Can insurers survive in an ACO-driven market?

Health insurance companies will be extinct in the next eight years and replaced by accountable care organizations (ACOs) throughout the industry, said a former White House advisor.

ACOs render insurers unnecessary by increasing coordination of patient care among providers and shifting the focus of healthcare toward keeping people healthy, Ezekiel Emanuel, an oncologist and University of Pennsylvania vice provost, wrote in a New York Times editorial.

The most significant reason insurers can't survive in an ACO-dominated healthcare market, Emanuel said, is that ACOs pool the risk of high-cost patients with patients who typically have lower costs into large groups, potentially more than 15,000 patients each.

Dovetail the risk-sharing ability of ACOs with the end of fee-for-service payments and insurance companies are no longer needed to handle billing and claims processing. Instead, employers, Medicare or Medicaid can directly make payments to ACOs.

Because ACOs will be paid a fixed, per-patient fee with bonuses for achieving quality targets, they will make money by keeping their patients healthy and avoiding unnecessary medical services. An added bonus for ACOs is recent developments in information technology and new models of integrated care delivery that will help ACOs improve health outcomes while also reducing costs.

Despite his overall doom-and-gloom outlook, Emanuel does believe there's room in the health industry for insurers - as long as they adapt and transform their business models. Some insurance companies already are taking steps toward that goal. For example, Wellpoint's purchase of clinic operator CareMore will help it transition into the ACO business. Also, UnitedHealth is developing data analysis services it can sell to ACOs. The key to a successful transformation, Emanuel said, is that insurers make themselves useful in a market dedicated to coordinated care.

To learn more:
- read the New York Times editorial