Don’t Throw Away Your Insurance Card Just Yet
I just can’t resist commenting on the January 30th commentary in The New York Times by Ezekiel Emanuel and Jeffrey Liebman on the demise of the Insurance industry by 2020 at the hands of an explosion of Accountable Care Organizations.
To test that premise, let’s go back to the role that insurance companies play in the health care market place. Insurance companies, otherwise known as payers, provide a financial safety net to consumers of health care services by aggregating different types of providers willing to provide health care services to consumers at a predetermined price. The insurance companies in turn contract with employers and individuals to provide that network for a cost to the employers or individuals ( usually the cost is shared). That cost, referred to as a premium, is determined by various factors that speak to how often the covered individual has used healthcare services in the past and based on that history how often the insurance company believes that the patient will access health services in the future, (usually the future is defined in annual increments) and by what the market place has priced the value of that service to be.
Said differently, the insurance company plays the role of a middleman between purchaser and supplier. In that role the insurance company also does something else, namely the aggregation of a lot of information about you and me regarding our utilization of health services and the consequent extrapolated assumptions about our lifestyle. Such data aquisition becomes a valuable commodity not easily or cheaply replicated by other organizations including self insured employers or ACOs.
What about ACOs? The Accountable Care Organization is typically either a provider sponsored or payer sponsored enterprise. In either case the ACO stakeholders include providers, patients or consumers and the payer/insurance company–in the absence of the insurance company the payer is the emloyer, the government, small business group purchasers, or the individual. The purpose of the ACO is to provide a framework for delivering the right service in the right setting, at the right time and for the most reasonable cost. The purpose is not to replace the payer, in fact the payer becomes a necessary strategic partner for ACOs with respect to information sharing, sharing of risk based on aggregation of defined populations via disease stratefication, etc.
The authors reference several benefits of an ACO which they assume will trigger the demise of insurance companies such as payment shifting from FFS to a fixed amount per patient; ACOs making money by keeping patients healthy; ACOs pooling patient acuity and consequent risk by capturing large groups of patients thus pooling risk; ACOs eliminating administrative costs such as those associated with claims billing and processing, and in general by eliminating unnecessary tests and procedures.
Those benefits can and should be realized by an ACO if everything goes according to plan. Those same benefits can also be realized by other types of health care redesign initiatives such as medical homes, or by payer sponsored networks of excellence or by Integrated delivery system service line initiatives or by any number of different approaches to providing improved coordinated care.
The bottom line is that ACOs will play a significant role in the movement to redefine how healthcare services are delivered, priced and paid for. They are a tool in the arsenal of healthcare reform. They also differ in character, scope and focus from enterprise to enterprise. Do they represent the successor to insurance companies as we know them today? I think not.