Flash back a few decades and health insurers looked a lot different. Once viewed as mere claims processors for employer-sponsored plans, health insurance companies in recent years have picked up a growing number of patients who receive benefits from public health programs, including Medicare and Medicaid. For some insurance companies, these taxpayer-funded programs have become their bread and butter.
The company that would form if Centene Corp. and WellCare Health Plans are combined as planned in a deal announced last week is just one example of how the health insurance business continues to change. Much of the attraction of buying WellCare is its Medicare Advantage experience.
The growing dependence on government programs has necessitated a change in how insurers operate. To manage these new and complex patients, they’ve made investments in capabilities like care coordination and programs to address social and environmental factors that affect a person’s health. And, prompted by the increasing cost of healthcare, they’ve had to learn to operate on tight budgets, often requiring them to form close relationships with clinicians under value-based payment arrangements.
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“No doubt … you’re seeing some type of slope of migration from commercial to government, though there are varying levels of the speed of that trend,” said Brandon Fryar, president of Albuquerque-based Presbyterian Health Plan, which has a Medicaid-heavy membership. “You have to do things lean and mean. You have to be creative. You have to be innovative. We start a lot of our value-based programs in the government business” before exporting them to the commercial side.
WELLCARE’S APPROACH TO PUBLIC, COMMERCIAL INSURANCE
WellCare Health Plans, as a potential merger partner of Centene Corp., brings a somewhat more diversified portfolio to the table with its proportionately greater foothold in Medicare Advantage plans.
In Medicare, WellCare’s success depends on having a strong network of providers that can help keep costs down and coordinate care effectively, said Michael Polen, WellCare’s executive vice president of Medicare. WellCare has always dealt exclusively with government-sponsored programs, but the Tampa, Fla.-based plan is growing rapidly: Medicaid membership rose 44% to 3.9 million in 2018 compared with the previous year, while Medicare Advantage membership increased 9.9% to 545,000.
Polen said WellCare invests heavily in helping providers become stronger performers under new value-based care models. Other investments center on identifying members with chronic diseases who could benefit from care management or supplemental programs that address socio-economic issues.
Being able to support Medicare and Medicaid members in a holistic way, and not just meeting a specific healthcare need, is vital to WellCare’s success, added Kelly Munson, executive vice president of Medicaid.
But the movement toward government-sponsored programs, which shows no signs of slowing, also comes with more risk. With the federal and state government as the biggest customer, insurers must build strong programs to monitor compliance with regulations. And for Medicare Advantage in particular, it requires expertise in risk-adjustment, as well as investments in quality programs to capture higher CMS star ratings.
The growing dependence among health insurers on government health programs reaches most corners of the insurance industry. While enrollment in commercial employer-sponsored plans has remained largely flat, seniors have been aging into Medicare rapidly and many are choosing Medicare Advantage, in which benefits are administered by private insurance companies. Meanwhile, many states’ adoption of Medicaid expansion under the Affordable Care Act and the tendency of states to contract with managed-care companies to provide those benefits, has boosted insurers’ Medicaid membership rolls.
The latest data from ratings agency A.M. Best published in August 2018 showed that U.S. health insurers’ Medicaid premiums grew to $224 billion in 2017—or 27% of total industry net premiums written—from $43.1 billion in 2007, or 10.2%. Medicare premiums grew to $202.7 billion in 2017, or 24.2% of total industry net premiums written, compared with $69.9 billion, or 16.6%. Advantage membership totaled 22.4 million as of January, an increase of nearly 7% in a year.
Some insurers that have long been characterized as commercial players now have trouble fitting that definition. Consider national Blues insurer Anthem: Its operating revenue from government health programs exceeded that of its commercial and specialty business for the first time in 2015 and has ever since, thanks to its growing Medicare membership. Aetna has experienced a similar shift, collecting more premiums from government programs than commercial customers for the first time in 2017.
UnitedHealth Group, meanwhile, has long captured more revenue from public programs but is growing even more dependent on government revenue. According to A.M. Best, 58.2% of UnitedHealthcare’s business mix was composed of government-sponsored programs, up from 47.2% in 2013.
Different members, different needs
Over the past five years, Worcester, Mass.-based insurer Fallon Health’s government program membership has ballooned to 50% from 20% of its total membership, driven by growth in Medicaid and dual-eligible Medicare Advantage programs, while commercial membership has hovered around the same mark. Its core operation systems work across any product line, but the services that each population needs are different and require investment in staffing and provider partnerships, said Michael Nickey, Fallon’s vice president of state programs.
Diversity among the plan’s Medicaid and dual-eligible members in some parts of Massachusetts requires an “incredible diversity of staff that mirrors the patient base” and membership materials in six languages. Many of Fallon’s Medicaid members in rural areas lack transportation, so the plan responded by operating a mobile health center with its accountable care organization partners to expand access.
And because addressing social needs that affect health must take place at the point of care, developing strong partnerships with doctors and hospitals is key, Nickey said. Fallon invested in telemedicine equipment that physicians would use to see dermatology patients in rural areas lacking specialists. It also bought two SUVs for a local senior agency to use to drive patients to medical appointments.
“Our providers have a very strong say in our Medicaid program and what goes on, so we’re really partnering incredibly closely to make decisions together, which is not something you would do, generally, in a commercial product,” he said.
Besides Anthem, other Blues Cross and Blue Shield companies, which have historically focused on commercial employer plans, are trying to capture more Medicare and Medicaid membership, but were late to game and are playing catch-up, said Doniella Pliss, a director at A.M. Best. Health Care Service Corp.’s business mix, for instance, was 31% government-sponsored in 2017, up from 10.7% in 2013, based on net premiums written, A.M. Best data shows. And recently, Blue Cross and Blue Shield of North Carolina won a contract to serve Medicaid members in the state.
“They have to build whole new capabilities because this is a very different clientele that they’re working with,” Pliss said, adding that insurers must also build systems to monitor compliance as they become more exposed to state and government regulations.
Kai Tsai, managing director at Navigant, said health plans like the Blues that focused in the past on administering benefits to self-funded plans were not really managing risk. But “taking on Medicare Advantage, it’s a completely different environment, highly regulatory, with different competencies you need to learn to be successful. There are levers that are super important like risk adjustment and quality programs. If you don’t do those well, you’re going to be challenged.
Fryar, president of the health system-run insurer Presbyterian Health Plan, said shifting away from fee-for-service payment toward value-based payment arrangements with clinicians is essential, because it creates incentives for physicians to meet cost and quality measures, which helps Presbyterian serve the population on a fixed, lean budget. (Medicare and Medicaid margins are much lower than commercial plan margins and payment rates are subject to the whims of federal and state governments.)
Presbyterian serves about 600,000 people; its Medicaid membership grew by a third overnight to 370,000 when it took on new members after UnitedHealthcare ended its contract with the state last year. New Mexico’s population is getting older and sicker and poverty rates are high, so the plan’s government-heavy membership isn’t likely to change. Fryar said 73% of Presbyterian’s payments to practitioners is structured under some sort of value-based model. He noted that for most other insurers around the country, that figure is closer to 30%.
Presbyterian has also put in place a clinical team that consults with providers in the state on how best to manage and treat patients with substance use disorders—an affliction prevalent among Medicaid members. Presbyterian has reduced systemwide opioid prescriptions by 16% and increased prescriptions for buprenorphine, a medication used to treat substance use disorders, by 50% in one year. It also tripled the number of prescriptions for naloxone, another such treatment.