This position would provide many more options for consumers to choose from.

Some experts believe that providing incentives that allow Americans to shop for their health insurance would bring the benefits of market competition and actually help reduce the high cost of coverage.

This represents a dramatic change of direction for the former Massachusetts governor, who once signed into law that guaranteed coverage for all of his state’s residents and required that they purchase health insurance. The individual mandate of the Massachusetts law is quite similar to President Obama’s hotly debated national health plan. This will surely be fodder for the President’s campaign attack ads.

There are risks. The plan could discourage companies from offering insurance to their workers. Some 150 million Americans get insurance through their employers. Businesses that provide insurance also get a break because their contributions to their employees’ health plans aren’t taxed.

Romney wants greater consumer choice so that people can choose the plans they want and won’t be limited to just what their employers offer. It also would open up health care to the competitive pricing of the free market. Currently, Americans who purchase their own health coverage do not get tax breaks. Romney would also promote individuals and small businesses to band together and increase their purchasing power.

Additionally, Romney’s plan would enable seniors to shop for their own health insurance through vouchers instead of using Medicare. This would be a huge change to the federal program, which covers more than 45 million Americans over age 65. Medicare is a huge cost to the government as it covers basic health services, physician services, diagnostic tests, hospital care, preventive services and, as of 2006, a prescription drug benefit. The entitlement program represents about 12 percent of the Federal government’s total budget.

According to the National Center for Policy Analysis (NCPA), when Medicare and other elderly health programs are included, spending in 2050 will equal 54.4 percent of taxable payroll. If this NCPA projection proves true, we have already pledged more than half the incomes of future workers just to cover benefits for the elderly already included under current law.

Clearly something has to change. However, altering the system to have senior citizens pay more for their health care is a political hot potato. It will be interesting to see if this is indeed the way Romney wants to go in an election year.

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A new nonprofit health insurance company that will be governed by its members — the individuals and businesses that purchase coverage — is being created in New Jersey with $107 million in low-interest loans from the federal Affordable Care Act.

The new company is sponsored by the Freelancers Union, which made the application to the federal program. But the nonprofit will be a completely independent entity, open to all customers — not just the 8,500 union members in New Jersey.

The venture is one of several nonprofit health insurers being launched nationwide by the federal Department of Health and Human Services. The nonprofits, several of which are also receiving federal low-interest loans, will operate independently of one another. (The $107 million applies only to the New Jersey company).

The goal of these independent nonprofits is to make sure consumers have plenty of affordable choices when Americans start shopping for government-subsidized health insurance from the state insurance exchanges that are set to begin operating under the ACA in 2014. That is when the ACA’s “individual mandate” takes effect, requiring most people to get health coverage.
Meanwhile, the future of the ACA itself is in doubt. Whether or not this new insurer will be able to launch won’t become clear until June, when the U.S. Supreme Court is expected to rule on the constitutionality of the ACA. Despite this uncertainty, the as-yet-unnamed nonprofit is preparing to apply for a health insurance license from the state Department of Banking and Insurance in order to begin enrolling customers in October 2013 for plans scheduled to take effect January 1, 2014.

Chief executive Tom Dwyer, whose 20-year career in healthcare and insurance has included the post of chief financial officer of the dental insurance company Dental Health Alliance, leads the company. Dwyer projects the new company will launch with a membership of about 17,000, with the number rising to about 60,000 by 2018. The new company will be a cooperative, with the majority of the board of directors elected by its members, who are also the health plan customers, he said.

“We will be asking our members to get involved in the governance of this company, and give us their ideas,” said Dwyer. The company will either return excess cash generated from its operations back to the members in the form of dividends, or will reinvest surplus funds back into the business.

“A nonprofit insurance company run by consumers could really change the market in New Jersey,” said Jeff Brown, healthcare campaign coordinator for the consumer advocacy group New Jersey Citizen Action.

Of the $107 million in loans awarded to the new venture in February by HHS, an estimated $13 million will finance start-up costs, and be repaid in five years. The bulk of the funding, $94 million to be repaid over 15 years, is the capital reserve that will protect the new company’s ability to meet its financial obligation to pay medical claims going forward. But as with any health insurer, the goal is to pay medical claims out of the premiums collected from the individuals and businesses that buy coverage.

The new company is teaming with Piscataway-based QualCare, a managed healthcare company that sells health plans to self-insured employee groups. QualCare will contribute its network of physicians and hospitals and handle the payment of claims.

