Late last month, leaders at the Washington, D.C.-based Advisory Board, a division of the Minneapolis-based Optum, presented a webinar entitled “Health Plan Strategy in the COVID Era.” It was led by Christopher Kerns, vice president for executive insights at Advisory Board, who was joined by Rachel Sokol, managing director of the organization’s Health Plan Advisory Council, and Natalie Treat, senior consultant of the Health Plan Advisory Council. After an update on the COVID-19 pandemic’s evolution, the Advisory Board research leaders held a wide-ranging discussion of the operational and financial landscape facing health plans in the moment, one with major implications for healthcare providers.
Kerns began the May 21 webinar with an extensive review of the current COVID-19 infection and death statistics, noting that “We’re currently at one-and-a-half million nationwide, and holding steady with the number of cases in New York City. We are starting to trend a little bit closer to those original estimates; it really depends on the success that states are having with voluntary social distancing measures. We are overall seeing a downward slope globally, particularly in Europe. We are beginning to trend downward in the US, though it’s varying by state. The downward trend will be a lot less steep than the upward trend. Total deaths per million are holding relatively steady at the moment, but that percent will go up as overall cases go down. We are holding steady overall with a plateau with a slight decline.” He noted that all states except for Michigan, on that date, had announced some form of relaxation of confinement measures (and then last week, Michigan announced partial opening measures).
Kerns also spent some time discussing the concept of herd immunity, and the fact that the journey to herd immunity in the U.S. will be a very long one. He also updated listeners on the development of vaccines for the disease.
With regard to U.S. hospitals, Kerns reported that, “Anecdotally speaking, a number of different hospitals that have been cleared for reopening are starting to report to us anecdotally that the overall volumes are up, and they are starting to work through their backlog, and in many cases, they have come back faster than they would have expected. They are still having trouble with ‘top of funnel,’ making sure they’re getting patients in for their PCP screenings, and making sure they’re able to sustain their business through 2020, but most are not seeing an erosion of demand, as they’ve come back.”
Kerns then welcomed Sokol and Treat. “So, Rachel,” he said, “one of the things we’ve been hearing about is that as a result of the cancellations of elective procedures, which we know account for about 51 percent of hospitals’ overall revenue, that has created a surplus for health plans. So what are health plans doing with that surplus?”
Sokol said, “Health plans are trying to decide where they can provide value with it now, to members and purchasers. So plans are using that unexpected funding to support members and keep them healthy and safe. They’re providing incentives for members to use telehealth, to avert any out-of-pocket expenses; and making sure they’re providing payment parity to providers around telehealth. They’re loosening restrictions on telehealth where they can. Also, plans are really incentivizing them to use primary care services for the entirety of the year. So plans are waiving cost-sharing for any primary care services for Medicare Advantage, and we’re starting to see that for commercial as well. They’re removing any barrier to get members preventive care and screenings as much as they can.”
What’s more, Sokol said, “Members have been really supported by their members in social services, via grants to community organizations around food, shelter, and child care; plans have also been announcing over the past couple of weeks announcing that they’ve also been providing direct premium support to their members; they’re either delaying the requirement for premium payments or reducing the amount of premium owed. They are doing that, knowing that they would likely have to refund it through the medical loss ratio rebates at the end of the year, anyway. So if you’re a plan sitting on unexpected surplus, instead of waiting until early 2021, they’re giving it to purchasers and members now, when they need it the most.”
Further, she said, “Plans are following in the footsteps of CMS [the Centers for Medicare and Medicaid Services] and the administration, by offering different types of financial support to providers; it really does depend on the health plan, the lines of business that they’re in, and their relationship with the provider community, and how they think about mitigating financial risk to the health plan, in providing these funds.” For example, she noted, “Blue Cross of Michigan is using funds from previously budgeted value-based care programs to pay providers that they would have been using in 2021 anyway. They’re advancing payments to some providers that have lost revenue. Centene is connecting their providers with different loan-procurement agencies. Premera [Blue Cross of Washington state] is providing cash to providers in advance payments around quality.”
