Tuesday, May 13, 2014

“We have to break people away from the choice habit that everyone has,” said Marcus Merz, the chief executive of PreferredOne, an insurer in Golden Valley, Minn., that is owned by two health systems and a physician group. “We’re all trying to break away from this fixation on open access and broad networks.” New York Times, May 13, 2014.

Whew, that doesn't sound a lot like the promises made during the debate on the Affordable Care Act:

No matter how we reform health care, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor, period. If you like your health care plan, you'll be able to keep your health care plan, period. No one will take it away, no matter what."

Let's put aside politics, though, and focus on what's happening.

Look at the corporate structure behind the statement above.  The insurance plan is owned by providers. One way to make money in a changing marketplace is to be both the buyer and the seller, no?  Look at some of the "success stories" often discussed in the media, like Kaiser Permanente and Geisinger. These and others control both sides of the transaction for a substantial segment of the population in their catchment area.

What will happen in markets like Boston where there is a dominant health care provider with dramatically higher costs than the rest of the market?  Is it possible for insurance companies to create commercially viable limited networks comprising the lower costs doctors and hospitals? They may try, but the day may also come when that provider group, to save its position, will create the insurance entity that will be focus business towards itself.  Once it does, it will be able to manipulate internal transfer pricing to optimize profitability.  Here's the advertising pitch, hyperbole included:

"Now, the same health care system that has brought you the latest in medical advances brings you the latest medical advance, an insurance plan that guarantees access to the best hospitals and doctors in the world."


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