Demystifying the strategy, opportunities and obstacles driving healthcare payers
Below is an excerpt of the full interview conducted with Mark Jamilkowski. Download the PDF now for the full article.
Key Takeaways
The government, and CMS specifically, continues to set the pace in the market.
Effective value-based care draws upon specialized programs and a full team approach versus solely upon a MD-centric model. Achieving contract measures is not just an ask of the MD, it’s an ask of the office team.
- Approximately 50% of every healthcare dollar spent in the United States is actually funded by a government entity.
- With that, we are already a relatively socialized healthcare system where a lot of the hospitals, physicians and insurance companies are working directly or as agents of the government. And for the most part, it all boils up to and somehow gets controlled by CMS.
- The government has wanted to squeeze down the costs of the Medicare Advantage program. Ultimately, CMS doesn’t want to be in the Medicare Program at all. The whole idea of launching Part C and D was to retire Parts A and B. However, that effort has been delayed by a decade at least.
Understanding payer strategic priorities
- Large payors look at the portfolio of business they engage in as a mutual fund. Typical line of business performance:
- Large payors look at the portfolio of business they engage in as a mutual fund. Typical line of business performance:
- High performing: Medicare Advantage and medium-sized fully-insured groups
- Mediocre: Third-party administration, self-funded businesses and smaller groups.
- Low margin / money losing: Medicaid, really micro groups and individual plans.
- The reason a lot of insurance companies love Medicare Advantage is that the government, for all intents and purposes, is guaranteeing 5-8% after tax margins (10%-15% pre-tax). The economic leverage on that is tremendous.
- Large insurance companies do not place heavy strategic priority on Third-Party Administrators (“TPAs”). TPA margins are very thin - approaching 1% on fees generated. That being said, there is margin in selling self-funded employers stop-loss insurance. Large insurance companies have dedicated arms that generate healthy margins selling stop-loss and managing general underwriters.
- Areas of permanent concern for payer CEOs:
- New government regulations
- On-going consolidation in the provider market
- New highly expensive drugs
You have to put together your business model and show that you can actually achieve it, and then the government does a retrospective audit of your results to make sure that you did exactly what it is you said you were going to do.
