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FEATURES


TOP PREDICTIONS FOR HEALTH INSURERS, EMPLOYERS IN THE NEW YEAR


EXPERTS’ TOP PREDICTIONS INDICATE THAT INSURERS AND EMPLOYERS WILL FACE HIGH
COSTS AND OTHER CHALLENGES BUT WILL ALSO FIND OPPORTUNITIES IN PLACES LIKE
SPECIALTY PHARMACY.

Source: Getty Images

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January 03, 2023 - Health insurers and employers face a challenging landscape in
2023, but these obstacles are accompanied by opportunities for growth, according
to experts’ top predictions.

Three years after the first wave of the coronavirus pandemic hit the US, the
American healthcare system is still feeling the effects. In 2023, the
anticipated unwinding of the public health emergency will send shockwaves
through the health insurance industry, impacting health insurers and employers
alike.

Out-of-control healthcare prices will continue to pressure employers and health
insurers to take cost-cutting measures. They will double down on practices that
have proven to lower costs while maintaining high quality of care.



In particular, payers will target pharmaceutical price increases and specialty
pharmacy costs with outcomes-based contracts. Additionally, they will defend
Medicare Advantage plans’ efficacy in improving quality and costs for the senior
population.

Experts from Blue Cross Blue Shield Association (BCBSA), Business Group on
Health, Humana, and Manatt Health broke down these and other trends that payers
should anticipate in 2023 with HealthPayerIntelligence.


MEDICARE ADVANTAGE PLANS WILL GROW, RESPOND TO PRICE INCREASES

The 2022 plan year proved that seniors are not immune to healthcare
affordability challenges. As early in the year as February 2022, researchers
found that Medicare beneficiaries were struggling to afford care. At the time,
one in five seniors said that covering healthcare costs was “very difficult” and
a fifth of seniors reported that half of their monthly income went toward
healthcare.



Alex Ding, MD, associate vice president of physician strategy and medical
affairs at Humana

Source: Humana

In 2023, seniors will continue to feel that cost pressure, projected Alex Ding,
MD, associate vice president of physician strategy and medical affairs at
Humana. As the pressure rises, more of this population will turn to Medicare
Advantage plans.

“A macro trend in Medicare is that we will continue to see more Americans moving
to Medicare Advantage benefits over original Medicare,” Ding said.

Medicare Advantage plans’ supplemental benefits, particularly cash benefits,
will become even more valuable and attractive to members. The 2023 Medicare open
enrollment data reinforced Ding’s point.

In the last five years, the average number of Medicare Advantage plans available
to beneficiaries has more than doubled from an average of 20 health plans per
beneficiary in 2018 to 43 plans per beneficiary in 2023. Major payers including
Aetna, UnitedHealthcare, and Elevance Health offered benefits cards that
Medicare beneficiaries could use to cover transportation, groceries, and other
needs.

Medicare Advantage plans came under scrutiny in 2022 due to overcharging—which
payers have decried—and marketing practices. Ding indicated that these
developments did not nullify the positive outcomes that Medicare Advantage plans
have demonstrated.

Sean Robbins, executive vice president of external affairs for BCBSA, concurred
and pointed to the plans’ high member satisfaction.

“Blue Cross and Blue Shield companies are committed to strengthening the
successful program and we will continue to work with policymakers to ensure MA
agents, brokers and any advertisements put consumers first,” Robbins told
HealthPayerIntelligence.

Sean Robbins, executive vice president of external affairs for BCBSA

Source: Blue Cross Blue Shield Association


CHRONIC DISEASE, PRICE INCREASES WILL FUEL PAYERS’ VALUE-BASED CARE EFFORTS

While cost increases are a resounding theme across experts’ expectations, it is
certainly not the only challenge that payers anticipate. Ding pointed out that
chronic disease care is becoming more common and more complex.

Policy and healthcare leaders also attest that chronic disease care is
expensive. The Consolidated Appropriations Act of 2023 allotted over $1 billion
in spending on chronic disease prevention and health promotion. The Centers for
Disease Control and Prevention has stated that 90 percent of annual healthcare
spending goes toward patients with chronic diseases.

Moreover, more individuals are living with multiple chronic diseases, a health
status that can negatively impact care complexity. Between 2020 and 2021, the
share of Americans with multiple chronic conditions rose five percent from 9.1
percent to 9.6 percent.

Payers and providers alike are feeling the pressure from an increasing
prevalence of complex conditions. Ding expected that this would drive
stakeholders toward value-based care agreements.

“Studies have shown—our data included—that in value-based care arrangements,
there's greater financial stability because there is a regular revenue stream
that isn't volume dependent. There's greater reliability and stability of
revenue. And so the practice is more readily available to budget, to invest, and
to be able to fund their operations,” Ding said.

