The Health Care Industry: Looking for Solid Ground in the Days Ahead

Sam Hanna, HealthInformatics@GW Program Director

The news surrounding the new president’s administration and the various health care reform proposals is creating uncertainty for the health care industry. While there’s no predicting what will happen next, especially after the House failed to pass the American Health Care Act (AHCA), there are some scenarios that are fairly certain. For example, the administration and many members of Congress either want to repeal without replacement; rebrand and fix; or repeal and replace the Affordable Care Act (ACA), the signature health reform legislation that passed under the Obama administration.

To gain some perspective on all of this, let’s think through the various scenarios in a way that puts each sector of the health care industry at the center. In other words, how do these proposals affect insurance companies and other payers; hospitals and other providers of health care; pharmaceutical companies, biotechnology and device companies; and new entrants? What are the implications for the payers — individual insurance companies, Medicaid and others?

The payer sector of the health care Industry faces tremendous headwinds in this debate around health reform. Generally speaking, the various scenarios outlined above will place increased cost and business pressure on insurance companies, Medicaid and others. Depending on the segment, the greatest impact will be on the individual and Medicaid markets. So in order to assess the magnitude of impact on payers, we should look at the known, as well as the unknown factors.

What Is Known

  • The individual marketplace will continue to become costly and risky as payers navigate higher costs of care, coupled with a demographic mix that is unfavorable.
  • The trend of High Deductible Health Plans will continue to increase. This continues to shift responsibility for health care costs to consumers.
  • Regulators and consumers will focus on cost, and it will become the primary talking point in many of the upcoming debates on health care reform. It will cloud other key aspects of reform such as access and quality.
  • Provider and payer collaboration will be key to maintaining and containing costs, while continuing to provide ample care to the population.
  • The continued availability of data and information that could be widely harnessed to create new solutions.
  • The Medicare Advantage market size may increase as time goes on.

What Is Uncertain

  • The change in the amount of risk taken by payers due to the various degrees of enrollment and the impact of costs on the employer/group segments. This is due to possible individual and Medicaid policy reforms.
  • The reduction of regulation could impact the overall market viability, thus creating tremendous opportunities for some, and high risk for others.
  • State response to high-risk pools and block grants in the new policies.
  • As new data and research analytics become common, new discoveries in pharmaceuticals might lead to cost implications for payers.
  • As providers tackle a potentially increased uncompensated care pool, payers may face certain pressures on discounts for commercial segments.

Given the conditions above, there are certain actions the payer community can take in order to develop resilience, as well as position for the new reality through some offensive moves. While the list is not all inclusive, these are some key steps:

  • Reduction in medical costs through continued investments in value-based care.
  • The growth and the real convergence of health care and financial services to provide more transparency. For example, Health Savings Accounts and multiple funding sources should be considered and integrated into the business model.
  • The patient/consumer experience is the key to success going forward. Payers should pursue initiatives to develop and enhance the customer experience, as well as provide methods for cost transparency.
  • Evaluate alliances and collaborative opportunities with other regional payers.
  • Evaluate potential acquisition opportunities in current business and new areas of growth.
  • Strategically convert fixed costs to variable costs to mitigate potential enrollment losses.
  • Medicare Advantage will continue to grow. Payers should position themselves to take advantage of this segment.
  • Develop a robust analytics engine and integrate into the payer business model. This will enable a better understanding of risks, market, care management and cost reduction. The successful payer will be able to create plans around the patient.
  • Expand into new geographical areas to spread the risk and increase market footprint.

The only thing certain for now is that the health care industry will face shifting ground in the days ahead. To be prepared, each sector of the industry must take steps to ensure it understands and can address the potential policy implications that come along with each proposal — be it repeal and replace or any of the other variations of health reform.