Alex Kacik: Hello and welcome back to Modern Healthcare's Beyond the Byline, where we offer a behind the scenes look into our reporting. I'm your host, Alex Kacik. I write about hospital operations for Modern Healthcare. It's earning season so I wanted to bring in insurance reporter Nona Tepper and we'll be talking about insurer's latest quarterly results and why some are investing in virtual-first plans. Thanks for joining me, Nona.
Nona Tepper: Thanks for having me, Alex.
Alex Kacik: Well, I wanted to hear your thoughts on the latest round of earnings. And earlier in the year, we saw some record profits for some of the big publicly-traded insurers, as patients put off care. That means I didn't have to spend as much. But it sounds like we're seeing that shift back a bit in the fourth quarter, as COVID-related care goes up, but as well as some of these payments are coming into play where States are looking to recoup some of the related savings that insurers have been seeing because utilization has dropped. So how are the year-end earnings trending?
Nona Tepper: Yeah. During the fourth quarter, you're right. A lot of profits dropped as COVID cases increased and care costs increased as well. It seems like a lot of insurers are investing in ways to try and meet their members where they're at in 2021, as they expect utilization to remain down, at least during the fourth quarter. So, we saw Humana partner with Dispatch Health, which seems like a pretty exciting partnership to offer 24/7 emergency care in the home for seniors. And then this week, we heard that Aetna was piloting a virtual-first plan with a national commercial customer. And we heard that Cigna has the opportunity to do that as well. So, it seems like it's a developing space.
Alex Kacik: Could you tell me more about these virtual-first plans? You know, what did they entail? You know, we've seen telehealth utilization go up so much during COVID, as folks have not gone down the traditional route of going in person for care, but what do these virtual-first plans entail?
Nona Tepper: Sure thing. Yeah. These plans are interesting because they require members to talk to their primary care doctor virtually before actually seeing them in person. Obviously, if you broke your leg, like please go to the emergency room, you'll be fine. But yeah, I think they appeal to companies or members who suffer from chronic conditions like diabetes, who don't necessarily need to be going into the hospital every four months, they could check their A1C with their primary care doctor telephonically. And they also appeal to maybe people who are younger, healthier, and looking to save money, as well as those who travel a lot.
Alex Kacik: Who are getting into these virtual-first plans? I know you alluded to a couple initially who are interested in this, but are there certain types of insurers that this is a particular strategy for? Who's been interested in this realm and what's their reasoning for getting into this space?
Nona Tepper: Good question. Yeah, it looks like regional insurers are actually pioneering the way here. And I think it's because they have dedicated provider networks. So it's easier for them to roll out. Also, they have a closer connection with some of their members, so it's easy for them to market it, I think. But it does seem like the bigger insurers are getting into play, where Harvard Pilgrim and Priority Health in Michigan started this. It seems like United, the nation's largest insurer, is piloting a project. Aetna's piloting a project and Cigna is even getting into it. I think Humana also has an offering as well. One notable and interesting cases, Kaiser Permanente, although they are a larger insurer because they are so locally-based, they've had a virtual-first plan, I think, for about a year now. And I think it's because they do have these local dedicated networks of providers. But we're even seeing startups like Oscar health getting into it, so it really does seem like the wave of the future.
Alex Kacik: Yeah. And I'm wondering what you can glean from these types of investments in terms of if this is a longer-term strategy, how they're measuring whether or not to continue investment here when they're looking at how many folks are using tele-health, what the reimbursement rates are, which can vary by state. I know one of your sources from that story you did on virtual-first plans saying that he expects insurers to stop paying the same rate for in-person and virtual care after the pandemic. So what do you think that means for the longterm outlook of these virtual-first plans in their insurers-related investment strategies?
Nona Tepper: Good question. Yeah. I think that insurers are right now reimbursing equally for virtual care, especially during the pandemic as consumers are wary about going into a hospital, but long-term, they may lower their reimbursement rates for providers who visit with their patients virtually first. And so, that would mean that it would lower the cost of covering care for their members and it could also increase access for those located in rural areas and increase their ability to offer more preventative services. Like if you're a diabetic, having the ability to connect with your primary care provider more often virtually could save costs in the long run for these insurers. So I think they view it as a cost saving measure and on the provider end, it could be good too. As the population ages and people need more care and more people need more care, obviously that presents a space constraint, so we might see fewer investments in real estate.
Alex Kacik: That's interesting. Yeah. I mean, this affects so many levels of health care where providers would potentially need less space or they maybe they just invest more in the ambulatory end or some of these urgent care clinics. It sounds like in general, the healthcare industry is a little wary and how much tele-health will take hold over the longterm. I think a lot will depend on states that reimburse telehealth at similar rates to in-person care. Some states have made those formal moves, where there's certain reimbursement parody laws to ensure that pay is more level, regardless of the setting. But I mean, there's so much that goes into insurer's earnings telehealth and those varying reimbursement rates is one. You have a lot of folks who have lost their jobs and their corresponding employer-sponsored insurance. I'm wondering, all these different factors that you've seen play out in the balance sheets that are affecting the earnings of these insurers.
Nona Tepper: I think insurers are feeling pretty optimistic. I think they're expecting maybe a softer Q1, but as vaccination ups some through maybe Q2 and definitely Q3, I think they're really expecting a rebound in the earnings. I think they're expecting utilization to increase, which is why premiums increased or so they say, year over year. And I think they might be expecting a greater acuity of cases for individuals who avoided the doctor in 2020, but probably did need to go see someone.
