Study paints dismal portrait of provider-backed health plans
Drawn by opportunity and/or a need for risk management, more than three dozen provider systems have established their own health plans over the past few years.
Unfortunately, according to a new study by the Robert Wood Johnson Foundation (RWJF), opportunities for the vast majority of these provider-sponsored plans haven’t exactly panned out, while risk has come in great abundance.
Of the 37 new health insurance companies formed and five health plans acquired by provider organizations since 2010, “only four were profitable in 2015, five have gone out of business, and two are in the process of being sold,” the report says.
The fundamental problem in most cases, RWJF concludes, is a lack of customers.
“Few new plans have gained enough enrollees to effectively manage risk, achieve economies of scale in plan administration, or have an impact on competition and price in their local markets,” the report says.
Current turmoil in Washington over a Republican-backed replacement plan for the Affordable Care is creating a “health plan environment [that] is not conducive to profitability for new provider-sponsored plans.”
“Given proposed cuts to Medicaid and changes to individual plans in the American Health Care Act, the future of the remaining provider-sponsored plans could face even greater uncertainty,” RWJF says.
Some organizations are hurting themselves by “pursuing their health plan strategy at the same time they are forming clinically integrated networks and Accountable Care Organizations (ACOs),” resulting in misaligned goals, the report said, while some undercut their own providers in a bid to compete.
“Many new provider-sponsored health plans set their prices lower for group and individual coverage to be competitive in their local markets and to gain market share,” RWJF says. “However, they do that mostly by paying their own providers below market rates, not by reducing utilization and costs through better care management. That is not a strategy that can be sustained for long.”
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