The Cost of Care: “How high can premiums go?”
One of the less publicized requirements of the Accountable Care Act is the requirement of health plans to spend at least 80-85% of the premium dollar on medical services. Aside from the expected discussion of what qualifies as a medical expense, under the previously mentioned medical expense target, health plans that submit “excessive” rate increases will be required to justify any premium increases that are viewed excessive in light of the 80-85 percent MLR target, and will run the risk of State or federal government regulating or rolling back the premium increases.
So why am I blogging about this? What does this have to do with ACOs or redefining how health care is priced and delivered? Well, think about it. If as a health plan I am now required to spend 80 or 85 cents out of every dollar collected on “medical expenses”, then I have 20 to 15 cents to pay for everything else. Depending on my profit margins set by my board or others I have to:
a) operate very efficiently;
b) have a very cooperative relationship, (clinically and financially) with my providers;
c) have the tools necessary to properly risk profile my members, to ensure that the member receives the right services from the right practitioner without excessive cost, and
d) create a customer service environment which not only attracts new members to my plan, but retains those members year after year once I have them in the plan.
Getting all that accomplished requires decision support tools (such as a the risk assessment tool), closely alligned provider relationships, clinical and financial integration and appropriate broker, consumer and provider education.
Meanwhile the provider community is faced with increasing consumer and payer demand for efficiency, accountability for quality, and timely and convenient access to services at a reasonable price. All necessary – but difficult to achieve objectives – given the prevailing practice patterns. Programs like ACO development, innovative payment approaches like bundled payment, and “cross over” provider payer initiatives like the Consumer Operated and Oriented Program and the CMS Health Initiatives program, are some of the tools available to Providers by which to achieve healthcare delivery redesign.
Come and talk to us about how we can help you strategize, identify tools and create strategic partnership with providers, vendors and other health industry stakeholders to meet your financial and medical service provision goals and to apply for and implement the programs mentioned above. We always have opinions and suggestions, and more importantly considerable expertise in the areas discussed based on successful client interactions that have spanned all aspects of the healthcare industry.
Our approach to providing the healthcare industry with business and strategic solutions is guided by a belief that there is a solution for every problem encountered –some might even be out of the box and unconventional … but that’s the idea. Think about it.