The End of Health Insurance?

Writing in the January 30 New York Times, Zeke Emanuel and Jeffrey Lieberman predict that accountable care organizations will totally replace health insurance within the next eight years.

They credit the health care reform act with establishing this revolutionary new form of care, in which claim processing is unnecessary, and ACOs will perform the risk-pooling function of insurance. This is uninformed twaddle raised to breathtaking heights.

First of all, the affordable care act did not create accountable care organizations. They have been around, under different names such as capitated physician groups and independent practice associations, since the San Joaquin Foundation for Medical Care pioneered the concept in the 1950s. If the notion of capitated groups of physicians hasn’t supplanted health insurance over the past sixty years, it’s hard to understand how the affordable care act will suddenly cause that effect now.

What the ACA did do was authorize a variant of ACO as an adjunct to the fee-for-service Medicare program (and set up a largely ignored demonstration program for pediatric ACOs under Medicaid). Unlike the imaginary ACO that Emanuel and Lieberman conjure up, the Affordable Care Act version is based on fee for service payments, not capitation. While the Pioneer demo program will experiment with capitation, the vanilla ACO version authorized under health care reform requires that all healthcare providers continue to submit claims and receive fee payments from Medicare. How does this threaten health insurance?  It doesn’t touch the non-Medicare world at all, and it consciously avoids changing benefits or payment mechanisms in the nation’s largest health insurance scheme, Medicare itself.

Emanuel and Lieberman assume that ACOs will be paid on a per capita basis, and that the capitation will somehow flow from the ACO to individual practitioners. In practice, this process requires the enrollment and claim processing functions of an insurance company. From whom, if not insurance companies, will payment be received? They rightly note that about 60% of people who receive coverage from employers are actually insured by the employer, who contracts with an insurance company to perform the tasks of determining eligibility, paying claims, maintaining networks of health care providers (including ACOs of various descriptions), and providing insurance to protect the employer from unusually large claims. How would a Medicare program designed to reward efficiency have any impact on these employer programs?

They envision ACOs pooling risk for populations of 15,000 or more beneficiaries, as insurance companies do now. Any that do so will come under state insurance statues, and will either have to become insurance companies themselves, or contract with insurance companies as risk-bearing provider organizations. Someone, either the ACO or an upstream carrier, will have to carry the reserves and comply with state mandates.

With the advent of health insurance exchanges, it is probably that local provider organizations will be able to develop and market their own insurance plans in competition with the national giants. The exchanges will create a retail marketplace in which the advantages enjoyed by the large carriers in marketing wholesale to employers will be diluted. But make no mistake, these new entrants will still be insurance companies, and will still need to operate in compliance with both the statutory requirements and economic realities that govern the business of health insurance.