deals closed, abandoned, and still in play.
Would the final 2023 merger guidelines from the U.S. Department of Justice and the Federal Trade Commission have affected this year’s biggest deals? Here’s a look at the key guideline takeaways and the deals in question. They include one that’s still on the table following a state justice request to the DOJ.
One rule to rule them all.
The new guidelines combine and apply rules for all merger types into a single document. In addition to horizontal mergers, the final DOJ and FTC rules apply to vertical mergers (different provider types) and cross-market mergers (different geographies)
Tougher market share and market concentration limits for horizontal mergers.
The new guidelines change the market share and market concentration levels that would make a horizontal merger “presumptively unlawful”: a combined 30% market share or a market concentration of over 1,800 as calculated by the Herfindahl-Hirschman Index (HHI). Horizontal mergers consolidate the number of entities that offer similar services.
The HHI:
Reflects how evenly market share is distributed
Ranges from 0-10,000
Helps identify markets that are moderately concentrated (HHI of 1,500-2,500) or highly concentrated (more than 2,500)
With a new market concentration of 1,800 making a merger presumptively unlawful, the DOJ and FTC have signaled that middle-moderate deals may be at higher risk for review and blockage. For vertical mergers, the guidelines soften but essentially maintain the presumption that a 50% market share suggests a monopoly.
Market share and concentration aside, companies must report any deal valued at more than $101 million to the DOJ and FTC.
Cigna and Humana: Had the deal proceeded and with Cigna retaining its Medicare Advantage business, the companies combined MA market share would have been 20% (18% Humana, 2% Cigna). But the dollar value of the deal alone would have initiated government review — in addition to its consolidation of two of the largest Pharmacy Benefit Managers in the U.S., a space the FTC is also reviewing.
Claiming efficiency won’t cut it
The final merger guidelines reject cost savings and efficiencies as a general defense against mergers deemed illegal and anti-competitive. The DOJ and FTC permit a “narrow path” for this defense, including evidence that:
The merger will produce unique benefits not achievable any other way
These benefits can be proven
Said benefits do not decrease market competition
The government has been skeptical of merger savings and efficiency claims (Crowell). Alternatively and on the provider side, consolidation can raise prices without improving quality (KFF).
Prove your case — economically, competitively, comprehensively
Where the draft guidelines had relegated economic and evidentiary analysis the appendix, the final version elevates them to the main body and in front of market definitions. Companies are already used to more rigorous evidentiary standards when working with the FTC and DOJ, including potential merger harms. The final guidelines add labor market impacts to those harms.
UnitedHealth Group and Change Healthcare: UnitedHealth Group proved its case in one of the bigger recent M&A surprises. In March 2023, the DOJ dropped its appeal of a federal district court ruling that permitted United to acquire Change Healthcare in a $13 billion deal. That ruling required Change to sell its claims editing business, which was a part of the government’s anti-competitive claims.
The role of the states.
While the final guidelines do not address State roles in M&A review, they do come into play. States challenge mergers using federal antitrust law and/or their own statutes. The National Academy for State Health Policy (NASHP) has proposed model legislation that would require state review of mergers below the FTC/DOJ threshold of $101 million.
Elevance Health and BlueCross BlueShield of Louisiana: The deal that was off is now back on. In September, Elevance’s acquisition was delayed by state concerns including those of the Louisiana Department of Justice (LADOJ). At LADOJ’s request, the federal DOJ encouraged the Louisiana Department of Insurance to “carefully consider the competitive impacts” of the Elevance-BCBS-LA merger. Several factors — the state Blues’ plan conversion to a for-profit company and changes to a new joint nonprofit foundation, including profit distribution and board governance — appear to be shifting the tide for a deal that could close in early 2024.
The immediate outcome is only part of the picture as short-term versus long-term and growth versus transformation mark a shifting Medicare Advantage landscape.
The move could make HCSC the next Elevance and Elevance the hands-down dominant player among BlueCross BlueShield companies.
Here are seven things to know.
HCSC and Elevance competing in $3B bid.
Bloomberg notes that Cigna’s MA business could fetch more than $3 billion, with final bids due this week from the reported suitors.
How bad does Cigna want a deal?
The company is more likely to secure a richer asking price now that there are multiple bidders. If it can’t, Reuters reports that the insurer might be willing to delay a sale. We already know that Cigna is willing to walk away from a deal in a big way — i.e., its failed Humana acquisition, if you’ve been living under a rock.
How bad does Cigna want a deal now?
What might sweeten the pot if Cigna can’t quite get its asking price? Freedom and stronger finances overall. If Cigna sells, it will presumably avoid five years of HHS compliance oversight as part of its $172 settlement of MA reimbursement fraud charges. In addition, Cigna’s MA unit will reportedly lose money in 2024. A sale now could curtail losses in two areas and provide added funds for the “bolt-on acquisitions” that Cigna is still considering.
