Is the Health Insurance Industry Heading on a ‘Death March?’

May 24, 2016 - The health insurance industry has been undergoing tremendous reforms in recent years due to new federal regulations including the Affordable Care Act. Reimbursement between payers and providers have been changing as well. Coverage for the majority of Americans and the elimination of pre-existing conditions clauses have drastically changed the risk pool that the health insurance industry must manage.

The next presidential election will also make a huge impact on the health insurance industry and patient access to medical care. Dr. John Geyman, Professor Emeritus of Family Medicine at the University of Washington School of Medicine, spoke to HealthPayerIntelligence.com about the next presidential election and the future of the Affordable Care Act.

“We need to change our financing system in order to reform the delivery system,” Geyman began. “One possible outcome for the future is continuance with the ACA with some improvements as needed. We see Hillary Clinton now in the current campaign making some suggestions about how she would improve that.”

“The second possible outcome is if republicans gain control of the White House and Congress, they would repeal and replace the ACA. They have their GOP plan in the works, but not yet fully identified. Based on the history of what they’ve been doing over the years, it’s likely their plan will say let’s sell health insurance across state lines, have high-risk pools, let’s emphasize health savings accounts, and let the market do its thing.”

“The third alternative is to establish universal healthcare through a single-payer, publicly-financed system coupled with a private delivery system, which would have negotiated drug prices like the DA has done for 30 years. It would have global budgets for hospitals, nursing homes, and other facilities. It would have negotiated fees with doctors,” Geyman clarified.

Geyman explains that there are a number of areas where the financing of medical care could move over the coming years. Depending on which direction healthcare reform moves, the health insurance industry should be expecting a large number of changes to implement.

“My view is that the ACA’s provisions and the government bailed out the insurance industry with very generous subsidies as well as long-standing tax advantages to employers who provide insurance and risk quarter payment systems, which protected insurers from any losses,” Geyman continued. “This is a controversy right now because the federal government has not paid some of them.”

“The point is not how the insurance industry will continue to profit because they are leaving markets all over the place and hiking rates all over the place. They still have ways to discriminate against patients and avoid sicker people. There are some protections in the ACA against that like pre-existing conditions, but they’re getting around that.”

“Wall Street tells us that healthcare stocks are doing just great. However, more and more patients cannot afford healthcare. More and more patients delay or forego care, so who is this system for?”

Essentially, the entirety of the healthcare field may be in jeopardy if it continues to operate in a for-profit manner, says Geyman. This profit-driven environment could be leading to needless services and even harm to patients especially in a fee-for-service reimbursement structure.

“You have to realize that the insurance industry is almost entirely for profit,” he mentioned. “That wasn’t true when health insurance started way back in 1929. The first private insurers were in Dallas Texas and they were not for profit and did not do medical underwriting. They were based on public service.”

“Today, if they can’t make money, they get out of the market. I think UnitedHealthcare will have an impact on the whole industry and the others will follow suit. Some will leave individual markets and some will go into other markets. Unless they go continue to make what their shareholders want and their CEOs want, they are not about service.”

“I think they’re an unsustainable industry and I think they’re on a death march,” Geyman cautioned. “If it were not for multiple ways for government subsidies, they would not still be here. Indeed, 63 percent of the total healthcare bill is paid by the government these days. A lot of it is used to prop up the private insurance industry and to keep the drug industry going just fine without imports of drugs from other countries and without negotiating prices down.”

The ability to negotiate drug prices and medical costs is missing in the Affordable Care Act and most other healthcare legislation today, which is making out-of-pocket costs unsustainable for consumers as well as bringing more challenges to payers attempting to reign in rising healthcare spending.

“The ACA has virtually no price controls. It leaves the drug industry with full latitude to set its own prices. The same goes for hospitals and medical device manufacturers,” Geyman explained.

“We see even supposedly not-for-profit hospitals making more and more money and increasing their treasury,” he continued. “There are lots of ways of gaming the present system. Meanwhile, the federal government has given very generous subsidies through the ACA to insurers. I think the ACA is unsustainable. It gives much more to corporate stakeholders than it does to patients.”

“We’re going to find that we can’t keep up with it. One-third of all healthcare services now are either unnecessary or inappropriate and some are even harmful. Why is that? Because the financial incentives are to maximize income. Nowadays, almost two-thirds of American doctors are employed now instead of in small group practices. Their practices have been bought by expanding hospital systems.”

“They are under pressure to be more ‘productive,’ which means to upcode what they’ve been doing. There are more conflicts of interest among some physicians to do more than is necessary like back surgeries. It’s an uncontrolled marketplace that is not to the advantage of patients. The ACA doesn’t deal with that. The reason it doesn’t was the political compromises that went into the development of that bill.”

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