A new report by the Robert Wood Johnson Foundation found that in 2015, of the 42 insurance plans backed by health care providers, only 4 were profitable; some of the rest suffered severe losses, and 5 even went bankrupt.

        The study found that most insurers did not incorporate clinically integrated networks and accountable care organizations into their plans. Instead, they cut costs by reducing payments to hospitals and physicians.

        For new health plans to succeed, insurers must deliver higher-quality medical services at lower cost, but most insurers have made little encouraging progress on this front.

        So far, some health systems have already achieved dominant positions in the health insurance market, such as Kaiser Permanente, Geisinger and the University of Pittsburgh Medical Center (UPMC), but the report found that recently established health plans continue to run into all kinds of problems. Such an outcome is hardly surprising. Health systems that have purchased insurance plans, such as Banner Health and Catholic Health Initiatives, say their bottom lines have been breached.

        The report shows that, in order to "gain market strength and greater control over health care revenue" while responding to changes in ACA payment methods and other market trends, health systems have established 37 health insurance companies since 2010 and acquired another 5 insurers.

       As of September 2016, only 4 insurers had enrollment between 50,000 and 100,000, another 4 had enrollment between 25,000 and 50,000, and all other health plans had enrollment below 25,000. This means they cannot "achieve economies of scale by managing health plans, gain the ability to manage risk, or influence competition and pricing in local markets."

        To boost market competitiveness, the new health plans deliberately lowered insurance prices for groups and individuals and also paid hospitals and physicians below-market rates, rather than cutting costs through better care management. This is therefore not a sustainable approach.

        Organizations shifting toward value-based payment models aim to reduce costs while improving medical treatment and patient satisfaction. But for many providers, cutting costs is genuinely difficult. Opinions therefore remain divided on whether value-based initiatives are more effective than other approaches, and reaching a sound assessment will take more time.

        For these health plans, this may not even be the worst of it. In May, the House of Representatives narrowly passed the American Health Care Act, which includes cutting more than US$600 billion from the Medicaid budget over 10 years and changing the commercial insurance market. The commercial insurance market is already struggling, and no one knows whether these insurers will still receive government cost-sharing payments.

        Market uncertainty combined with a series of reform measures will expose insurers to greater risk. The report notes that these challenges may cause insurers to reconsider their "commitment to devoting additional capital, energy and attention to ensuring the success of their health plans. For these and other reasons, the prospects for success of these new health insurance plans are not bright."

Source: Healthcare DIVE