Health Insurance Plans and Health Management
10 03 08 - 11:56
by Scott MacStravic
March 10, 2008 at 8:58 am . Filed under Insurance, Health Plan/Payer CEOs, Policy Makers, Health Management
At first glance, health insurance plans ought to be major supporters of proactive health management (PHM) for their member populations, at least to the extent that this reduces members' use of sickness care. Most health plans do offer some kinds of PHM services, and many are into it in a big way, with large plans such as CIGNA and Aetna offering PHM to employers who are not even their health insurance clients.
But the first glance may be too simplistic. Consider the full "systems dynamics" effects of engaging in PHM. True, when done effectively, PHM can significantly, often dramatically reduce healthcare costs for populations affected. But this also reduces the "loss ratios" for the plans, and can threaten their overall profits, since to maintain the same percentage of profits with lower premiums, its total profit amounts will be reduced, even if their margins remain constant. They will enjoy less growth in revenue, which will threaten their share prices, and shareholder as well as Wall Street analyst happiness.
Moreover, there is a built-in risk when engaging in PHM that some portion, perhaps a significant, even the major portion of the benefits of PHM investments will end up aiding some other plan, as members change plan selections at least annually. If employed members have high turnover relative to their employer, or high "churn rates" relative to their plan selections, they may not remain members of a given insurer long enough for any, or at least enough payoff to the insurer that paid for their PHM services.
The upside potential, however, is that health plans that demonstrate success in PHM may deliver such added benefits to their employer clients that the added revenue they derive from PHM, along with perhaps higher loyalty levels among employers who are also clients for their insurance, will end up increasing their total profits and shareholder value. It is impossible to predict with any confidence what might be the overall economic impact on insurance plans that offer PHM services. Too much depends on how well they perform in the PHM marketplace, and what the overall mix of impacts turn out to be.
But plans do enjoy a significant advantage over employers, who might otherwise decide to develop and offer their own PHM programs. Thanks to federal regulations (both EEOC and HIPAA), employers are seriously limited in terms of what incentives they can offer for what things, as well as what they are allowed to know about their employees' health as individuals. By and large, insurance plans are not so handicapped. Of course, neither are the growing number and size of specialized PHM vendors, which can include hospitals and physician practices in the same community as the employers.
Plans also may suffer from a disadvantage based on whatever reputation and image they have among their own plan members or consumers in general. Given all the scandals about denial of coverage, retroactive termination of individuals after they start using care for conditions the insurer deems pre-existing, and the general hassles that have made employees' personal physicians antipathetic toward insurers, this may be a significant handicap.
One thing is clear, at least - insurers cannot afford to ignore the PHM market and the impact this can have on their premium revenue, relations with employer clients, and with consumers, for that matter. PHM is too big an elephant to pretend it is not in the room.