Is it the end of insurance companies as we know it?

Last updated on: March 4, 2014 at 4:33 pm by Jane the Actuary

Is it the end of insurance companies as we know it? 2014-03-04T16:33:00-06:00 Jane the Actuary

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That’s what Zeke Emmanuel says, in an article in The New Republic, which is itself a book excerpt. In Emmanuel’s world, the ACA is going to transform healthcare delivery and health insurance into a set of vertically-integrated healthcare providers. I promised my son I’d back crescent rolls with him (yeah, from a crescent roll tube), so I’m not going to go into too many details, but he basically envisions all healthcare providers becoming the equivalent to Kaiser Permanente, that is, staff-model HMOs.

Why would the ACA transform the health system, long after HMOs basically died? Emmanuel doesn’t really say. In my “VoucherCare” concept (yeah, I like to it periodically and don’t get any takers) I thought these sorts of organizations would be more viable once the link to employer healthcare is severed, because an employer needs to please employees spread throughout a metro region, but a prospective staff-model HMO coming out of a sole hospital and affiliated doctors has a much more limited draw, and could better succeed if it could market to individuals. Maybe Emmanuel presupposes the death of employer-sponsored healthcare, and this excerpt just doesn’t get into that — after all, he himself proposed a vouchercare system.

But maybe he just envisions increasing mandates from the government to compel people to buy HMO policies, or carrots and sticks in future rounds of subsidies (get the silver plan-based subsidy if the plan you elect meets various criteria, or the bronze-level otherwise)?

Anyway, I’ve never entirely been clear on why HMOs failed. Sure, the capitation model in which BCBS contracted with Independent Practice Associations — groups of doctors — was a bust because the IPAs really couldn’t be their own mini-insurance companies. And anytime you’d visit your doctor, he’d spend 5 minutes listening to you, and you’d leave with referrals to a dozen specialists. And there were hidden financial issues around fee agreements, and various lawsuits around exclusive networks.

But I would have liked to have seen more Kaisers. It seems viable — a large enough system that people don’t face the problem of not being able to find a specialist. And yet — there aren’t more Kaisers. I’m not a healthcare actuary. But there are reasons why there aren’t more Kaisers, more large staff-model, employee-doctor systems out there. What those reasons are I don’t fully understand, and it would be great if there were real changes in the way healthcare works that will make more Kaisers viable in the future. But Emmanuel sounds as if he thinks he can will more Kaisers into being.

Oh, and, in addition, from what I understand, the concept behind the Kaiser system is great, but it doesn’t actually produce better, cheaper, more efficient healthcare. I read about this a while back and maybe I’ll try to find the article again later. But, of course, if Kaiser’s premiums were exceptionally low, we’d know it, and there would be dozens of systems trying to copy Kaiser already.

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