Provider-led health plans in the age of ACA repeal

Dismantling of the Affordable Care Act (ACA) does not change the fact that insurance carriers have consolidated to create more financial pressure on medical providers as well as employers going forward, which will continue to impact the healthcare system both negatively and positively.

In order for the majority of medical providers to survive and thrive they will need to control patient steerage as well as find ways to increase financial margins.

One thing is for certain, standing on the sidelines may not be a good decision because insurance carriers will use their leverage to demand lower reimbursement rates and impose greater levels of managed care protocols.

Many health care providers (Hospital systems and Physician groups) have successfully increased steerage and financial margins over the last few years by developing and deploying Direct-to-Employer (DTE) arrangements with self-funded employers. The DTE program is controlled independently by the medical provider exclusive of any other third party arrangement with PPOs or managed care organizations. This strategy is established when a local medical provider organization contracts with a single employer or multiple employers to supply health care services to members through a contractual arrangement using clinical and financial data to better target and address health care needs of a population. The financial incentives include a gain sharing arrangement if an employer plan achieves a favorable variance to the budget and might (if desired) also include provider risk should the budget be exceeded. The DTE strategy incorporates plan designs that financially incent members to use the sponsoring local medical provider and adhere to referral protocols and pre-authorizations intended to address gaps in care and to manage appropriate utilization. Optimal attribution is ensured as these arrangements almost always require selection of a primary care physician (PCP) at point of enrollment.

A medical provider's payer mix and negotiated contracts with third party payers directly impact its financial stability. In most instances, commercial payments represent the greatest contribution to margin. The majority of commercial payments are secured through managed care organizations and PPO networks where the medical provider is a passive participant in the transaction. When the PPO network or managed care organization is the intermediary in securing commercial business the medical provider has little leverage in defining its relationship to the individual or employer purchasing health care coverage. In this system the medical provider is nothing more than a discounted medical delivery system.

A DTE strategy allows the sponsoring medical provider to control the delivery of care, optimize steerage to its panel of medical providers, build additional incremental income, and further establish their brand as a community asset. Additionally, the following represents key advantages:

• Securing direct reimbursement terms through gain sharing, plan management revenues, increased revenues through payment of certain disease management regimens of care, and reduction in outmigration of services through plan design and plan steerage.
• Directly having a voice in the development of protocols and procedures with regard to case management, regimens of care, referral authorizations, plan design parameters and use of nurse managers to effectively engage in population health management in order to positively impact employers' healthcare budget.
• Disintermediate commercial insurance payers in order to better negotiate current reimbursement contracts, or realign these agreements to optimize margin.

According to the 2016 Kaiser Family Foundation and Health Research & Education trust report, sixty-one percent of covered workers are in a plan that is completely or partially self-funded. The percentage of covered workers who are in a self-funded plan has increased over time from 49% in 2000 and 54% in 2005. In recent years, the percentage of covered workers enrolled in a self-funded plan has remained steady: 60% of covered workers were in such an arrangement in 2011; similar to 61% in 2016. For the medical provider the employer-sponsored segment of its commercial business is substantial. With the advent of changes that will occur with the repeal of the Accountable Care Act (ACA) there are increased uncertainties and escalating costs for employers that continue to offer a group health plan. Other key market forces indicate that:

• Employers are looking to establish direct relationships with medical providers to improve quality and reduce costs
• Employers are becoming more frustrated with the lack of accountability with their current health insurance vendors
• The fully-insured marketplace is moving steadily to self-funding alternatives
• There is very little risk management in the marketplace to manage and understand the key elements affecting healthcare quality and cost

Medical providers interested in developing a DTE plan need to understand what is required in order to deliver its medical delivery system. Many of the key requirements are provided below:

• A complete network of medical services through the medical provider in addition to wrap networks for out of area emergent care and out of area plan participants
• Administrative Systems – claims, customer service, fulfillment, compliance, data reporting, billing, etc.
• Stop Loss Insurance coverage that incorporates contract arrangements and care management results
• Integration of claims data, biometric, health risk assessment, and some EMR data
• Population health management, wellness programs, nurse coaching
• Educate and communicate with medical providers for gaps in care and clinical practice improvement
• Deployment of technology to stratify risk segments for properly targeting of potential large claimants and management of chronically ill members of the commercial population
• Actuarial validation of contractual arrangements
• Administration of plan designs
• Sales, marketing, branding, and broker distribution
• Financial distribution of gain share disbursements & reporting