“We hope as practices recognize that positive aspect of value-based care that,
in an economic downturn, they will take another look and take a stronger
consideration of transitioning to a value-based care practice.”

Robbins agreed that financial pressures would drive higher adoption of
value-based care in 2023. However, he added that payers’ and providers’
definitions of value-based care will determine the industry’s progress.

“Sometimes what people call ‘value-based’ is really just a bonus program to do
what should already be done versus true value-based where you're sharing risk
between the provider and the payer for the outcome of that individual,” Robbins
explained.

“What I mean by ‘value-based care’ is not upside only. It's a true
up-and-downside risk-sharing agreement between payers and providers. The extent
to which we can accelerate that in the marketplace, patient outcomes will be
better.”

As providers gravitate toward value-based care, payers will play a significant
role in supporting their advancement from low-risk value-based care agreements
to higher risk contracts.

“Our goal is to come in and help a provider at the stage that they're at and
really assess what they're ready for and not throw them into the deep end, but
really to kind of provide them the tools, the data, the resources, the
assistance, the guidance that's needed to move along that continuum as they're
ready to do so,” Ding explained.

Payers can offer financial and technical support to provider partners in order
to fuel their transition to value-based care, research on value-based care’s
progress in Medicare Advantage has indicated. Payers can also advocate for
primary care transformation by instituting strong metrics and emphasizing
patient-centered care.

Ding also pointed to the positive evidence driving the shift into value-based
care. Humana’s data showed, along with other research, that Medicare Advantage
value-based care programs can decrease low-value care spending, hospital stays,
emergency department admissions, readmissions, and acute care.


COVID-19, TECHNOLOGY WILL INFLUENCE PAYER DEALMAKING

Health insurers’ merger and acquisition decisions will be shaped by both a
departure from past trends and the emergence of new influences from the present
in 2023, according to Robert Belfort, partner at Manatt Health.

“A number of years ago it became apparent that the megamergers of the major
health insurers were pretty much at the end of that process for antitrust
reasons, and that it wasn't going to be possible, at least under the current
interpretation of the antitrust laws for those types of consolidations to
continue,” Belfort told HealthPayerIntelligence.

In lieu of megamergers, several different types of transactions arose in recent
years that will continue to characterize deals in 2023.

First, health insurers will try to use acquisitions and mergers to fortify
product lines that their companies might not be as adept at offering. They might
also acquire smaller, niche health plans to improve existing service lines.

Robert Belfort, partner at Manatt Health

Source: Manatt Health

As an example, Belfort referenced small Medicare Advantage plans that received
venture capital money. Insurtech companies that have started Medicare Advantage
plans raked in venture capital funding in recent years, driving many to go
public.

However, these small plans could not stay small for long. The nature of the
health insurance industry would not allow it.

“Fundamentally, health insurance is a business that requires scale, so you don't
get a lot of small players that remain in the market for a long time,” Belfort
explained.

“They build up a certain amount of capacity of enrollment or technology or
whatever it is that is appealing a license or contracts. And then they end up
being acquired by a bigger platform that can reduce the administrative costs of
running the plan because they're spreading those costs over a much larger
enrollment base.”

Additionally, acquisitions of and mergers among small Medicare Advantage health
plans will continue into 2023, but they will not form the bulk of the dealmaking
in the new year. Payers are more likely to seek out providers or vendors to
acquire, instead of horizontal mergers.

Third, technology vendor acquisitions will dominate the payer dealmaking
landscape. These deals may emerge from existing service arrangements between
payers and vendors or providers which evolve into an acquisition.

Belfort anticipated that acquisitions related to improving telehealth options—or
“tech-enabled care management models,” as Belfort called them—for the senior
population would be paramount. Additionally, payers will continue to acquire
technologies that collect and analyze data. They may also seek to acquire
digital solutions that bridge traditional medical services and innovative care
management or social determinants of health supports.

Fourth, provider acquisitions will be prevalent. Payers will use these
acquisitions to expand their services and become well-rounded in their
offerings, instating or reinforcing their home healthcare products, expanding
medical services, and overall moving toward vertical integration.

“When I started practicing law many years ago, there were staff model HMOs where
the physicians were basically working for the health insurer, and then the
market really moved away from that model and moved toward broad networks of
loosely-connected physicians,” Belfort shared.

“Some of the limitations of that model from a cost control, and quality
monitoring standpoint have become apparent.”

Fifth, Belfort anticipated that payers would use mergers and acquisitions to
inflate their identities as convenient and flexible sources of coverage that
offer care when and where consumers want it. This identity formed due to the
telehealth boom during the initial waves of the coronavirus pandemic.

However, the flurry of telehealth utilization that the pandemic prompted was
largely attributable to the public health emergency flexibilities. Payers have
been advocating since 2020 for Congress to solidify telehealth flexibilities so
that they will continue even after the public emergency ends. So far, the House
of Representatives has extended telehealth flexibilities to the end of 2024, but
the bill has been awaiting the Senate’s attention since late July 2022.

