No.
But let’s talk about what it might take to get there.
Background and benefits
Mehmet Oz, MD, the new CMS Administrator, in a Senate confirmation hearing, expressed support for exploring multi-year products for Medicare Advantage. While his remarks were made in the context of avoiding unnecessary member churn and associated elevated broker commissions, there are much broader ramifications of transitioning from single-year to multi-year health plan products. His remarks have sparked interest in the industry to explore this idea further.
Healthcare for an individual and for populations should be optimized for the long-term, ideally for life. But our basic health insurance product structure has been an annual one, incentivizing optimization primarily over the one-year timeframe, and then “rinse and repeat” the same cycle every year. This annual construct has been a barrier to making healthcare investments with longer-term payoffs, as health insurers and risk-bearing providers have understandably worried about creating value through certain programs but not being able to capture value as members may migrate to other insurers over time.
The idea of a multi-year horizon for health insurance has been around for a long time. I recall including this among ideas for one of my clients 20 years ago! As an example, health plans have sometimes offered multi-year trend guarantees in the commercial business, a very “lite” version of multi-year plans.
Capability requirements
The potential transition from single-year to multi-year health insurance plans will require an extensive re-architecture of how health insurance companies and providers (risk-bearing and otherwise) operate currently. Select areas that will need transformation include:
- Pricing and medical cost projections would need to be conducted over the multi-year horizon of the plan – the longer the horizon, the greater the perceived uncertainty. Figuring this out will be a new mission for healthcare actuaries.
- Product design, including on-ramps and off-ramps for members to enter and exit these multi-year products. This is a crucial design consideration for the viability of multi-year products and will require strong analytics, deliberation (wisdom?), and experiential learning to find the balance between providing flexibility to members and the potential unintended consequences of excessive flexibility like adverse selection and moral hazard. In a more advanced future state of the multi-year health plan market, one could imagine the creation of a robust secondary market that buys and sells multi-year health plans from primary health insurers to help provide more liquidity to primary health insurers and more flexibility to policy holders / beneficiaries. Figuring this out will be a new mission for financial engineers and healthcare actuaries.
- Care model and provider network development and optimization for the long-term. This is the most exciting aspect of multi-year products as this is the essential “secret sauce” that should allow these products to be more viable than single-year products over the long run. These innovations will require thinking harder and deeper about what drives good health of populations over the long run. A more fundamental approach to understanding the root cause of good health (and lack thereof) will be needed and a much more proactive/upstream and broad-based approach to healthcare should emerge. These ideas also overlap to some extent with the recent surge in interest in longevity and improved health span. Figuring out innovations in care models and provider networks will be a new mission for population health / value-based care, and health analytics / technology professionals across health plans and providers, and will require further integration with experts in areas like nutrition, health/food/environment policy, etc.
- Financial management and reporting that enable health insurance and risk-bearing provider management to monitor and manage the more complicated financial picture associated with a multi-year health plan business, as well as report and explain this evolution to Boards and investors. Figuring this out will be a new mission for the health plan and provider Finance function and the C-Suite.
Opportunities and partnerships
As indicated by the significant new capability requirements above, multi-year products will be a tough nut to crack. However, a big prize could await those that can pull off this innovation as the U.S. population ages and financing for healthcare gets even more strained over time. While the strategic thinking on this front should be bold and expansive, the launch of the first few products could be “baby steps” that appropriately manage the risk of the transition to the more expansive end-state.
Health insurers, risk-bearing providers, and their collaborators interested in innovating in this area will need to shape and manage a vastly different regulatory environment at the state and federal levels. Will innovation follow regulation, or will regulation follow innovation in this area? Perhaps innovators need to consider the late Supreme Court Justice Thurgood Marshall’s advice: “You do what you think is right and let the law catch up.”
Health insurers and risk-bearing providers will need a range of partners on this journey. For instance, life and long-term care insurers have historically sold multi-year products. The insights and capabilities they have gathered over decades could help in exploring multi-year health plans. One could also imagine exploring convergence between health insurers and life and/or long-term care insurers.
A word for providers that don’t bear population risk
While this blog focuses on what multi-year plans mean for health insurers and risk-bearing providers, there are also profound implications for health systems and healthcare professionals that don’t bear population risk yet. For instance, multi-year health plans could significantly improve the calculus for investing in population health and value-based care models by making preventive and proactive care more viable, shifting the mix of skills, services and facilities health systems invest in. Some existing care services may see higher or lower demand profiles in future with the advent of multi-year health plans, and it may make offering new services more viable in future. Health systems will need to be able to explain and “sell” these new care and financial models to their Boards and bond-holders if the industry starts moving in this direction. And they will need to build the capabilities to be successful in these models.
Conclusion
Multi-year health plan products have the potential to change a lot about how healthcare business models work today. Given the inherent complexity, it is likely to be a slow journey towards the destination. Even so, incumbent health insurers and risk-bearing providers would be well-advised to start strategizing and building / experimenting with prototypes to manage their risk of being disrupted by multi-year-native health plan innovators. The new administration has already shown that it can move with alacrity and is not afraid to be disruptive in the process. The shift to multi-year plans could come sooner than expected. Or it may not. But in any case, it is better to be prepared.
