Joseph Burns
Contributing Editor

Health plans are the pioneers of coordinated care, says Karen Ignagni, president and CEO of America’s Health Insurance Plans, and have led the way in health care through innovation. Therefore, they are not likely to go out of business; it’s more likely that they will continue to innovate, she says.

“To say that health insurers will go out of business by 2020 is totally inconsistent with what’s going on in the real world,” she says. “Since the 1990s, health plans have been the engine of change. All around the country, you can see the evidence of how health plans are innovating in any number of areas.

“Take patient-centered medical homes, for example. They are operating in every state and are becoming the building blocks for improving primary care. Or accountable care organizations (ACOs), in which health plans and their partners have produced terrific results by working collaboratively.

“Health plans are improving outcomes and controlling costs with bundled payments and value-based benefit design, both of which provide financial incentives so that physicians and patients’ actions are aligned with those of the delivery and payment systems.

“We also developed tiering, which helps patients to make appropriate choices that balance cost and quality, and we are delivering information to providers so that they can compare their practices with those of their peers to identify which patients will require the most resources,” she says.

Despite these and other advances, significant problems loom. First, there is strong competition driven by horizontal consolidation among hospitals and other providers in certain markets, Ignagni adds. “When large systems acquire smaller community hospitals, they generally increase the costs that plans must pay,” she says. Second is a similar problem: When hospitals acquire physician practices, the result again is higher prices. Both of these factors tend to increase the unit cost of care.

“At one time, we thought the country had a problem with utilization costs. It is no longer utilization alone that is driving up costs, but unit costs are a significant contributing factor,” she says. “The health policy community does not yet recognize the problem with unit costs because they don’t have access to the data that plans have. So, that is a trend that deserves more attention.”

Health plans can bring this problem to the public’s attention through increased price transparency, Ignagni says. “In Massachusetts, we’ve seen how reports by state Attorney General Martha Coakley have had an effect on health care costs,” she adds. “In the past two years, she has issued two reports showing that high cost is not associated necessarily with high quality. Those reports have led the policy community to demand transparency and finally to look beyond rate discussions to see the real drivers of costs.”

Coakley issued two reports that examined health care cost trends and drivers, one in March 2010 and one in June 2011.

This year, the market may be responding. In March, Harvard Pilgrim Health Care excluded the state’s highest-priced providers from what it calls its new focused network. Employers that use the network of more than 50 hospitals and 16,500 doctors will get a 10-percent saving.

“While Harvard Pilgrim is stressing the wide range of hospitals and medical services that are part of the new network, just as significant to many health care market watchers is who was excluded: many hospitals identified by the state attorney general’s office as the highest-priced. Among them are Massachusetts General and Brigham & Women’s hospitals in Boston and others owned by Partners, the state’s largest hospital and physicians group,” the Boston Globe reported.

Disruptive innovation

“The Coakley reports were a disruptive innovation,” Ignagni concludes. “For the first time, it seems like the light went on politically about this issue.”-

It is no longer utilization alone that is driving up costs, but unit costs are a significant contributing factor.

Health Plan 2020


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