If the public health emergency ends without policymakers making telehealth
flexibilities permanent, then it could influence payers’ telehealth-driven
models and, as a result, payers’ dealmaking decisions.

Lastly, Belfort added that greater adoption of Medicaid expansion could also
impact payers’ deals. If Medicaid expansion is more widely accepted, Medicaid
managed care will become more attractive. But some states remain sharply divided
over the issue.


PAYER STRATEGIES: FOCUS ON SPECIALTY PHARMACIES, OUTCOMES-BASED CONTRACTS

Some trends in 2023 were clear, like the overall upward trajectory in healthcare
spending and healthcare costs. But other trends have yet to solidify. One
question on Robbins’s mind was: how will drug list prices respond to the
post-COVID—or nearly post-COVID—era? He projected that list prices will return
to pre-COVID levels.

The drug price trend from 2022 was heading in that direction. More than 1,200
drug products saw price hikes that outpaced inflation between July 2021 and July
2022, with an average increase of 31.6 percent, according to the Department of
Health and Human Services (HHS). Some pharmaceutical companies increased a
drug’s list price by over 500 percent. The number of price increases in January
2022 set the record on increases in that month since before 2016.

Robbins predicted that payers will respond to these increases by aiming their
cost control efforts at specialty pharmacies.

“A tremendous amount of the cost growth exists today in specialty pharmacy and
specialty medications,” Robbins said. “There’s a real market opportunity there.
I'd be surprised in 2023 if we don't see payers make bold and aggressive moves
to try to figure out how exactly that will work in the market.”

It is a particularly challenging space in which to control costs. Specialty
pharmacies deliver life-saving medications. But the price tags for these
therapies often amount to millions of dollars.

Outcomes-based agreements will be a dominant strategy among payers as they
intensify efforts in this area of the industry.

“The fee-for-service, ‘use it and bill it’ approach is simply not sustainable
when a drug is $1 million, $2 million, or more per course of treatment. And so
how that will work and how that builds in the marketplace is going to be—not
just a 2023 trend, but a 2023 and forward trend,” Robbins said.

January and July 2022 saw the highest number of drug price increases in seven
years.

Source: "Price Increases for Prescription Drugs, 2016-2022" by ASPE, 2022
(https://aspe.hhs.gov/reports/prescription-drug-price-increases).


LABOR SHORTAGES WILL FUEL EMPLOYER AFFORDABILITY CHALLENGES

Affordability is the top concern on most employers’ minds, a concern they share
with healthcare leaders across the industry. The challenge of rising healthcare
prices is not new, but the pressures of 2023 are adding a layer of urgency,
Ellen Kelsay, president and chief executive officer of Business Group on Health,
told HealthPayerIntelligence.

Ellen Kelsay, president and chief executive officer of Business Group on Health

Source: Business Group on Health

“Certainly, healthcare spending trends have been a long-time concern for
employers but, as we look to the year ahead, affordability is really of
significant concern because of the foundational baseline already being costly to
begin with and we're seeing the highest trends that we've ever seen in recent
years forecasted for 2023 and 2024,” said Kelsay.

According to recent surveys, Kelsay’s assessment may come as no surprise to most
companies’ executives.

Seven out of ten employers reported that they anticipate moderate to significant
cost increases in healthcare over the next three years with many projecting a
six percent increase in 2023, according to a Willis Towers Watson survey. In
2022, many employers expected their healthcare spending to surpass budgeted
amounts.

Provider shortages will fuel the affordability problem in the new year.

Labor shortages and labor costs will be main drivers of the anticipated $370
billion increase in healthcare spending by 2027, a McKinsey report found. The
nursing workforce alone may see 200,000 to 450,000 registered nurses leave the
industry by 2025.

As a result, employers and their payer partners will not have the upper hand in
contract negotiations. Health systems may drive hard bargains in 2023 which
would impact healthcare spending. Employers will have to lean into available
resources to determine a fair price.


POLICY CHANGES WILL AFFECT EMPLOYER HEALTH PLAN ENROLLMENT

Tara Straw, senior advisor at Manatt Health, emphasized the effects that policy
changes could have on employer-sponsored health plan enrollment.

Tara Straw, senior advisor at Manatt Health

Source: Manatt Health

First, the public health emergency unwinding will change employees’ eligibility
for Medicaid. Researchers have found that as many as 18 million people could
lose coverage under Medicaid in the 14 months after the public health emergency
ends if it expires in April 2023. The largest share of those individuals (9.5
million) is expected to transition into employer-sponsored health plans.

Employers who have low-wage workforces are likely to see an influx of employees
joining their health plans from Medicaid coverage.

