Below is an interesting chart from the PricewaterhouseCoopers’ Top Health Industry Issues of 2011 report, showing regional variation in the percentage of consumers who say they are willing to stay within an accountable care organization for all of their care needs. Nationwide, PWC found, 50% of consumers say they were willing to do so.
We keep talking about the healthcare market shifting toward “consumerism.” Well, here’s what consumers surveyed by PricewaterhouseCoopers had to say about healthcare and reform. From PWC’s annual Top Health Industry Issues report:
- Only half of consumers said they would stay within an ACO-like organization for all of their care.
- Less than half of consumers know what a health insurance exchange is.
- Nearly three-fourths of consumers said they would trade employer-sponsored insurance for higher pay.
- Currently, eighty-six percent of consumers do not access their medical records electronically.
- More than one-third of consumers said costs and waiting times would increase as a result of healthcare mergers.
- Consumers seek health information from media companies more than from government, healthcare companies, and consumer companies combined.
We all knew that the advent of health insurance exchanges through reform — along with the need for health plans to cut costs to maintain profit margins — would result in slashed individual and small group commissions to insurance brokers. Case in point: Aetna. An analysis by Carl McDonald of Citi suggests that Aetna has cut 2011 individual premiums by about 50% — a number the company wasn’t able to verify by presstime. The new individual commissions will apply nationwide (as opposed varying state by state as in the past) and will be based on volume as shown in the chart below from the Aetna individual commission schedule sheet:
As for small group, here’s a link to an interactive commission schedule from Aetna, allowing comparison of broker commissions by state for 2011 versus 2010. In some states, Aetna shifted to a commission structure based on number of employees (i.e., a per employee per month structure) from one based on a percentage of premiums. In other states, Aetna maintained the percentage of premium structure, but simply reduced the percentages. The company explains in an email:
The impact on brokers will vary from state to state. In states where we are moving to a PEPM model, the impact will depend on the amount of membership that a broker has with Aetna. In states where compensation will remain a percent of premium, we made a number of adjustments to remain competitive. In some states we have simply reduced the percent of premium brokers receive in order to offset medical inflation – for example in California the compensation rate decreased from 7% to 6.7% (4.3% decrease). In other states, we have kept the percent of premium the same for new business but lowered the compensation level for renewal business, again to offset medical inflation – NJ new business remained the same and renewal compensation was lowered from 4.5% to 4% (11% decrease).
(Editor’s Note: Post modified to add details of Aetna individual broker commissions).
Here’s the link to proposed HHS regulations released today, which would make health plan premium rate hikes of 10% or more in the individual and small group markets subject to regulatory review and require insurers to publicly justify and list the assumptions behind the increases. States would make the final call on whether a rate hike is “unreasonable,” unless the state doesn’t have an effective rate review process — in which case HHS would handle the review. HHS says that 43 states already have some form of rate review, and a “significant majority” are expected meet the standards of an effective review process. HHS and state officials at a press conference made clear the goal isn’t to supplant state authority, but rather to provide a backstop. A 10% hike isn’t necessarily “unreasonable,” but could be deemed so “if the actuarial assumptions underlying the increase were invalid or unreasonable.” Even in cases where states don’t have the regulatory authority to reject a rate hike, the thinking is the very process of making public and questioning the assumptions behind the increases will help moderate trends. The 10% national threshold is only a starting point and is expected to be made state-specific over time. In setting the 10% threshold, HHS found that “the majority of increases in the individual market exceeded 10% each year for the past three years.”
Here are the headlines from the December 2010 issue of ACO Market News:
- Thoughts on Aetna’s Acquisition of Medicity for $500 Million
- CMS Picks 8 States for Medical Home Demonstration
- ACOs, Medical Homes: Where Do Health Plans Fit in the Mix?
- Jury Still Out on Health Plans Medical Home Payment Models
- UnitedHealth CFO Says Provider Payment Models May Take Many Forms
- Humana to Buy 300+ Clinics with 650 Physicians
- Is UnitedHealth Interested in Acquiring Physician Practices
- WellPoint Has 10 Medical Home Pilots Touching 80,000 Members
- Humana Has 50,000 Commercial, Medicare Lives in Medical Homes
- 0.4% of U.S. Physician Practices Are Recognized as Medical Homes
Click here for a copy of today’s ruling, in which U.S. District Judge Henry Hudson in Virginia found that the mandate included in the healthcare reform law requiring virtually every American to purchase health insurance by 2014 or pay a penalty is unconstitutional. Given that a federal judge in Michigan ruled otherwise, the next stop for this dispute is the U.S. Supreme Court. Hudson also ruled that the mandate could be invalidated without finding the entire law unconstitutional.
The decision is already being described as a defeat for Obama that could further erode political support for reform. But the irony is thick. Obama, who didn’t want the mandate in the first place, had to be dragged on board. Yet Republican state attorneys general are the ones litigating against the mandate. Meanwhile, the health insurance industry — also an opponent of reform — favors the mandate to protect against adverse selection (i.e., only the sick buying insurance) and to ensure membership growth.
Assuming the going rate for healthcare information exchanges (e.g., Medicity, Axolotl) is eight to 10 times revenues, Carl McDonald of Citi posits that Availity could be worth about $1 billion. Aetna announced it was acquiring Medicity for a fat $500 million, while UnitedHealth bought Axolotl for a undisclosed sum. Humana owns 22% of Availity, which suggests its stake could be worth more than $200 million, McDonald says, or about 2% of Humana’s market cap.