Warning: Health Insurance is Hard

As a former commercial medical director, the Disease Management Care Blog has wrangled with a number of physician colleagues in the population health, medical home and accountable care business on the basics of health insurance .

Many are afflicted with two “insurance-is-easy” conceits:

1. Insurers take in premium money, pay claims and keep what’s left over, and

2. Quality health care means more money is left over.

Both have fueled the Accountable Care Organization (ACO) gold rush. Since insurers are supposedly fat with money, it’s a no-brainer to want to get a piece of the action, especially since “stuff” like mammograms and the electronic record will save even more bucks.

Win-win, right?

Not so fast.  Insurers’ ROI is not huge, quality costs and the EHR’s money-saving potential is just that.

Which is why the DMCB likes the short American Journal of Managed Care manuscript on ACOs that asks “Is the Deal Any Good?“

Author François De Brantes reminds readers that 1) a lot of patients are needed to dampen the individual impact of costly outliers, and 2) certain assumptions must be made about cost trends.  Get either wrong and you could lose money.

The author also asks readers to consider the achievable savings rate. To the DMCB, this speaks to the assumption that quality and prevention automatically add to the bottom line. That’s not necessarily true and could make you lose even more money.

Says the author:

Over a decade ago, the ability of providers to understand the uncertainty of the financial risks eventually led to the demise of many and a significant setback for the country in our collective ability to rein in runaway medical costs. We cannot allow the same mistakes to happen again, and both providers and payers need to understand whether or not the deal is any good.

In other word, insurance is hard.  Stay tuned on whether the ACOs have figured that out.