Provider-Sponsored Health Plans

By June 23, 2017 Commentary

There have been provider/health insurance organizations in the United States for a long time, going back to the original Group Health plans and Kaiser Permanente.  For the last 30 years there have been periodic efforts by more traditional private sector providers, including hospitals and physician groups, to establish health plans.  Partly this is driven by a desire to protect themselves from the supposed depredations of other health insurers and partly to protect and expand volumes and income.  A new report from the Robert Wood Johnson Foundation looks at what has happened to the latest generation of provider-sponsored health plans, which arose in the wake of the federal reform law.   (RWJ Report)   The report does an overall survey of these plans, examines regulatory filings and does an in-depth case study on three.  Since 2010, 37 health plans were started by health systems and they acquired five others.  Uhh, five have already gone out of business and only four were profitable in 2015.  About half sell only Medicare Advantage plans.  Four had total enrollment of between 50,000 and 100,000 and four more were between 25,000 and 50,000.  Generally they are too small to have much of an impact on prices and competition, although most markets sorely need new competitors.  To the extent that the new provider-owned plans have lower prices, they appear to be subsidizing that by the providers taking less reimbursement.  Among these plans several participated in the new exchange markets and most lost their shirts and have either withdrawn, or like the other remaining plans, are asking for very large price increases.  There is little evidence that these plans are managing utilization better or providing higher quality.  Personally, I see no reason to think provider-owned plans will be beneficial to the market.  They seem to mostly be formed by dominant health systems as a way to preserve and extend their market power.  I suspect if successful at all, they will lead to high insurance and health care prices.  If the owner has a certain market share in an area, ownership of a health plan should probably be forbidden or steps taken to prevent anti-competitive behavior.  Health systems generally have poor management supported only by market power which allows excess revenue and profit.  They need to be broken up to ensure real incentives to reduce cost and improve quality for consumers.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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