Annette Catino, chief executive officer of QualCare, said she decided to work with the new venture “because there needs to be more alternatives in the New Jersey marketplace.” The federal government is funding these new health insurers around the country, “on the condition that they are not for profits and that they are consumer oriented, and we believe this will provide a new competitive alternative for New Jersey,” she said.

Dwyer said he expects to supplement the QualCare network with other providers. In particular, he will seek out primary care physician groups that have been designated patient-centered medical homes by the national standards group, the National Committee for Quality Assurance, as well as with practices that want to evolve into medical homes. A medical home coordinates patient care, whether it’s from the primary care physicians or specialists, and strives to improve the delivery of care and better manage chronic conditions like diabetes and heart disease, which account for much of the escalation in healthcare spending nationwide. The idea is to lower costs by improving health outcomes.
The high cost of health insurance is a major reason why the insured go without coverage, and Dwyer said the new company will encourage innovative ways of delivering healthcare, in an effort to bring down costs.

Right now, most physicians and hospitals are paid on a fee-for-service basis, which rewards the healthcare system for providing more care, whether or not the population gets healthier. Instead, Dwyer said he would like to use a capitation payment model, in which healthcare providers are paid to provide and manage all the care the patient needs, meet quality goals, and have a financial incentive to avoid unnecessary care.

“The fee for service model has not worked, and we want to work with providers that understand that,” Dwyer said.
He added that company would not try to grab market share by offering low-priced coverage. “We are going to put out competitive products that we believe will be different enough in their design, and in the entire value proposition, that a segment of the [healthcare provider] marketplace will be looking forward to partnering with us.”

That said, Dwyer does expect the new company to gain market share.

“We are telling people, ‘We are here to innovate and shake up the market, so give us a try.’” The new company is starting out with the idea that “Fee for service is broken and we want to change that model and pay for outcomes.” A key goal is engaging the patients in how to use the healthcare system efficiently and become involved in improving their own health.

Dwyer commented that better care “is not necessarily cheaper care. We don’t mind paying for centers of excellence. We don’t mind paying top dollar for certain services, but we want to know that it’s being done efficiently and effectively.”

Online consults or telemedicine are one of the most exciting advances in the market. These solutions address rising costs, improve access to care and improve the healthcare experience for patients.

Rising Costs

Primary care visits can run $75 or more in an insurance plan. Without insurance, these visits cost even more. What we are seeing in the online world is ‘visits’ ranging from $0 to $40. Certainly the definition of ‘visit’ is not the same in the virtual world, but many believe these are just as effective as the real thing. Common stats cited are that more than 50 percent of primary care visits could have been avoided completely with a quick phone call. We also know that 70 percent of ER visits are potentially avoidable. So there are tremendous costs advantages online versus a $100 real visit or a $1,500 ER visit. Clearly, insurers will adopt many of these programs just from a cost perspective. For the uninsured, these low cost virtual visits
are truly a game-changer.

Improved Access

One of the goals of Health Reform has been to provide insurance to the uninsured. If the Supreme Court upholds the mandate, many people will be concerned about the healthcare system’s ability to handle these new patients. Granted many of the 50 million uninsured people are already in the system, but chiefly via the ER. The real upside to insuring this crowd is to get them much needed primary care. But the concern is we don’t have the access. We have not been producing primary care doctors at the rates required, essentially because the economics are upside down. If we don’t pay doctors well enough for primary care, they won’t be there. But some elements of Health Reform redirect dollars to primary care which is great news. But online and telephonic consults will be the disrupting force that cures our access problems.

The promise here is truly amazing. I see a comparison to developing countries that never invested in a traditional landline phone system and went straight to wireless. They didn’t waste the money on infrastructure and are now poised to reap the benefits of cheap, available communications. Likewise with healthcare, third world and developing countries cannot afford to invest in brick and mortar health facilities, but now anyone with a cell phone can get access to basic medical advice from the best doctors around the world. So, improved access to care is going to really help us in the U.S., but the global impacts will be far reaching.

Improving the Healthcare Experience

Healthcare in general is going “retail”. By that I mean, more and more employers are dropping coverage. And the Affordable Care Act – the so-called “Obamacare” legislation — will force many Americans to shop for their own coverage, albeit with various forms of financial assistance. So, when people look for their own insurance plan, they will also be shopping for healthcare services the way they shop for other retail goods and services. Thus, the entire healthcare delivery system, including physicians, needs to understand this new customer and treat them accordingly. Who will engage the customer and win his business? Most evidence suggests that people LOVE the ability to access medical advice on a real-time basis with providers they trust. A quick phone call to put a mother at ease when her newborn runs a fever. A quick consult that ends in a prescription for an antibiotic, as opposed to 5 hours in an emergency room. We have the technology now, so let’s deploy it.

