By Jeff Kennedy September 21, 2015. Increased hospital mergers ◦ Insurers need to offset hospitals bargaining power ◦ Affordable Care Act Nationwide.

By Jeff KennedySeptember 21, 2015

Increased hospital mergers ◦ Insurers need to offset hospitals bargaining power◦ Affordable Care Act

Nationwide Rules State exchanges (i.e., “Covered California”)

Additional Concerns◦ Pharmaceutical and Biotech companies charging

high prices Conclusion

◦ Insurers moving forward

Kaufman Hall and Associates Report◦ Shows number of Hospital mergers increased by

44% from 2010 to 2014

Health Care Providers market power increases through◦ Consolidation, control of entry and other

arrangements

Affordable Act Requirements◦ Insurers must spend at least 80% - 85% of every

premium dollar (80/20 rule) on medical claims and activities that improve quality Results in lower premiums for the consumer

Since 2011 $9 billion was saved

◦ Health-insurance companies must take all customers No longer about “avoiding sick people”

Covered California◦ Requires uniform benefits

Apples-to-apples comparisons Before there were differences in deductibles,

copayments and coinsurance Led to confusion for consumers

◦ Differences in premiums Average increase

No. California (7%) vs. So. California (1.8%) Average premium cost

No. California is 30% higher than So. California Due to higher prices charged by hospitals and

physicians

Average profit margin◦ Top 151 pharmaceutical companies – 24%◦ Top 400 bio tech firms – 23%

Gilead has a 88% profit margin

Insurers (offered by Covered California) profit margin – 1.1%

Recap◦ Insurers are merging (not necessarily a bad thing)◦ Opportunity to offset providers’ market power

Offer lower premiums (80/20 rule) More value in health care

Moving forward◦ Organizing or contracting with Accountable Care

Organizations (ACO) Rewarded for higher quality and lower costs of

health care◦ Rewarding volume to rewarding value