Purchasers and payers have lots of health worries this year. Not only will they have to take care of their enrollees, they will be nursing along their contracting carriers.
HMO earnings are flat, margins thin and stock prices sluggish. Pressure from Wall Street will likely translate into a 2% to 6% rise in premiums this year.
Of course, this poses a problem for employers with large healthcare expenditures, or purchasing alliances that market themselves as powerful cost-containment devices. They can exert their clout on their contracting health plans, but it could come back to haunt them. To please purchasers and payers, the carriers' main mitigation these days is to pare reimbursement to providers or even reduce their networks.
Meanwhile, they need to increase cash flow or cut expenses to please shareholders. Enrollees are suddenly faced with losing their physicians and having grievances with their health plans stalled due to personnel reductions.
Last year, the California Public Employees Retirement System, the nation's second-largest purchasing alliance, was flooded with more than 400 requests from members asking to change health plans prior to open enrollment because their primary-care physicians had been dropped. Near the end of the year, CalPERS began boxing the ears of its contracting health plans. It demanded they stop dropping providers prior to open enrollment, and threatened financial penalties to those that continue to do so.
In the end, financial pressures could lead to the start of a compromise between healthcare's biggest buyers and sellers. Instead of constantly demanding reduced premiums, there may be another annual guarantee: mandated levels of quality and patient outcomes. This could be used to gauge customer value and could spur something long in demand: a uniform, accurate health plan "report card."
Or health plans could find themselves cut out of the group purchaser picture altogether. Instead, direct contracting between businesses and providers-which has begun in Minnesota and has started to make forays into California-could come into vogue. The main argument behind direct contracting is that it removes the overhead and profit associated with a third-party health plan, and, therefore, drives costs down further. That might work on a large scale-at least until purchasers and providers begin to clash.