Today on Health in 2 Point 00, Jess and I are back from Europe and there is a LOT going on in health tech right now. In Episode 86, Jess asks me about United Health’s big moves, between acquiring PatientsLikeMe and their acquisition of DaVita Medical going through; integrated mental health company Quartet Health raising $60 million; Xealth closing a $14 million round (maybe now they’ll make Epic relevant); Collective Health’s $205 million raise led by SoftBank,; Vida’s $30 million round led by Teladoc (who knows why Teladoc didn’t just acquire Vida); European telehealth company Zava raising $32 million; and finally, Phreesia going IPO (wasn’t Livongo the one to watch?). —Matthew Holt
OptumCare Can Reach 70 Percent of the US Population
Who will be the first to take integrated health care delivery national?
A few years ago, the best bet might have been an established provider with a nationally compelling brand and a growing affiliate federation such as Cleveland Clinic or Mayo. Instead, Optum – just a decade ago three separate services largely focused on serving United’s health benefits business – has entered care delivery and — by a constant stream of acquisitions big and small — built up beachheads in a majority of markets and is – via ongoing big acquisitions, tuck-ins and greenfield expansions – laying the foundations of a national integrated ambulatory system.
Particularly in light of the latest rumors about the role of clinics in driving the value of a potential AET-CVS combination, it is timely to take a look at what Optum has put together, size its geographic reach and discuss some strategic implications.
State Insurance Exchange Blind Spots: Unknown Risks and Unintended Consequences
October 1st marks the first ever public exchange open enrollment season. This means some of the speculation around consumer awareness and understanding, enrollment/uptake, premiums, and payer participation (not to mention the technical readiness of the exchanges) will finally subside and give way to a clearer picture of the PPACA’s initial success in mandating individual health coverage.
Despite this approaching level of clarity, however, several very significant “blind-spots” will continue to persist, principally for the health insurance carriers that choose to participate by offering PPACA compliant plans in the exchange.
This is due to the law’s guaranteed issue mandate prohibiting health carriers from denying coverage based on preexisting conditions. As a result, the traditional enrollment process which consists of a comprehensive assessment of each applicant’s health status and risk cast against the backdrop of time-tested underwriting guidelines is completely thrown out.
What takes its place is an extremely limited data set (i.e., the member’s age, tobacco/smoking status, geographic region, and family size) from which carriers can determine pre-approved premiums and variability therein. To use an analogy, health insurance companies no longer have a “bouncer at the door” turning people away, or a sign reading No shirt, No shoes, No service at the entrance.
In other words, everyone, regardless of their risk profile, must now be welcomed in with open arms and with very limited risk-adjusted rates.
This wouldn’t necessarily be a problem if the enrolling population comprised a well understood risk pool representing a true cross-section of the population. The reality, however, is that a predominantly unknown and potentially unhealthy population will flood the individual health insurance marketplace in a two weeks just as most states quickly phase out their high-risk pre-existing condition pools and shift them into the exchanges.
Economics and Health Systems
Two of the largest healthcare systems in the Twin Cities have announced plans to merge – and if approved it will created the second largest hospital system in Minnesota in terms of revenue (Mayo Clinic is first).
For those non-Midwesterners – the geographical environs of the Twin Cities Metro area comprise a 50 mile circumference anchored by Minneapolis to the west and St. Paul to the east. At a high level, this move essentially links West (Park Nicollet) and East (HealthPartners) and according to news releases from both organizations, the combined health system will include more than 20,000 employees and 1,500 multispecialty physicians. However, there is a more compelling angle to this story.
On the surface the motivation for this move could be primarily economic: The average operating margin for a U.S. hospital is 2.5% — tough financial sledding in a disrupted and crowded market. Overly simplified, the economics of a hospital requires keeping beds full (aka “heads in beds”) … and as hospitals today strive to better align with physicians in order to get more than their fair share of referrals, a range of new business models and ways to engage consumers are emerging in the marketplace.
Continue reading…
The Medical Loss Report: Fiddling while Rome Burns
Today’s headline was “Millions Expected To Receive Insurance Rebates Totaling $1.3 Billion.”
The Kaiser Family Foundation estimates that 3.4 million people in the individual market will receive $426 million in consumer rebates because of the Affordable Care Act’s new MLR rules. In the small group market 4.9 million enrollees will see $377 million in rebates, and 7.5 million people will get $540 million in the large group market.
Wow!
But take a closer look at the report. Only 19% of those in the large group market will be getting a rebate and that rebate will average $72.31 per person. In the small group market 28% of those enrolled in these plans will get a rebate averaging $76.37. And, in the individual market 31% of consumers who have these plans will get a rebate averaging $126.81.
The Wall Street Journal, citing a Goldman analysis, is reporting that Aetna will be paying out $177 million in rebates. But Aetna has $11 billion in premium so that’s only a 1.6% rebate. UnitedHealth will be paying out $307 billion but that is only 1% of its $28.8 billion in premium. Wellpoint will pay out $94 million in rebates but that is only .28% of its premium for the year.
The average cost of employer-provided family health insurance is now about $13,000 per year. A family rebate of perhaps $200 will amount to only about 1.5% of premium for the relatively few people who will even get one.