It may not be enough to desire a DTE program. Medical providers first need to answer the following questions:

• Is the current composition of medical provider providers commercially viable?
• What other providers are needed to round out the current medical delivery system?
• Do we contract with a local, regional, or national PPO to provide a complete network of providers in our catchment area?
• What administrative infrastructure can we insource versus outsource?
• What initial capital is required to deploy a program based upon an insourced versus outsourced model?
• Who are the primary competing commercial payers and insurance producers in the market and what is their value proposition?
• What are the local purchasing patterns of employers and what key issues drive purchasing decisions?
• What analytics and administrative systems are needed to appeal to a self-funded employer?
• How do we actuarially price the impact of our medical provider in the commercial market?
• How do we define our value proposition with employers and insurance agents?
• How is the program going to be marketed locally?

Most of the requirements to deploy a DTE plan may already exist with an outsourced administrative firm. In reviewing an outsourced partner, medical providers will want to evaluate the following critical items:

• A full service administrative infrastructure that can provide claims processing, customer service, billing, COBRA/HIPAA compliance, agent commission tracking and payment, employee/employer and provider self-service applications, etc.
• Access to high quality stop loss insurance underwriters
• A proven track record of exceeding industry standards for financial, procedural, and processing accuracy
• A proven system of care management results that can be integrated with the medical provider
• A proven means to commercialize an medical provider DTE product
• A successful insurance agent distribution model that has worked over time
• A system to define a legitimate gain sharing model, tracking of results, and properly distributing excess funds to providers
• A reporting and analytical system that can stratify populations based upon health status, determine gaps in care, provide clinically based physician profiling, integrate claims and biometric data, produce both customized and ad-hoc reporting tools on a "real-time" basis, and produce end user reporting to quantify success

For all but the largest medical provider organizations, outsourcing may be the most cost efficient and timely means of deploying a DTE program. Capitalization of the needed infrastructure to support a DTE program could well exceed $2 million and take a year or longer to deploy, whereas outsourcing these same services could be 10% of the cost and take less than 6 months to deploy. This serves to lower the barriers of entry and allows the sponsoring medical provider to focus on the clinical business and not the business of administering a health plan, while at the same time reaping the medical revenue rewards. Opportunities abound for medical providers that can successfully align themselves with a partner who has a proven track record for deploying DTE programs.

Jack Hill is Executive Vice President of Accountable Care Solutions Group, LLC, based in Indianapolis, IN. He can be reached at Bret Petrick, CLU, ChFC, CSFS is the ACSG Distribution Partner, based in San Jose, CA. He can be reached at The company web site is

About the Authors:

Jack Hill – Executive Vice President – Accountable Care Solutions Group, LLC. Jack has over thirty years of experience in the medical practice management, HMO, CO-OP, insurance/reinsurance, self-funding, and employee benefits industries providing services to physicians, hospitals, academic medical centers, Union Funds, HMOs, insurance companies, Third Party Administrators, and other insurance related organizations. Jack's experience includes senior executive and ownership positions within the reinsurance, managed care, and employee benefits industries. Jack is the author of numerous publications for the employee benefits and healthcare industry, most notably "Electronic Data Interchange: The Physicians' Guide" written for the American Medical Association, and has published articles for Employee Benefit News, Accountable Care News, Becker's Healthcare, Employee Benefit Advisors, St. Anthony's Capitation Report, Health Insurance Underwriter, and the Self Insurer publications. Jack is a graduate of Taylor University and has completed postgraduate work at the Wharton School of Business and Ball State University.

Bret Petrick, CLU, ChFC, CSFS is a Distribution Partner with Accountable Care Solutions Group, LLC and has over twenty years of experience in the insurance and risk management industry providing services to closely held as well as public companies. He has been a featured speaker on several topics for groups most recently including the Northern California HR Association. Bret's experience includes senior executive as well as ownership positions in the employee benefits consulting industries. Bret has published articles for Accountable Care News and Becker's Healthcare. Bret is a graduate of San Jose State University as well as holding the following professional designations: Chartered Life Underwriter, Chartered Financial Consultant and Certified Self-Funding Specialist.

The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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