But I think we're going to see a lot of investments again, in virtual care and ways to reach members where they're at. And I think we're also going to see investments in the social determinants of health. I noticed recently that United invested 10 million in an affordable housing project in the South side of Chicago. And I thought that was pretty innovative and cool. And I think we're going to see a lot of that going forward, where they can really meet members where they're at and maybe provide housing as well as a clinic, as well as maybe a grocery store on site for individuals. So I think it could change our cities and it could change our healthcare system and it really could change everything as we know it. It's an exciting time in the space.
Alex Kacik: It's interesting to see how the strategies overlap between insurers and providers. A lot of times, there's push and pull between the two entities when you have things like prior authorization and these disputes in reimbursement rates and some out of network care. But I'm wondering if we'll see more of like these coordinated between these entities when it comes to things like affordable housing or trying to get folks to eat nutritiously. Yeah, I know CVS has some programs where they have personal shoppers of sorts where they'll have certain folks who have had trouble getting access to high quality food go to send someone to go grocery shopping with them. But have you seen overlap between the different sectors here and some of those goals align?
Nona Tepper: That's a good question. I think that I've definitely seen some initiatives overlap between providers and payers when it comes to bundled payments and value-based care. I think there's a lot of cool startups in the space now, like Karem health offering bundled payments. And I think insurers are definitely investing in, as you mentioned food pantry goal, fresh food access for their members, transportation for vaccination, of course, and affordable housing. I think anybody you talk to is going to say that they expect more overlap between the two going forward as, hopefully, healthcare gets more transparent and consumers demand more from their insurers and more from their providers.
Alex Kacik: I'm wondering what else you're gleaning from these reports. You know, you're going through these balance sheets that are always chock full of data, and there's different things that stand out to you outside of the just profits and losses and revenue. And I'm wondering how you sift through those because I imagine the presentation varies based on the company a little bit. And what high points are you looking or some little nuggets do you pull out that you think would make an interesting point in a story?
Nona Tepper: Good question. Some of these reports are so long. I think that I always am looking at the medical loss ratio, which basically means that the amount of medical costs that they spent per dollar per individual and relatedly, for insurers that are particularly active in the Medicaid-managed care space. I have been seeing a lot of risk sharing expenses recently as Medicaid members deferred care. So I've been looking for those expenses. And I've just also been looking, as we mentioned about investments they've made in the community. I think there's been a lot of that recently because no one wants to be seen profiting from the pandemic. And I think insurers are really looking at it as a way to balance their long-term bottom line by lowering the overall cost of care.
Alex Kacik: Elaborate on the risk-sharing payments where some states are asking for it sounds like clawbacks for what they're paying into the system, given that not as many folks are using it. So insurers are being hit with a bill toward the end of the year.
Nona Tepper: Yeah. It's a pretty complicated system, at least from my end. But basically, it means that for companies that are active in the Medicaid managed care space, their members deferred care in 2020. And so, states are climbing back those funds that were not spent on medical care. I think increasingly states are looking to clawback these funds and some, the way that they disperse the funds is pretty interesting. States like Virginia immediately gave the money back to the providers to help them stay afloat, but other states are putting it in into their general fund, which actually means they have to give some of the money back to the federal government because the federal government matches Medicaid funds for states. So it really shows, in a way, how desperate a state can be to balance their general fund and their bottom line, as well as the investment they want to make in their local provider community.
So, I think insurers across the spectrum are being hit with these. I know Molina has been hit with quite a few recently and they said they were surprised by it. United was hit with a few as well, although they said they expected it. And I think they're expecting these in 2021 as Medicaid redeterminations are paused and as consumers continue to defer care and as the economy just remains suppressed. So, I think that they're expecting them. I don't think there's that much they can do to avoid them. Maybe how they structure their contracts, if they qualify something as like quality assurance, as opposed to medical care. But I think it's just something that they need to expect. I did notice California was not in a risk-sharing agreement this year, which I thought was interesting. And I'm curious as to why.
Alex Kacik: I'm wondering what insurers are saying about the special enrollment period coming up, the Biden Administration wanted to extend the time period for folks to get signed up through the ACA exchanges. How are they factoring that into their outlook and will help folks get covered and how will affect them?
Nona Tepper: Yeah, I think larger national insurers are really expecting a bump from this special enrollment period. Molina said maybe something to the tune of 150 million to its bottom line, which is a ton of money. And then Centene said it actually could impact their Medicaid enrollment with consumers headed to the marketplace, looking to purchase coverage and then discovering, "Oh, hey, I qualify for Medicaid."
I think that is a big area. It doesn't seem like many are worried about adverse selection. Although I think, I don't see how they couldn't be, cause it does bring some in certainty into their risk pools. And I know that some insurers are investing more in their marketing to try and to alert consumers like, "Hey, you have this great opportunity to sign up for coverage. You might be eligible for increased subsidies. Log onto the exchange." So I think everybody's pretty excited about it.
Alex Kacik: All right Nona, well hey, thank you so much for breaking this down with me. Appreciate you taking the time and sharing your expertise.
Nona Tepper: Thanks Alex.
Alex Kacik: All right. Thank you all for listening. If you'd like to subscribe and support our work and the analysis that goes into this kind of business reporting that Modern Healthcare does, there's a link in the show notes. You can subscribe to Beyond the Byline on Spotify, Google Podcasts, Overcast, and other platforms. And you can stay connected with our work by following myself, Nona, and Modern Healthcare on Twitter and LinkedIn. We appreciate your support.
