California Broker March 2018

Page 8


From ACA To ACOs: Starting With Tax Reform




hile the administration hit some well documented road bumps in its efforts to replace Obamacare, one thing is clear. If not by design, then by creative destruction and new thinking, several streams are joining to create a significant wave in healthcare reform. The contributing factors include tax reform, the CVS/Aetna deal which promises to be transformative in the way healthcare is delivered, the DOL’s proposed rule on association health plans (AHPs), and most recently, the announcement by Amazon, Berkshire Hathaway and JPMorgan Chase to form such an association, with the idea of lowering employee healthcare costs and improving outcomes. LET’S LOOK AT THESE, FACTOR BY FACTOR. With tax reform, the biggest change results from doing away with the mandate to buy health insurance. What this leads to most notably is the return to, and expansion of health savings accounts (HSAs) and health maintenance organizations (HMOs). People will be getting back to health savings accounts and health maintenance organizations. My analysis is that the proposed changes, particularly around abolishing the mandate, will encourage HSAs and HMOs—there will be more of them, and more ways for insurance companies to get in and manage that money. From a tax standpoint, if a person has an HSA, he or she can invest it. Managing your HSA money, in the same way as managing your retirement accounts, becomes a service that newly sprung insurance-financial services entities will be able to provide. Therefore, you’ll see HSAs becoming a permanent part of the healthcare structure. Along with this, there’ll be a rise


of patient-centered care through accountable care organizations (ACOs) that emphasize patient outcomes. Patient services will be decentralized from regional hospitals to small local outlets. And the market will open up to association health plans, as well as the selling of health insurance across state lines. The second area where we’re seeing tectonic shifts is exemplified by the CVS/Aetna model. This is an entirely different kind of merger. Typical synergies that occur with horizontal mergers are about taking out duplicate costs in accounting, finance, HR, IT, sales and the like. You’ll see little of that in the CVS/Aetna deal. But there are new synergies to be found in the patients themselves: knowledge of them through vertically integrated data and a more transparent view across their treatment. The acquisition of Aetna by CVS is the first large-scale example of a movement within healthcare over the past decade to embrace patient-centered healthcare. Taking a closer look at this, patientcentered healthcare has not been the way healthcare has traditionally been managed and delivered. But the concept behind it has given rise to accountable care organizations (ACOs), which have been experimenting with ways to improve the delivery of health- -

care that the fee-for-service model was never able to do—notably by fixing the lack of incentives for providers to offer successful outcomes. While the old fee-for-service model was designed around managing the patient, it wasn’t necessarily about managing the patient’s outcome. Rather, it was a top down tactic. ACOs, on the other hand, take a bottom-up approach, wherein a successful patient outcome is the mandate. It does so by developing the team of providers that deliver the best outcome for the patient. What ACOs have found is that the location of the service is one of the most important aspects of delivering healthcare. The current centralized model has the hospital as the main management point for the patient. It doesn’t matter if the hospital is 40 miles from the patient’s home. To this end, what the CVS/Aetna deal recognizes is that a distributed business model allows a better focus on patient outcomes. And the first step in this process is to better locate where the services are to be provided. Association health plans, for all the talk of the risk they entail, can certainly play a role in opening the market to more choice and more competition, and on a larger scale, in decentralizing health insurance. To mention one exMARCH 2018

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