It couldn't happen to a more deserving industry; insurers.
Cap Times-Mike Ivey: Days numbered for middle men in health care: Health care insurance executives … are dealing with what is often termed “disintermediation” … it applies to the revolution taking place as private companies change how they buy health care. It means getting rid of the middle man.
Health insurers are the ultimate middle men. In the new world of health care economics, they are in danger of disintermediation for the first two functions.
Private companies are stampeding to self-insurance so they can control their own destiny as they manage their health care benefits. They don’t want to be in expensive insurance pools, hitched up to sluggish organizations that don’t aggressively manage care. Already, 93% of large corporations with more than 5000 employees are self-insured, and almost 60% of all covered workers are in self-insured plans. The employers are taking on the health care risks, so the insurers are out of the underwriting game. The health insurers do keep a piece of the game by offering stop-loss coverage, or reinsurance, to companies for big cases.
Private sector payers are fed up with the chaotic prices offered by providers. Procedures can vary in a region by 300% to 400%. The ranges on prices are just crazy … So the payers are demanding bundled prices, say $27,500 for a joint replacement. Further, they are setting caps on how much they will pay for a procedure — no more than $30,000 for a knee or hip replacement. Or, no more than $1500 for a colonoscopy. These are called reference based prices (RBP), and they are being adopted by larger payers Wellpoint just announced it will initiate caps on 900 procedures in 2014.
The next stage of payment reform is for those providers to post their bundled prices on a transparent web site. Get them right out there where everyone can see them, just like a real marketplace. The good news: it’s starting to happen.
Seeing a train, a new model of delivering care, coming down the tracks, some health plans are rapidly diversifying their businesses, including acquisitions of care providers. Such disintermediation is what happens when disruptive business models take root. The current economic model for the delivery of care in America is just plain busted.
And guess who broke it? The insurers themselves. So much for the greed factor. Bye bye.
Keep in mind, politicians like Dumb Ron Johnson, Paul Ryan and Sean Duffy want to not only preserve the dysfunctional system in place now, but loosen regulations even more on providers and insurers, making taxpayers cover preexisting conditions in costly high risk pools.