Price, alignment, desire: Then and now
Price: Cigna will want to fetch more than $3 billion for its MA portfolio, given that it paid $3.8B a decade ago to acquire it from HealthSpring. In 2011, that price tag equated to $10K per MA member and $500 per member for PDP. Since then, Cigna’s MA enrollment has grown from 340,000 to 600,000 and its PDP enrollment from 800,000 to 2.5 million.
Desire: Analysts were surprised in 2011 when Cigna hearted HealthSpring, with Forbes reporting: “Cigna hasn’t expressed a lot of interest recently in becoming bigger in government business, with their near universal focus on growing internationally.”
What a difference a decade makes.
Fast forward to a Goldman Sachs analysis from 2022: “Cigna said that it considered government business a significant growth driver, with a targeted annual growth rate of 10% to 15% . . . and that it had identified government business as an area where it could grow via M&A” (SeekingAlpha).
What a difference a year makes.
Alignment: Given that Cigna would be offloading its MA business, it doesn’t have to worry about the “limited cost and revenue synergies” that might have played in role with Humana. HCSC and Elevance won’t need this synergy either unless unique Cigna MA customer expectations significantly impact cost and revenue. What the two Blues plans will need is the ability to retain the customers they acquire and synergy with their existing business models.
Who is the likely buyer?
Based on buying power alone, Elevance is more likely to prevail. Its 2022 revenue was nearly triple that of HCSC ($156B versus $54B, respectively). If Elevance was Cigna’s second MA suiter, it likely made a more attractive bid in either pure dollars or other details. Being a publicly traded company, Elevance can make a cash-and-stock offer whereas HCSC would be limited to a cash-only deal.
Who is the ideal buyer?
Current and long-term factors affect how Elevance or HCSC would steward Cigna’s 600,000 MA lives:
Membership: HCSC’s current MA enrollment is roughly 1 million — 5.3% of its total 18.6 million enrollment. Elevance’s MA enrollment is larger and a bigger percentage of its total enrollment: 2.9 million of 47.3 million lives, or 6.3%. (In contrast, Cigna’s MA enrollment represents 3.3% of its 18 million lives.)
Footprint: Elevance has a much larger MA footprint, operating in 22 states compared to HCSC’s five (IL, TX, NM, OK and MT). Both plans overlap with current Cigna MA markets while operating in a few states that Cigna doesn’t.
Networks: Elevance’s footprint reflects an existing national infrastructure and provider network, which HCSC lacks.
Elevance has the size and scale to absorb 600,000 new MA members. That growth would increase its MA market share among BlueCross BlueShield plans from 67% to 81% (if other BCBS growth remains relatively flat). That’s significant but not transformational in the short term.
Conversely, HCSC’s acquisition would be transformational immediately, shifting it from a company that prides itself on its local approach to one that would become a national player overnight and would begin to resemble Elevance in the Medicare Advantage space.
7. All that glitters is not gold?
In the long term, a larger MA footprint could increase the buying power of both companies, particularly of other BCBS plans. Elevance is already demonstrating this with a $2.5B acquisition of BlueCross BlueShield of Louisiana that is now back on. The last time HCSC acquired a Blues company was in Montana in 2013.
There is also the longer long-term. Earlier this month, The Wall Street Journalnoted that the “Medicare Gold Rush” was slowing down, citing the now-dead Cigna-Humana deal and slower projected growth from UnitedHealth Group.
Cigna couldn’t take advantage of the Gold Rush. It remains to be seen if Elevance or HCSC can and what role a Cigna MA acquisition would play.
Year-to-date, Cigna share prices are down 10.3% (as of Dec. 10, 4:00 pm ET). But its investors netted big short-term gains after news broke that deal talks were off between Cigna and Humana.
Jackpot. On Monday, Cigna Group shareholders banked a 16% increase, the company’s biggest gain in 14 years (MarketWatch). Year-to-date, Cigna share prices are down 10.3% (as of Dec. 10, 4:00 pm ET). But its investors netted big short-term gains after news broke that deal talks were off between Cigna and Humana. More on that here.
Who’s reaping the gains?
Institutional investors make up nearly 89% of Cigna's ownership, not uncommon for managed healthcare companies (CNN Business). Among Cigna's largest investors are the world's two largest investment firms — Vanguard Group, Inc. and BlackRock. Vanguard holds nearly twice as many shares as BlackRock (8.01% versus 4.5%) and a handful of other institutional investors in the 4% club.
That club also includes Dodge & Cox and Massachusetts Financial Services (now known as MFS Investment Management), which have increased their shares by 11.67% and 3.01%, respectively (time frame unknown). Other top purchasers include Fidelity Management & Research (3.87% stake, +15.56% gained) and JPMorgan Investment Management (1.3% stake, +5.7% gained)
The rest of the top 10 is here, including Cigna’s biggest institutional buyers and sellers.
