Health Insurers Consolidate on Business; Fragment on Policy
A few days ago, this blog discussed the wave of consolidation among health insurers. The two main deals discussed in the business press are Anthem’s bid for CIGNA and the likely takeover of Humana by a bigger insurer which wants to beef up its Medicare Advantage and/or Medicaid managed care business.
While this consolidation plays out, the policy world was surprised to see the largest insurer, UnitedHealth Group (UNH), pull out of AHIP, the health plans’ trade association. Both parties soft-pedalled the exit of the association’s largest member.
I do not plan to speculate recklessly on the reasons for the exit. UNH noted that its “diversified portfolio” is not best served by membership in AHIP. UNH has two very distinct businesses, UnitedHealth Group and Optum. The former is a health insurer and the latter a vendor of big-data analytics. UNH consistently stresses that they are different businesses, to the degree that it sometimes verges on denying it is a health insurer at all.
Optum was a rolled up from a previous UNH subsidiary, Ingenix, which got in trouble with Andrew Cuomo when he was attorney-general of NY. (I wrote about it back in 2009.) Since then, it has bolted on a lot of businesses and retained a much higher independent profile than its predecessor. For years, I have thought that UnitedHealth Group and Optum might have to split because Optum’s customers might see a conflict of interest (like when Merck, a drug company, owned Medco, a pharmacy benefits manager). However, I have not seen an analysis of break-up value and Wall Street expects UNH to keep buying other companies.
My own view is that AHIP has been too supportive of Obamacare, not only for the public interest but even for its members’ interests. Sure, Obamacare mandates coverage, which should benefit insurers. However, the risk-reward profile of the Obamacare exchanges is pretty bad and will get worse in years to come. Insurers cannot expect to make money in them like they can in Medicare Advantage and Medicaid managed care.
Yet, AHIP submitted an amicus brief in favor of the administration in the King v. Burwell case, which would have cracked open the exchanges and demanded significant changes to Obamacare. AHIP appears to believe that Obamacare is fine as it is, and needs no changes (other than to repeal the health insurance tax, of course).
Maybe UNH thinks some changes are needed if it is to thrive? We will see.
Perhaps there would be an opportunity for United Health Group to structure a health insurance product for the faith based organizations that are looking for a true accommodation. I wonder if UHN might consider a defined contribution product in lieu of the defined benefit product that requires the objectionable benefits. A second option might be a Health Savings Account free of such benefit restrictions. A third option might be a health insurance product that provides the same exemptions that the Amish and other groups received. A fourth option might be a health care product that allows for Natural Family Planning in lieu of the objectionable requirements under ACA. While I have not sized the market, I understand it is at least 20% of the healthcare market. Two faith-based groups alone, from the data I have, constitute 155 million people. The market opportunity appears to be attractive.
But if they are illegal under the ACA?
Thank you. The place for you to post this comment is at http://healthblog.ncpathinktank.org/over-the-counter-contraceptives-better-than-a-mandate/.