Nation’s focus must move from coverage to cost, health insurance industry leader says

Karen Ignagni, the voice for the nation’s health insurers, summed up the federal health reform law with a picture of a triangle, divided into three horizontal bands.

The law focuses most on expanding access to health care coverage and changing the insurance market, concepts at the base of the triangle. Far less attention was devoted to care quality, and the least — the top sliver of the triangle — was paid to cost.

But now, as the changes the law mandates roll out, the triangle might as well be flipped on its head. Public policy discussions in the coming years will focus primarily on the cost of health care, she said.

“To sustain the access, we’re going to have to get a better handle on the cost,” said Ignagni, president and CEO of America’s Health Insurance Plans, the trade organization for health insurers. She spoke at The Bushnell in Hartford Wednesday morning, hosted by the Connecticut Health Council, a recently formed group aimed at bringing together and promoting the various parts of the state’s health care sector.

The debate leading up to the Affordable Care Act addressed health insurance premiums, but Ignagni said it missed the mark, focusing on the cost of insurance, rather than the underlying costs of health care that drive them.

“The point that we made during the debate was that we’re the last stop on the train,” she said, describing premiums as the result of prices from hospitals, pharmaceutical companies and other parts of the health care industry. And she said lowering the underlying cost of health care will be critical not just for social reasons, but for the economy.

Not everyone in the health care system shares Ignagni’s perspective. But even groups that have been deeply critical of private insurers, including the Universal Health Care Foundation of Connecticut, are now turning their attention to ways to reduce overall health care costs, focusing on problems that go beyond the often-vilified health plans.

In Massachusetts, for example, which had a head start on expanding insurance coverage because of state-level reforms, policymakers are now trying to target health care costs. Ignagni predicted that the rest of the country would too, as the federal reform law makes it easier for people to see the factors that go into health insurance premiums.

Health insurance exchanges, the new state-based marketplaces created as part of the Affordable Care Act, will give people a way to compare insurance plans side-by-side. In California, Ignagni said, people can now see striking differences between prices for the same plans in the northern and southern parts of the state, the result, in part, of different levels of hospital consolidation.

“It’s just an example of when beneficiaries see the different pricing for the same benefit package… that sparks a discussion,” she said. “The game is dramatically changing with respect to cost.”

In addition, the health reform law limits insurers’ administrative expenses, including profits, limiting them to no more than 20 percent of premiums collected in individual and small-group plans, and 15 percent for large-group plans.

So how will costs be addressed?

Ignagni said it will be key to focus on containing costs overall, not simply shifting them from one payer to another, or from one part of the system to another. In the past, when governments reduced reimbursement rates for Medicaid and Medicare, private insurers have generally paid more to make up for it. That hasn’t put pressure on hospitals or other industries to reduce costs, Ignagni said.

She also talked about consolidation in health care, a trend across the country, including in Connecticut, where hospitals are forming alliances with former competitors or large national chains. Those who promote the idea point to cost-efficiencies, but, Ignagni said, “We just haven’t seen that yet in the delivery system.” Critics of consolidation say the larger networks give hospitals more leverage to negotiate higher prices with insurers.

There’s also a major push to move the overall system from one that rewards volume, paying for each service delivered on an individual basis, to one that rewards keeping patients healthy, at lower costs. Health plans will broaden their roles from covering people when they’re sick to helping people stay well, Ignagni said, and consumers will likely start getting more reminders about preventive care and other services to ensure they stay healthy.

In states like Connecticut, where many physicians work in solo or very small practices, health plans are developing the ability to link independent practices so they can cover for each other to care for each other’s patients after hours, she said. They can also connect the small practices with nurse practitioners to use data to help determine which patients are the sickest, who could benefit from care management, and who could benefit from early interventions to prevent problems from developing.

And Ignagni predicted that health plans will increasingly use tiered networks of health care providers, arrangements in which patients are given incentives — such as lower out-of-pocket costs — to go to providers that deliver higher quality care and can control costs. The idea is similar to having tiers for prescription drug benefits, in which people pay less for generics and more if they choose name-brand drugs.

In the past, Ignagni said, people have resisted efforts to cut costs by pointing to the strengths of the nation’s health care system and raising concerns that those could be harmed. But now, she said, the gaps in cost between the U.S. and other countries are so large that any quality differences are not commensurate. And health care costs have grown so significantly, failing to address them will present problems for the nation’s economy.

Still, she acknowledged that there will be major challenges for many of the industries people in the audience represented. Many hospitals, for example, have spent years building new facilities and expanding. Now the payment models insurers and government payers are trying to establish emphasize getting people care to stay out of the hospital as much as possible, leaving hospitals to figure out what to do with the new beds that might not be filled.

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