“The special enrollment periods are also different for people coming out of
Medicaid or CHIP coverage,” Straw noted.

Typically, employees have 30 days to join a new health plan during a special
enrollment period. However, Medicaid beneficiaries have 60 days to enroll in new
plans after losing their Medicaid coverage.

“Employers may not know that because it isn't as common today as it will be at
the time they start the Medicaid unwinding,” Straw said.

Another key policy change that could impact enrollment is the family glitch
solution. The “family glitch” refers to a policy issue in which some employees
found employer-sponsored health plan coverage unaffordable when they added their
families, but they were ineligible for Medicaid coverage.

In October 2022, HHS finalized a rule that aimed to resolve this problem through
the Affordable Care Act marketplace. The rule allows families without access to
affordable employer-sponsored health plans to purchase coverage on the
Affordable Care Act marketplace using premium tax credits.

The law may result in employees’ family members and some employees abandoning
their employer-sponsored marketplace plans in order to join more affordable
plans on the Affordable Care Act.

However, this population is likely to be very small, Straw projected. The influx
from Medicaid due to the public health emergency unwinding will be more
significant.

“Even if employees' family members move into the marketplace, that doesn't
increase the penalty that large employers could pay for not offering affordable
coverage to their workers,” Straw added.

“That might be a concern of some employers who might be less familiar with the
rules, thinking that the loss of those family members is going to somehow
escalate their potential penalties under the ACA, but that just isn't the case.”


EMPLOYERS WILL RETAIN HEALTH EQUITY, MENTAL HEALTH FOCUS

While affordability may dominate the conversation around 2023, Kelsay
highlighted that employers will continue to prioritize mental health benefits
and health equity endeavors in the new year.

“In this economic environment where affordability is a concern, I think some
people are saying, ‘Oh, well maybe employers won't prioritize those as much
anymore,’” she said.

But those projections did not align with Kelsay’s predictions.

“[Mental health and health equity] become even more important in an era where
affordability is going to be more challenging for individuals,” Kelsay said.

Robbins observed the same emphasis on mental health benefits among employers
from the payer perspective.

“There is consistent feedback from the business community on mental health
within their benefits packages: what are the tools and approaches that drive
better mental health outcomes for their populations? And that is something that
I think every payer is working earnestly to try to—not just solve in terms of
offering solutions, but offering solutions that have high impact and efficacy,”
Robbins said.

“There is no magic solution there yet. The country has a supply and demand
challenge in general. And then we're trying to figure out how to find the
solutions that actually make an impact, not just drive supply for the sake of
driving supply.”

> “Mental health and health equity become even more important in an era where
> affordability is going to be more challenging for individuals.”


EMPLOYER STRATEGIES: PURSUE APMS, REASSESS PARTNERSHIPS

Kelsay expected employers to pursue a couple of proven strategies to contain
costs.

She predicted that employers would revisit their partnerships to reassess their
quality—particularly partnerships they forged during the pandemic.

“They're going to be looking hard at their partnerships to ensure that the
vendors that they have in place are actually delivering proven outcomes, that
they're improving patient experience, and that they are high-quality solutions,”
Kelsay emphasized.

Employers may apply a special level of scrutiny to their virtual care vendors.
They will re-examine the price of the interventions, in addition to assessing
the patient outcomes and patient care. The new year will bring a renewed focus
on outcome measurements and quality of care.

Kelsay projected that employers will continue to blend independent contract
negotiations—or “direct contracts”—and contracts made through their health plans
and intermediaries. They will maintain their activist mentality and continue to
hold their health plans accountable for costs and value-based care progress.

Direct contracting remains the road less traveled among employers: less than 10
percent of large employers have direct contracts in primary care, according to
Business Group on Health’s 2021 Large Employers Health Care Strategy and Plan
Design Survey.

However, the overall trajectory of employer negotiations is driving toward more
direct contracting, Kelsay said. Interest is swelling and 17% of large employers
reported that they were considering the approach for 2022 through 2023.

Kelsay also anticipated that employers would explore alternative payment models
in order to control costs. In particular, she expected that employers would rely
on centers of excellence and advanced primary care alternative payment models.
They will also revisit their virtual care and telehealth arrangements to pursue
alternative payment models.

“If all these new solutions and virtual modalities are delivered in a
fee-for-service environment, that's a step in the wrong direction. So employers
will be increasingly looking at APMs within their virtual and telehealth
solutions as well,” Kelsay said.

As employers and payers enter 2023, they face strong financial pressures and
uncertainty over the fate of pandemic policies. But they also can look forward
to new opportunities to improve specialty pharmacy offerings, pursue
identity-refining deals, and reassess partnerships.

 * Tagged
 * Coronavirus
 * Employer Sponsored Health Plans
 * Interviews
 * Medicaid
 * Medicare Advantage
 * Telehealth

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