The Future of Health Insurance Exchanges and Commercial Insurance

Recently,  I attended an AHA meeting focused on the implementation of health insurance exchanges and their implications for hospitals. The most provocative speaker was Paul Keckley, PH.D., a former executive with Vanderbilt Medical Center and now Executive Director of the Deloitte Center for Health Solutions. Paul is highly regarded for his insights about health care reform, as you can see from his bio.

Paul shared with us his insights regarding health insurance exchanges, but his comments about the overall health care environment were most provocative. If your reaction is like mine, some of these will seem hard to believe. But Paul and his colleagues have interviewed thousands of persons (business and health care leaders, patients, providers, etc.) to gather intelligence about market trends, and they have a solid reputation. Here are some of Paul’s most notable comments last week.

  • Based on Deloitte’s interviews of senior executives from the business sector (large and small), many large employers want to exit the commercial health insurance market. When asked about their plans to purchase health insurance for their employees after 2014, many indicated they intend to drop insurance for their workers once others lead the way. The emerging term for this is “fast second.” These companies don’t want to be the first to drop insurance coverage, but once their competitors do so they will quickly follow. Why? On average, a business that drops coverage and pays the fine instead will save $4,600 per employee.
  • With respect to insurance exchanges, Keckley and his colleagues have talked to most of the major national insurance carriers and learned they do not intend to participate in the exchanges for a while. The national carriers believe insurance exchanges will create an unfavorable environment for them, and most would gladly give up the individual policy market. (They earn substantially less money on individual policies than on group policies.)
  • The large national health insurance plans are in massive growth modes, working hard to monetize their proprietary data sources.
  • Every major health plan is purchasing physician practices in 2011, and they are likely to continue. According to the latest survey, 23% of US physicians are aligned with hospitals while only 6% are aligned with health insurance plans. Insurance plans are targeting physicians in concentrated metropolitan areas, where they can move more rapidly to a capitated model.
  • As for hospitals, the Deloitte Center predicts that exchange-based reimbursement will continue to erode payments. Deloitte projects rates in the exchanges will be roughly 90% of Medicare payments.
  • Keckley believes one in four US hospitals will be insolvent within two years.
  • Turning to politics, Keckley and his colleagues at Deloitte expect the Joint Select Committee to offer up $1.5 Trillion in savings this fall, but they expect Congress to reject the plan in favor of automatic cuts.
  • While Deloitte does not hold itself out to be a professional polling firm, Keckley and his colleagues believe Obama would be re-elected if the vote were held today.
  • Here’s the one that we all found most shocking: Keckley believes the US health care marketplace will become so unstable and frustrating to consumers after 2014 that one of the nominees for President in 2016 will champion a Swiss-style single payer system for American health care. Apparently the consumer satisfaction and budget stability in Switzerland make the Swiss system one of the most attractive to US policy advisors. (See what I meant earlier?? I find this one hard to believe. But, I can easily see the US system breaking down after 2014 to the point Americans are fed up and ready for a different approach.)

I thought you might enjoy learning the insights of someone who is watching health care reform every day—they’re stimulating, to say the least!