We recognize that virtual visits cannot possibly replace the in-person experience, but the improved access and lower costs will lead to significantly improved satisfaction among patients. And this is where insurers and doctors will benefit. Ultimately, in order to reform, the healthcare industry has to listen to its retail customers. And its customers are starting to say “hey, we like this virtual model”.

Does President Obama’s proposal make healthcare cheaper or more expensive? Well, as with anything that comes out of Washington, it depends what you are looking at, what your timeframe is, and what your spin on it is. I am sure the CBO provides its best to guess at these numbers, but let’s be serious: Did anyone really think that we would reduce spending on healthcare by providing insurance to 30 million uninsureds? Of course not.

Rather, this whole thing has been about HOW to pay for the expanded coverage including increasing the ranks of Medicaid, providing subsidies for the poor, and filling the Rx doughnut hole for seniors. In some shape or form, all of us will bear the costs for providing the increased access to care. Pick your poison: higher premiums, taxes, penalties, or assessments on insurers and big pharma (all of which will be passed along the to end customer).

None of this comes at a great time in our economy with $4 gas gallons and conflicting unemployment figures. The Supreme Court just might turn some of the Affordable Care Act (ACA) on its head. Some people will be very happy to go back to the status quo of double digit healthcare inflation and no relief in sight for anyone. However, for two years I have been inside the belly of the ACA beast and there are some promising trends that I see could actually move the needle on costs — maybe not in 2014, but certainly over the course of time. What I like is that the market, in general, is starting to embrace some of the Affordable Care Act concepts, and robust debate is occurring in every city and state. Some examples are:

1. There is an increased emphasis on primary care in the Affordable Care Act, a long overdue investment in the U.S. Let’s invest to keep people healthy, not to cure their ills. The initial investment will be expensive upfront as we reorganize the delivery of primary care into medical homes and use IT to improve accessibility. However, the ROI on this will come down the line in the form of savings on acute care, chronic conditions and emergency room visits.
2. Obama’s healthlaw promotes Accountable Care Organizations (ACOs), which provide incentives for providers to work together, prove outcomes and share in the savings. There should be some real savings here, although some fear the larger ACOs may monopolize markets.
3. Healthcare exchanges are a key component of the President’s proposals, but the private market is also toying with these models. People on both sides of the aisle seem to understand that these exchanges can lead to healthy competition. Initially, there is heavy investment to build the exchange infrastructures, but the promise lies in the power of the market to keep premiums in check and force the players to innovate.
4. Consumer awareness is also a key feature in the Affordable Care Act. As they pay more and more for healthcare, Americans are becoming more like true healthcare ‘customers.’ Instead of blindly consuming healthcare, we are starting to shop and compare. Transparency of pricing at every juncture in healthcare will only help move the needle.

So, while the absolute costs of healthcare will go up as the Obama healthcare plan is phased in, I believe there are some hopeful signs that real change is taking place: how we shop for healthcare, how we access healthcare, how we pay providers for healthcare. As in the reformation of different markets in our history, healthcare may be no different. The Government may push us in an uncomfortable direction for a bit, but the market and the innovators will adapt and survive… and possibly save us a few bucks in the longer term.

Link to Freelancers announcement: http://freelancersunion.org/co-ops/

However, there is growing evidence that “private” healthcare exchanges will play a major role in the coming years. For simplicity, I am defining a “private” exchange as anything that is not a “public” exchange. Examples of a private exchange include Medicare online exchanges (ExtendHealth), small group purchasing exchanges (HealthPass New York), large group exchanges (AonHewitt) or even an individual exchange (eHealth).

The role of these exchanges will be to facilitate the ultimate “retailization” of healthcare. The retail customer will be the actual individual (not an employer) buying health insurance directly from the insurer via an exchange. The U.S. citizen himself will have a much more ‘retail’ experience, shop and compare; he will seek value as he defines it.

We have been talking to the people who are opening up this new private exchange world. There are new technology companies with nice “shop and compare” tools. There are benefits consultant types that really understand products. And there are the more traditional TPA companies that do transactions really well. Each type of company will launch their own flavor of private exchange solution.

Picking a partner takes careful consideration of the needs of your organization and how it will play in the private healthcare exchange world.