by Leslie Small
Jan 3, 2018 12:00pm - Fierce Healthcare
After the demise of two major insurer mergers and multiple Affordable Care Act repeal attempts, few could argue that 2017 wasn't an eventful year for the health insurance industry.
But 2018 is shaping up to be just as interesting—complete with more political wrangling, M&A intrigue and evidence that, despite all this uncertainty, insurers are pushing ahead and embracing innovation.
Read on for our predictions about what's in store for the industry in the coming months.
While the lines between payer, provider and pharmacy benefits manager have been blurring for a while now, CVSf $69 billion deal to purchase Aetna is undoubtedly a game-changer.
The move was likely motivated by a desire to compete with UnitedHealthfs thriving Optum subsidiary, which has its own PBM and an increasing presence in care delivery. So it stands to reason that other major insurers will try to strike deals of their own that mimic that scale and level of diversification.
Already, Humana has made a bid to purchase part of hospice- and home-health giant Kindred Healthcare. Therefs also been speculation that it is preparing to be acquired—possibly by Cigna, or in a deal that would mimic CVS-Aetna, Walmart or Walgreens.
Other insurers may also seek to build PBM capabilities, following in the footsteps of UnitedHealth, a combined CVS-Aetna and Anthem, which announced in October that it would team up with CVS to create an in-house PBM called IngenioRx.
Itfs certainly possible, however, that CVSf purchase of Aetna will not pass regulatory muster. While it would require less divestment than the ill-fated Anthem-Cigna and Aetna-Humana deals, the DOJfs decision to block another vertical deal—between AT&T and Time Warner—doesnft bode well for its chances.
With one less Republican senator—thanks to Alabamafs election of Democrat Doug Jones—the GOP likely wonft have the votes to pass a repeal bill without bipartisan support. Senate Majority Leader Mitch McConnell acknowledged as much before Congressf holiday recess, though he clarified the next day that he would be happy to pass an ACA repeal bill if there are enough votes for it.
McConnell also owes Sen. Susan Collins, R-Maine, as he had promised her hefd pass her reinsurance bill and a bill that would fund cost-sharing reduction payments this year. While Collins held up her end of the bargain—voting for the GOP tax bill—the ACA fixes didnft make it into the stopgap spending bill Congress passed on Dec. 21.
RELATED: Special Report—8 ways to fix the Affordable Care Act
Democrats, meanwhile, will also be motivated to reach across the aisle. The repeal of the individual mandate will likely put the ACA on more unstable footing, lending more urgency than ever to the task of shoring up the exchanges.
Both parties will also likely face pressure from the healthcare industry's biggest lobbying groups to get some sort of ACA fix passed. The push to do so, however, will be complicated by the full slate of legislative priorities Congress is facing in the new year, including reauthorizing funding for the Children's Health Insurance Program.
The individual mandate is now gone, and arguments about its effectiveness aside, that was one of the mechanisms that encouraged healthy people to buy insurance and stay covered. Even if the effect on coverage levels is minimal, the move is probably going to be enough to push risk-averse insurers to raise rates and even exit more rating areas in 2019.
There is also little indication that large insurers that have exited will come back anytime soon. After all, why invest resources in an unstable market when there are far more steady and lucrative markets like Medicare Advantage?
Adding to the policy uncertainty for the remaining insurers, there is no guarantee that Congress will authorize short-term funding for cost-sharing reduction payments. Many insurers raised their 2018 rates to account for the possibility of them disappearing—which turned out to be a wise move—so it stands to reason theyfd have to do the same for 2019.
Perhaps the best harbinger of whatfs to come came from a study conducted in November, which noted that the actions insurers and state regulators took to fill in gbare countiesh on the ACA exchanges are gtemporary and unsustainable without long-term federal action.h And with Republicans in charge, federal action to patch up the exchanges is unlikely.
Although it was overshadowed by all the repeal-and-replace drama, Trumpfs healthcare-focused executive order has huge implications for the industry. Put simply, it paves the way for expanded use of association health plans, short-term health plans and employer-based health reimbursement arrangements.
In 2018, wefre likely to see the relevant agencies start issuing rules to implement the order, which could dramatically change the individual market as we know it—and not for the better. Such rulemaking would also set the stage for a power struggle between the federal government and left-leaning states.
In fact, a coalition of healthcare organizations have urged state insurance commissioners to take steps to override any rules resulting from the executive order. For example, states could restore the three-month limit on short-term health plans if agencies unwind that Obama-era rule on the federal level.
Since only certain states are likely to heed these suggestions, the upshot of Trumpfs executive order will be to create a patchwork of individual market rules across the country. If that sounds strangely like what the individual insurance markets were like before the ACA, well, thatfs precisely the point.
On the one hand, the Trump administration clearly wants to scale back the federal governmentfs role in pushing payers and providers away from fee-for-service payment models. The surest sign was CMSf announcement late last year that it would end mandatory bundled payment models for hip fractures and cardiac care.
Some have worried that moving away from those mandatory programs would be a setback for the move to value-based payments, given that the feds play a powerful role in galvanizing the industry to change. In addition, the administration wants to take the Center for Medicare and Medicaid Innovation in a gnew directionh—one that CMS Administrator Seema Verma said would gmove away from the assumption that Washington can engineer a more efficient healthcare system from afar.h
But even if the federal government will take a lighter touch in the move from volume to value, itfs not likely that the private sector will take that as a cue to reverse course. On the payer side, especially, too many industry-leading companies have invested heavily in alternative payment models to turn back now. And they have compelling business reasons to keep investing in those models, given their potential to lower costs and improve care quality.