Redefining Health Insurance in 2011?

Experts at PwC’s Health Research Institute weigh in on the top issues of 2011 that will take front and center for the health care industry.

And of course, the issues identified on the agenda center on increasing health care costs, the Patient Protection and Affordable Care Act and U.S. competitiveness. According to PwC analysts, the top 2011 issues for the health industry are:

1. Booming business in health information technology (HIT).

The HIT spending boom is driven by (1) federal requirements that hospitals and physicians meet at least stage one requirements for the meaningful use of electronic health records to qualify for federal stimulus funds in 2011;

(2) an aggressive timetable for massive upgrades in back-office infrastructure to comply with new medical coding requirements that will add five times the number of diagnosis and inpatient codes and require providers and payers to use the new HIPAA 5010 electronic transaction format, which will require more than 1,300 system modifications by January 2012; and

(3) final FDA rules that will require online reporting of adverse events related to medical devices, resulting in possible new tracking technology throughout the supply chain.

Stage one "meaningful use" requirements mean hospitals and physicians must be able to provide patients with an electronic copy of their health record upon request. But consumers are not asking.  Nearly half of consumers (49%) surveyed still call their doctor's office to request paper medical records.

While the policy goal of EHRs is to allow consumers to participate in shared medical decision-making, only 13% of consumers have ever been asked for input into what they would like to see in their electronic medical records or how they would like to use them.

2. Gearing up to redefine health insurance: From MLRs to insurance exchanges.

The health reform law now requires health plans to spend a minimum of 80 to 85 cents of every premium dollar on medical care and health care quality improvements, depending on the size of the plan. If health plans spend less than the minimum threshold, they must give customers a rebate beginning in 2012.

According to PwC, this would require an unprecedented level of actuarial precision for rate-setting, and insurers may opt to pay rebates rather than under price their products in the first year.  Many insurers already are contemplating new pricing and rebate scenarios for group plans.

At the same time, many employers are contemplating the advantages of employer-sponsored health coverage as health insurance exchanges come online. PwC anticipates a high level of state legislative activity as employers, health plans and states begin to work together in 2011 to define and develop health insurance exchanges.

3. ACOs: Is this the next big thing or not?

Accountable care organizations have created buzz in the industry that this is the next big thing for population health management. But 2011 could be a make-it-or-break-it year for ACOs depending on Congressional action. In anticipation of new performance payment incentives, health organizations are positioning themselves to participate in ACOs and share risks and rewards of keeping people healthier. 

While ACOs hold great promise for reduced costs and improved quality, the challenge will be keeping people in the ACO and engaging them to stay healthy, which could be the difference between profit and losses.

PwC’s research found significant demographic and geographic differences in consumers’ willingness to seek all their care within ACO-like organizations, indicating the need for consumer segmentation strategies.

4. Nowhere else to cost shift: Consumers could continue to reduce utilization.

Higher health insurance premiums, steeper deductibles and larger coinsurance mean consumers are spending more out of their own pockets for healthcare, and 60% of consumers surveyed by PwC expect to pay even more in the future. Yet cost shifting may have reached the end of the line as increased price sensitivity has caused consumers to cut back on utilization.

PwC forecasts a trickle down effect, starting with physicians and pharmaceutical companies as consumers reduce office visits and drug spending, followed by reduced sales of other medical products, fewer lab tests, imaging scans and other diagnostics. 

The danger lies in whether short-term cost avoidance could lead to more expensive conditions long term. 

5. M&A: Deals will bond the familiar and unfamiliar as organizations look to fill strategic gaps.

Mergers and acquisition activity among all the health care sectors are expected to continue to trend upward in 2011.  Within the pharmaceutical and life sciences sectors, PwC expects deals to focus on strategic mid-market transactions valued between $100 million to $500 million; international growth could yield larger transactions. 

Increased consolidation is expected among payers, physicians are aligning with hospitals, hospitals are merging with other hospitals and health systems, and recent deals reflect blurring of the lines between the payers and providers sectors.

Competition for acquisitions is likely to come from private equity funds investing in healthcare.  Though consumers are wary of the benefits of M&A, many seem open to new provider alliances. 

Seventy-eight percent of consumers said they would prefer to use a retail clinic partnered with a local hospital for primary care services versus only 22% who would prefer an independent company owned by a retail pharmacy.

6. Follow-me healthcare: Patients look to health organizations that are always "on."

The mobile health market is growing exponentially as health organizations use wireless and remote technology to interact with patients anytime, anywhere. To influence patient outcomes, organizations have to engage patients and understand how to connect with them. 

Health care organizations are spending tons of resources to produce online content, yet PwC found that consumers are three and a half times more likely to go to the media and third-party information service companies for information about treatments and conditions than to any other site, especially pharmaceutical company websites.

Only 11% of the people PwC surveyed said they would go to a pharmaceutical company for health information. 

Pharmaceutical companies have typically been removed from the end user of their product, but by understanding online preferences and adopting multi-channel strategies to meet consumers on their terms, pharmaceutical companies see an opportunity to significantly increase their visibility. 

This story has been reprinted with permission from Employee Benefit News.

For reprint and licensing requests for this article, click here.
Policy adminstration Digital distribution Core systems
MORE FROM DIGITAL INSURANCE