Healthcare in Upheaval: Where Are We Headed?

Mark Bremer discusses some of market changes we expect from the evolving changes in healthcare.

Headlines about changes in healthcare tend to center around the Affordable Care Act (ACA), but that’s just part of the change. Current fee-for-service models are giving way to reimbursement based on outcomes, which transfers more risk to providers to deliver positive results. Understanding the relative populations and flows of public and private coverage is critical to gauging provider growth, payor mix and profitability, and ongoing stability of various provider businesses. The ACA adds layers of uncertainty to these issues regarding the speed and extent of covering uninsured individuals and other questions.

To help provide deeper insights into the shifting market and establish a tool for examining a range of scenarios, Stax has built a proprietary model to help us study the flows in relative pools of insured. It consists of a dynamic model that considers the flows between pools of private group, private non-group, Medicaid, Medicare, and uninsured individuals. In doing so, it incorporates demographic flows, economic variables, and ACA factors (like exchange effectiveness and enrollment periods).

Here are a few of the things we’re seeing:

• We believe there will be limited changes to the overall population coverage mix over the next 18 months:

– There is significant friction in the system due to exchange issues, limited enrollment periods, state level inconsistencies, and uptake issues.

– Growth in enrollment through exchanges is offset by short-term cancellations in the non-group market, and coming cancellations in the employer group market.

• Our model suggests that over time, there are a couple of clear trends that are realized under a range of many different input scenarios:

– Mix will shift away from employer-sponsored insurance toward more non-group insurance

– Mix will continue to shift away from private and toward public coverage

These shifts will certainly not be complete, and the speed of shift varies significantly depending on inputs to the system.

The next enrollment period will be telling. Employer response is key. The amount of employer-sponsored insurance loss is a critical input to the system. If employer losses are higher than expected, positive outcomes in terms of the net reductions in the number of uninsured are unlikely. By the next enrollment period, awareness will be higher, time will have elapsed to make additional exchange changes, and more cancellations will have been realized. It is also worth noting that the next enrollment period coincides with an election, which could have major implications. This introduces still further uncertainty into the system.

The insights cited here are looking at a national level. Of course, what matters most to healthcare providers and their investors is what’s happening in their specific markets, and that can vary dramatically. Our model can be adapted to analyze trends at this level, and our consultants have significant experience advising on individual healthcare markets. If you’d like to gain more perspective on the trends in a given market or region, Stax would be happy to discuss.

–Mark Bremer