Smaller HMOs and insurers more likely to be affected

The headlines suggest that the worst is yet to come. When Eliot Spitzer, the New York attorney general, recently disclosed an investigation into alleged rigged insurance bids by Marsh & McLennan, investors reacted with anxiety. Initial reports focused on major brokers and insurers of commercial lines. But then news quickly surfaced that Spitzer was also going to look at the health insurance industry.

A move was foreshadowed in Spitzer's complaint against Marsh & McLennan. In it, he noted ominously that health is one of four major business lines overseen by a Marsh & McLennan unit that was charged with dealing in contingent commissions. The complaint also singled out the insurer's arrangement with an HO in Florida as an example.

"The insurance industry needs to take a long, hard look at itself," Spitzer declared. "If the practices identified in our suit are as widespread as they appear to be, then the industry's fundamental business model needs major corrective action and reform. There is simply no responsible argument for a system that rigs bids, stifles competition, and cheats customers." Pretty strong words.

Not surprisingly, shares in the biggest health insurers sold off quickly and stayed depressed for several days after Aetna and Cigna revealed they received subpoenas. Afterward, shares in Humana and UnitedHealth Group also took hits. Although lawsuits weren't filed, the health of health insurers was suddenly being questioned and no one seemed to have a prognosis.

The reason for the sell-off was two-fold. First, the scrutiny implies that brokerage fees could become apparent to customers. This would increase competition and, as a result, squeeze the companies.

Then, there's also the threat of huge fines and lost business, depending upon what an investigation may find. But as several Wall Street analysts point out, the biggest health insurers generally don't use brokers as go-betweens when dealing with large employers. For this reason, David Shove, a health care analyst at Prudential Equity Group, dismissed the episode as headline noise that shouldn't have any long-term effect.

"It's certainly fair to say that one can't anticipate everything that will happen," says Shellie Stoddard, a credit analyst at Standard & Poor's, which so far doesn't plan to take any ratings actions against the health insurers caught up in the investigation. "But we can compare the sales practices of the property and casualty sector to the health sector."

Such a comparison, she says, finds that large employers — or jumbo accounts that involve 10,000 or more employees — are usually buying administrative services and access to networks. Rather than brokers, consultants are usually retained as part of this process. So concern about a commissions scandal is much less likely.

If there is potential for danger it may lie in the lower echelons, such as the medium-sized market which is defined as employers that have fewer than 10,000 workers, or still smaller businesses. For instance, brokers are generally more widely used as go-betweens by companies with 500 or fewer workers on the payroll. "All the companies have reacted to this, but there's much more fragmentation in the smaller cases," says S&P's Stoddard. "And while it's true there are some volume-based incentives involving large insurers, the indication so far is that it's a relatively small percentage. It exists, but it's a very small piece of their overall business."

For instance, such commission business represents between 6 percent and 10 percent of premiums collected by large insurers with small cases, depending upon the insurer. In other words, the big health insurers have enough diversity to allay concerns about reliance on one source of income.

— Ed Silverman

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There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

Major health care players are determined to make health information exchanges (HIEs) work. The push toward value-based payment alone almost guarantees that HIEs will be tweaked, poked, prodded, and overhauled until they deliver on their promise. The goal: straight talk from and among tech systems.

They bring a different mindset. They’re willing to work in teams and focus on the sort of evidence-based medicine that can guide health care’s transformation into a system based on value. One question: How well will this new generation of data-driven MDs deal with patients?

The surge of new MS treatments have been for the relapsing-remitting form of the disease. There’s hope for sufferers of a different form of MS. By homing in on CD20-positive B cells, ocrelizumab is able to knock them out and other aberrant B cells circulating in the bloodstream.

A flood of tests have insurers ramping up prior authorization and utilization review. Information overload is a problem. As doctors struggle to keep up, health plans need to get ahead of the development of the technology in order to successfully manage genetic testing appropriately.

Having the data is one thing. Knowing how to use it is another. Applying its computational power to the data, a company called RowdMap puts providers into high-, medium-, and low-value buckets compared with peers in their markets, using specific benchmarks to show why outliers differ from the norm.
Competition among manufacturers, industry consolidation, and capitalization on me-too drugs are cranking up generic and branded drug prices. This increase has compelled PBMs, health plan sponsors, and retail pharmacies to find novel ways to turn a profit, often at the expense of the consumer.
The development of recombinant DNA and other technologies has added a new dimension to care. These medications have revolutionized the treatment of rheumatoid arthritis and many of the other 80 or so autoimmune diseases. But they can be budget busters and have a tricky side effect profile.

Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

More companies are self-insuring—and it’s not just large employers that are striking out on their own. The percentage of employers who fully self-insure increased by 44% in 1999 to 63% in 2015. Self-insurance may give employers more control over benefit packages, and stop-loss protects them against uncapped liability.