Managed Care Matters

I'd been meaning to get to the Center for Studying Health System Change's annual Wall Street comes to Washington meeting for several years - finally made it and it has been well worth the trip from Conn.

There were two sessions, one devoted to health plans and the other to providers. I'll be reading thru my notes today and tomorrow to come up with a couple unified-theme posts. For today, we'll focus on what health plans are doing to prepare for health reform.

Panelists opined that there are two issues health plans have to address - dealing with the newly-insured and preparing for the possibility that the employer will not be the locus of control for health insurance purchasing. Christine Arnold noted that Cigna, Humana, and Coventry recently entered the individual market, with Aetna expanding its role while also acquiring Schaller Anderson, a veteran of the Medicaid world. UHC has been in the individual business for a while (post purchase of Golden Rule) and also has significant experience in the Medicaid and special needs populations (high cost, high risk Medicaid folks).

The individual market expansion is a hedge against McCain's plan becoming the law of the land. As I've noted, McCain wants to discard the employer-based health system and rely on the market to cover individuals (while doing nothing to prevent medical underwriting or exclusion of pre-existing conditions). As Arnold noted, the individual market won't cover many more folks unless there is a requirement for guaranteed issue and a significant penalty for those who refuse to enroll (otherwise they'll just wait till they get sick, then sign up).

For those who question whether an individual program will work, Bob Laszewski noted that the Feds already have experience with a large scale, community-rated guarantee issue voluntary benefit plan - Part D. In terms of enrollment, the plan has been extra-ordinarily successful (despite my prognostications to the contrary). In terms of financial rewards, the numbers are good for those sponsors that excluded many of the most popular drugs, and pretty dismal for the two biggest players - Humana and UHC. These companies cover all of the most popular drugs, so seniors interested in a drug plan found the plans that covered their drugs and then checked prices.

And promptly used their cards and that's why UHC and Humana are getting killed by Part D.

So what's the lesson here? Health plans need to understand the individual market, but they also need to remember that benefit design drives adverse selection, which drives higher loss costs. While selling individual policies may seem like good preparation for a possible McCain-type plan, examining the results of Part D may be more instructive.