And she added, There’s a couple of reasons that plans are doing that—getting to a much more predictable medical-loss ratio—the share of premium revenue that plans have to spend on care. And really, just trying to prevent the collapse of their provider networks, particularly for the smaller physician groups. Also, the smaller, local, regional plans, are trying to keep their providers in business.”
Kerns asked Sokol about pressure on Capitol Hill to retain the relaxation of policies around telehealth, beyond the COVID-19 pandemic. “Are health plans feeling that pressure, too?” he asked.
“They’re definitely feeling pressure,” Sokol said. “I think the really big open question is, what happens in 2021, when individuals have potentially enjoyed their experience with telehealth, really prefer the virtual visits, what will plans do with regard to their incentives there? One factor will be what utilization looks like now. And, how are provider groups thinking about it? Are providers really invested in, and adaptable to, this new workflow? Or would they rather go back to a more in-person format?”
“Given the pressures now, what is the future of risk-based payment?” Kerns asked.
“That is a great question,” Sokol said. “There are a couple of ways we can look at it, depending on the type of risk group involved and the timeframe. If I’m talking about upside-only versus capitation—or what these types of contracts look like in the next six months. In the short term, plans are largely calling a mulligan on 2020, discounting the months connected to COVID, that kind of thing. Longer-term, does this accelerate or decelerate the movement towards broader risk-based payment? That depends on several factors. You could argue that the movement towards risk-based payment will provide for greater predictability of spending, for both plans and providers. In a time of so much unpredictability, would you consider entering a risk-based contract? The last element is around lines of business. Providers participating in MA are more likely to be interested in capitated payment. Historically, we haven’t seen a lot of emphasis on downside risk, because employers haven’t wanted narrow networks. But I would have to say we’ll see more risk-based payment on the table in the future. I would not see risk going higher in Medicaid, though.”
“And what’s changing among provider behaviors that might have been different a couple of months ago?” Kerns asked.
“I would say plans want very similar behaviors among their members and providers,” Sokol said. “Right now, we’re in an extreme time, and they really just want people to be safe and to help providers survive. In the future, they’re going to try to look for alignment with providers. And members have been taking calls from their plans and really looking more at their plans as a trusted source; they’ve been enjoying telehealth. Taking that closer relationship forward, if plans are really able to show that they’ve supported their members and providers, that could turn the conversation into the future.”
“Natalie, I’ve got one multi-billion-dollar question for you: what is going to happen to premiums next year?” Kerns said. “You’ve got to upgrade that to a trillion-dollar question in reality,” Treat said, with humor. “But it’s a very big question on everyone’s minds right now. And everyone’s heard all the recent earnings calls from the publicly traded plans that their margins are very healthy right now. The plans have saved money on care that wasn’t provided because of COVID-19. And that’s what they want their investors to see. The real question is what’s going to happen in the rest of 2020 and into 2021. And I unfortunately have to say that it is too soon to tell, because it depends on a bunch of interrelated factors, but it is important to understand all the things plans are trying to predict. Plans are trying to predict utilization for the rest of this year and into next year—for example, if we have a second wave of COVID” that compels very high rates of utilization of medical care. “Also, plans don’t know what will happen with their actual revenue—if a lot of members are going to shift across products, that hurts the law of large numbers for pricing, and a lot of purchasers will struggle to pay premiums.”
In addition, Treat said, “Plans also have to think about issues around the medical loss ratio. Also, stabilization; the House just added a risk-corridors amendment to the HEROES bill they just passed, and plans are paying attention to that. Also, plans might find that contract negotiations with providers are trickier in the future, if providers consolidate as a result of these pressures. All plans except self-funded plans, must spend a certain percentage of their revenues, 85 percent, on medical care; if you spend more than that, you have to rebate to purchasers. Plans want to hit that right on the mark; that’s why they’re providing provider support right now.” There remain a wealth of unknowns ahead for health plans as well as providers, she noted, and that is an important factor in all of this, going forward.
