January 30, 2012, 9:00 pm - New York Times
The End of Health Insurance Companies
By EZEKIEL J. EMANUEL and JEFFREY B. LIEBMAN
Herefs a bold prediction for the new year. By 2020, the American health
insurance industry will be extinct. Insurance companies will be replaced by
accountable care organizations — groups of doctors, hospitals and other health
care providers who come together to provide the full range of medical care for
patients.
Already, most insurance companies barely function as insurers. Most
non-elderly Americans — or 60 percent of Americans with employer-provided health
insurance — work for companies that are self-insured. In these cases it is the
employer, not the insurance company, that assumes most of the risk of paying for
the medical care of employees and their families. All that insurance companies
do is process billing claims.
For individuals and small businesses, health insurance companies usually do
provide insurance; they take a premium and assume financial responsibility for
paying the bills. But the amount of risk sharing that is accomplished is limited
because the insurers charge premiums that vary, depending on the health of an
individual or a group of employees, and use their data and market power to
identify healthy people to cover and unhealthy people to exclude from coverage.
(The health care lawfs total ban on exclusions for pre-existing conditions will
begin in 2014.)
Many health insurance companies also impose barriers — like requiring prior
authorization for tests and treatments and denying payment for covered services,
which forces patients to appeal — to discourage patients from using the medical
services for which they are insured and to attempt to avoid paying for those
services. While these barriers can reduce waste by preventing unnecessary care,
they can also discourage patients from receiving care they need, as well as
impose administrative burdens on doctors and patients.
But thanks to the accountable care organizations provided for by the health
care reform act, a new system is on its way, one that will make insurance
companies unnecessary. Accountable care organizations will increase coordination
of patientfs care and shift the focus of medicine away from treating sickness
and toward keeping people healthy.
Because most physicians and hospitals today are paid on a fee-for-service
basis, medical care is organized around treating a specific episode of illness
rather than the whole patient. This system encourages overtreatment and leads to
mistakes and miscommunication when patients are sent between their primary care
doctors, specialists and hospitals. Indeed, under todayfs payment system,
investments in providing better care are doubly penalized. If a hospital hires a
nurse to follow up with patients after they are discharged in order to reduce
readmissions — for example, to help patients with diabetes improve blood sugar
control — it must pay for the nurse, which is typically not reimbursed by
insurance companies or Medicare, and it loses revenue by preventing the
readmission.
In contrast, accountable care organizations will typically be paid a fixed
amount per patient, along with bonuses for achieving quality targets. The
organizations will make money by keeping their patients healthy and out of the
hospital and by avoiding unnecessary tests, drugs and procedures. Thus, they
will actually have a financial incentive to hire that nurse for follow-ups.
In addition to providing better and more efficient care, A.C.O.fs will also
make health insurers superfluous. Because they will each be responsible for a
large group of patients (typically more than 15,000), they will pool the risk of
patients who have higher-than-average costs with those with lower costs. And
with the end of fee-for-service payments, insurance companies will no longer be
needed to handle complicated billing and claims processing, nor will they need
to be paid a fee for doing so. Payments can flow directly from an employer,
Medicare or Medicaid to the accountable care organizations. A.C.O.fs will
require enhanced information systems to track patients and figure out how to
deliver more effective care, but this analytic capacity will be directed at
improving health outcomes, not at imposing barriers to those seeking
treatment.
A.C.O.fs are not simply a return to the health maintenance organizations of
the 1990s. Although in both models patients are members of a provider network
with a specific group of doctors and hospitals, and both are paid primarily per
member rather than per procedure or test, there are big differences between
them. H.M.O.fs were often large national corporations far removed from their
members. In contrast, A.C.O.fs will consist of local health care providers
working as a team to take care of patients who are likely to be members for
years at a time. H.M.O.fs often cut costs not by keeping people healthy but by
denying patients services and by forcing doctors and hospitals to take lower
payments. In the 1990s, we lacked the information technology and proven models
of integrated care delivery that we have now. These advances will allow A.C.O.fs
to simultaneously improve health outcomes and reduce costs.
A final bonus of A.C.O.fs is that they will lead to a better form of
competition in health care markets. Today, consumers have to choose among
insurance plans with a bewildering array of copayments, deductibles and annual
out of pocket maximums — choices that few of us are any good at making. In the
A.C.O. model, consumers will choose a primary care physician and the team of
doctors and hospitals that are in the same group. Choosing a doctor and provider
group is a responsibility that consumers want to have and are likely to be much
better at.
A few health insurers see this asteroid coming. Wellpoint, for example,
bought the clinic operator CareMore for $800 million last summer to make the
transition into the A.C.O. business. Others, like the Optum unit of UnitedHealth
Group, are developing data analysis services to provide to future A.C.O.fs. If
they donft want to go the way of the dinosaurs, insurance companies will have to
find a new business to be in, one that is useful in the new world of coordinated
care.
Ezekiel J. Emanuel is a contributing opinion writer for The New York
Times. Jeffrey B. Liebman is a professor of public policy at Harvard. Both were
advisers in the Obama administration.
Copyright 2012 The New York
Times Company