Opinion: GM's contract with Henry Ford should worry insurers

While it may be a few years before the healthcare industry can study the effects of Amazon, Berkshire Hathaway and JPMorgan Chase's joint healthcare venture on the industry, Bloomberg columnist Max Nisen claims key industry players should be more concerned by corporations potentially forgoing insurers to contract directly with providers.

General Motors on Aug. 6 announced a deal with Detroit-based Henry Ford Health System to offer a cheaper health insurance option to more than 24,000 GM employees and their families. The move follows in the footsteps of several other large employers that have struck similar deals with providers that cut out the insurer middleman, Mr. Nisen notes.

Firms like Boeing and the Walt Disney Co. have cut similar deals, allowing them to save money by eliminating insurer intermediaries and providing them with greater control and flexibility in how they manage their employees' healthcare costs.

The trend shows large-scale corporations are unhappy with the rising cost of insurance, Mr. Nisen wrote. Direct contracting allows businesses to offer cheaper care options that do not rely on massive deductibles. In GM's deal with Henry Ford, employees can expect to save $300 to $900 per month relative to the cheapest traditional insurance plan, Mr. Nisen states.

Mr. Nisen cites a recent National Business Group on Health survey in which an estimated 11 percent of companies surveyed said they plan to enter into some kind of direct contracting agreement in 2019.

"This is still very much a nascent trend, and one that has some clear limits. It requires a significant employee presence in a concentrated area in order to work. And insurers have a lot more experience in negotiating contracts with providers and keeping costs down, so there are bound to be bumps in the road. … But if, as seems likely, this movement builds into more of a steady stream, the industry may start hurting long before Amazon becomes a threat," Mr. Nisen wrote.

To access Mr. Nisen's full op-ed, click here.

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