Though next year is likely to bring transformative change to the health insurance industry, 2016 was by no means uneventful.
Perhaps most visibly, this was the year of health insurers reacting to the challenges of the Affordable Care Act’s individual market—and regulators scrambling to find solutions. Meanwhile, the government pushed back against the prospect of unprecedented insurer consolidation, suing to block Anthem’s acquisition of Cigna and Aetna’s purchase of Humana.
Payers—alongside providers and policymakers—also found themselves grappling with the effects of a mounting opioid abuse crisis, alongside increased pressure to cover behavioral health treatments and services as adequately as they do medical ones.
Amid all this upheaval, payers still found many opportunities to innovate by embracing value-based care models such as accountable care organizations and bundled payments. They also became increasingly adept at privately managing beneficiaries in two major government programs: Medicare and Medicaid.
But then the outcome of the 2016 election changed everything, leaving payers bracing for yet another healthcare policy overhaul under new Republican leadership.
As 2016 winds down, let’s take a closer look at how all of these developments played out.
Insurers, regulators, consumers cope with ACA exchange turmoil
At the end of the last open enrollment period, 12.7 million people signed up for Affordable Care Act marketplace plans, and so far during the current open enrollment period, 4 million people have signed up for coverage through Healthcare.gov. But while consumers continue to demonstrate demand for plans, the individual market has not been without its problems.
As the year wore on, it became increasingly clear that insurers were not adequately prepared for how high medical utilization would be among many ACA plan enrollees. This trend led some major for-profit insurers like UnitedHealth, Aetna and Humana to drastically reduce their exchange participation, citing continuing financial losses. Some Blue Cross Blue Shield plans and even startup insurers also pulled back from the exchanges.
But costly members weren’t the only complaints insurers had about operating in the exchanges. Insurers were critical of the special enrollment periods, saying that too-lenient rules led some consumers to game the system and only sign up for coverage when sick.
Two of the ACA’s premium stabilization programs also continued to come under scrutiny—the risk corridor program because it was only able to pay out a small fraction of what it owed insurers, and the risk adjustment program because some argued it unfairly penalized smaller insurers. Problems with both programs were the subject of payer lawsuits and helped hasten the demise of many consumer operated and oriented plans.
For consumers, one major worry was rising ACA plan premiums. Benchmark silver plan premiums rose an average of 7.5% for 2016 and are set to rise 22% next year, though in both cases some areas were on track to see much larger rate hikes. Before and during both open enrollment periods, however, the Obama administration was careful to stress that because of subsidies, most consumers could still find a plan with a monthly premium of $75 or less.
Remember: 7 out of 10 people find plans with monthly premiums for $75 or less. Beat the deadline: https://t.co/lnsDKCdAs4— Andy Slavitt (@ASlavitt) December 14, 2015
The administration also attempted to ease insurers’ concerns by offering up several policy fixes—including tightening special enrollment period regulations—and retooling the risk adjustment formula in a recently released final rule. And partially in response to concerns about competition on the exchanges, Democrats revived the idea of a public option on the exchanges.
Major insurer mergers run into roadblocks
When the Aetna-Humana and Anthem-Cigna deals were announced back in 2015, industry insiders knew that such unprecedented consolidation would be a game-changer. That proved even more true in 2016.
While both deals continued to make progress in gaining necessary approvals from state insurance commissioners, it became increasingly clear that they would have a tough time passing muster with federal regulators. Further, the acquisitions faced continued criticism from provider groups, which also had a hand in campaigning against the mergers on behalf of consumers.
Doubts about the prospects of the Anthem-Cigna deal, meanwhile, deepened when details emerged about infighting between the firms’ top executives and when Cigna broke with Anthem’s view of when the deal would close. Aetna also faced controversy when a letter surfaced from CEO Mark Bertolini that appeared to link the insurer’s ACA exchange participation to federal regulators’ treatment of the merger.
The biggest bombshell, however, came when the Justice Department sued to block both deals, arguing that they would “drastically” constrict competition in a number of key health insurance markets. In response, Aetna and Humana worked out a deal to divest some Medicare Advantage assets to Molina, and Anthem CEO Joseph Swedish implied the company could increase its ACA exchange participation if allowed to acquire Cigna. Cigna CEO David Cordani, however, told investors that Anthem decided “independently” to fight for the deal.
Anthem and Cigna’s antitrust trial began Nov. 21, with the first phase focusing on how the deal would affect national account markets as well as addressing the simmering conflict between the companies. With no ruling after the first phase concluded, the second phase—concerning the effect on local markets—began Dec. 20, with the trial expected to extend into 2017.
The Aetna-Humana trial began Dec. 5, with opposing sides clashing over the deal’s potential effect on the ACA exchange markets, how to define Medicare markets and the merits of the Molina divestiture. With the trial now over and the judge’s decision expected in mid-January, the insurers extended their merger deadline to Feb. 15.
Medicaid, Medicare Advantage are big business
Though Medicaid enrollment growth tied to Medicaid expansion leveled off in 2016, the number of Medicaid beneficiaries covered by a private managed care plan rose to 54.7 million, accounting for 73% of all Medicaid beneficiaries. That’s a 60% increase from 2013. Predictably, that growth has been a boon for insurers, especially those that specialize in managed care such as WellCare and Molina.
Medicaid also was a major newsmaker in the policy realm. In April, the federal government released a long-awaited update of the regulations governing managed care plans, creating a quality rating system, allowing states to set network adequacy standards and limiting how much insurers can spend on administrative costs, among other changes.
Medicare Advantage, meanwhile, also continued to provide a growth opportunity for payers. MA plans gained about 3.4 million members in the last three years, and as of October covered more than 18.5 million seniors, or about 32% of those eligible for Medicare benefits.
Insurers also continued to invest in their MA plans in a bid to earn lucrative quality bonuses from the government, though both Humana and Cigna saw their star ratings drop for 2017. In fact, Cigna was banned from selling new Medicare products until it fixes what regulators said were “substantial failures” to comply with the rules governing them. Further, a report from the Centers for Medicare & Medicaid Services said many MA plans have inadequate provider directories.
Spotlight on behavioral health gets brighter
As opioid abuse grew into a full-blown public health crisis in 2016, private insurers joined providers and policymakers in their efforts to address the issue. One motivator was financial, as a report released in September noted that spending among private insurers for opioid-related diagnoses skyrocketed in recent years.
For its part, the Blue Cross Blue Shield Association formed an executive committee to improve opioid prescribing practices and help members manage addiction. Cigna agreed to supply the American Society of Addiction Medicine with claims data to help it combat substance abuse, and later in the year said it would eliminate problematic delays for patients receiving medication-assisted treatment for opioid addiction.
Other payer-driven initiatives include assigning social workers to certain patients, screening members for substance abuse and limiting the supply of painkillers patients can access in an initial prescription.
The opioid crisis also contributed to increased scrutiny of payers’ compliance with behavioral health parity regulations. In response, the White House created the Mental Health and Substance Use Disorder Parity Task Force, which in October released a report outlining the ways various government agencies plan to step up enforcement, along with future recommendations.
At the same time, health plans—most notably Medicaid managed care organizations—are finding ways to integrate behavioral and physical healthcare services.
Insurers further innovative, value-based care models
Months earlier than it originally anticipated, the federal government announced in early 2016 that it had already reached the milestone of tying 30% of Medicare payments to alternative payment models. Private payers, too, showed no signs of slowing down in the move to value-based care—and in some cases reaped a return on their investment.
For example, Anthem Blue Cross and its 17 accountable care organization partners accrued savings of $70.4 million over a 12-month period. Humana, meanwhile, reported that its Medicare Advantage members who were affiliated with providers in a value-based reimbursement model experienced 20% lower costs last year compared to estimates for fee-for-service Medicare costs.
How Anthem Blue Cross & 17 ACO partners provided better care, saved $70.4M for 450,000 PPO members over 12 months. https://t.co/OKAyLRKjYu— Anthem Blue Cross (@AnthemPR_CA) October 31, 2016
In another avenue of innovation, Health Care Service Corp. said it would expand its Pharmacists Adding Value & Expertise program, which engages members to improve medication adherence.
Private payers also followed the feds’ lead when it came to experiments with bundled payments. UnitedHealthcare launched a bundled payment option for patients in its employer-sponsored plans who undergo knee, hip and spine procedures. Further, the payer teamed up with Moffitt Cancer Center in Florida to create a new bundled payment model pilot will focus on reducing variations in care for early stage lung cancer.
Election ushers in new wave of uncertainty
As the run-up to the 2016 elections dominated the news cycle, details began to emerge about how healthcare policy fit into the candidates’ campaigns.
The Affordable Care Act came up in both the second and third presidential debates, with Donald Trump framing the law as a “disaster” and Hillary Clinton largely defending it. Healthcare policy also became a key issue in some tight congressional races, with Republican candidates seizing on news of coming double-digit rate hikes for ACA exchange plans.
But all that paled in comparison to the shock waves sent through the health insurance industry when Trump secured a surprise victory. His win, paired with GOP control of both chambers of Congress, made it a near-certainty that the ACA’s days were numbered.
With a vote to repeal—and delayed implementation of that repeal—likely early in 2017, healthcare experts, leaders, and lobbying groups were quick to weigh in on how to roll back and replace the law responsibly. America’s Health Insurance Plans, for instance, outlined a slew of recommendations to both stabilize the individual markets and strengthen Medicare Advantage and Medicaid during the transition.
Supporters of the ACA, including members of the Obama administration, also took steps to champion the law’s successes and warn against the dangers of rolling back consumer protections in an effort to combat the GOP’s push toward a repeal.
The incoming administration’s healthcare policy priorities became even clearer when Trump nominated Tom Price for Department of Health and Human Services Secretary and Seema Verma as head of the Centers for Medicare & Medicaid Services. Price has been a staunch opponent of the ACA and Verma is expected to expand opportunities for states to implement conservative overhauls of their Medicaid programs.