Adapt or Die: Health Care Reform’s Tag Line

There’s a movie coming in April called “Hanna.” Looks like a mashup of the Bourne Identify, Ender’s Game, and Blade Runner. Or maybe not. What caught my eye when I saw the ad for this movie in the Los Angeles Times Sunday was it’s tag line: “Adapt or Die.”

I don’t know how well “Adapt or Die” describes the movie, but it certainly describes the reality facing stakeholders in America’s health care system. And it would have whether or not the Patient Protection and Affordable Care Act has passed or not. Lawmakers and regulators at the state and federal levels are far from done with their revisions, tweaks and changes to the PPACA.

Nonetheless one thing is for certain: the status quo (the health care reform system as we knew way back when — a year ago) is going to change dramatically. Even if the PPACA were to be thrown out as unconstitutional (a very unlikely outcome), the way we were is gone. Republicans recognized this when they changed their battle cry from “Repeal Obamacare” to the mantra “Repeal and Replace.” No one wants to go back to the “old” system. Republican driven health care reform would be different than what Democrats passed, but it would still require stakeholders to adapt to a changed world. Republicans support exchanges. They support requiring carriers to accept all applicants without underwriting. They want medical malpractice reform, but their cost containment ideas go far beyond reducing the volume of law suits.

Even more significant, the American people don’t want to go back to the way things were. They like the idea of increasing the portability of coverage, eliminating pre-existing condition exclusions. Many support increased government oversight of premiums and regulating carriers use of rescission and the like.

The result is that everyone involved in the system will need to adapt:

  • Carriers will have less flexibility when it comes to setting rates, underwriting, and benefit designs. They may face new competitors – some with an unfair advantage created by skewed playing fields. As the “old” ways of competing are limited, the importance of offering providing strong value and superior service will become a more important differentiator. Which means carriers will have to do more with less – provide more and better services while spending less to provide those services.
  • Brokers need to develop a business model that accommodates reduced and more transparent compensation. I’ve been warning for several years that, even without the PPACA, commissions based as a percentage of premium – premiums that were rising at the accelerated rate of medical inflation as opposed to general inflation – was unsustainable. The PPACA means this transition to a new compensation model will come more quickly, but it was coming nonetheless. At the same time brokers will need to powerfully communicate and demonstrate their value, which means a greater emphasis on post-sale service, services that no government bureaucrats can deliver. Add to this the reality that agencies will need to diversify their offerings and brokers are in for a tumultuous time of adaptation.
  • Providers today are in an enviable position: they set the demand while simultaneously providing the supply. OK, enviable might be overly stating it, but they are in a favorable position – for now – enabled by the dominance of a fee-for-service payment structure. So long as as doctors and hospitals are paid for doing more rather than less, regardless of the outcomes, they will be tempted to do more, a temptation that will be even stronger given the reality that law suits are not often brought because providers provide too much care. The PPACA contains demonstration projects, pilot programs and other elements aimed at encouraging a greater focus on the outcome of medical care, as opposed to the volume of care, patients receive. The reform law also encourages the creation of a more integrated care system, changing the way providers practice and the relationship between doctors and facilities.
  • Employers were one of the loudest voices calling for change. Health insurance costs were devouring resources and profits, eroding their competitiveness, and distracting executives’ attention from their core missions. If health care reform, as passed, actually reduced health care coverage costs employers might be rejoicing. But the PPACA all but guarantees higher premiums while also imposing greater regulatory burdens on businesses large-and-small. The exchanges might offer a refuge for some businesses, especially very small businesses, but if history is any indication they will be far from the panacea their advocates (which include both Democrats and Republicans) promise.

There are other stakeholders: pharmaceutical companies, state and local governments, and consumers to name a few more. But you get the idea. America’s health care system needed to change. Consequently, those impacted by America’s health care system would need to adapt. This doesn’t excuse or justify the elements of the PPACA that do more harm than good.

As Congress takes up health care reform yet again, it’s important to keep what’s happening in perspective. Some modification of the new health care reform law is inevitable. Lawmakers,  regulators or the courts may dramatically alter the PPACA. Regardless of whether the revisions are large or small, the one certainty is that we’ve passed the point of no return: the status quo is history. Which means we all will need to adapt or, if not die, at least move on.

11 thoughts on “Adapt or Die: Health Care Reform’s Tag Line

  1. Thirty years in the business with top websites in two sates…I’m throwing in the towel…NOT!

    I think brokers will and should have a role in the Exchanges. Virtually every few days, I receive emails or comments regarding the service we provide and refreshing and helpful (and unbiased) we are.

    Is anybody in Washington listening?

    • The question is not whether agents should or should not have a role in the Exchanges. the question is… at what level of compensation. MLR takes care of this in a way that makes it impossible to take on the role. Agents still need to eat and pay a mortgage.

  2. Alan, this discussion reminds me of a similar discussion I participated in back during the “Hillary Care” days. It was during a gathering of friends, including Physicians (at the home of one), Hospital Administrators, Pharmaceutical Reps, Attorneys, and one sole Insurance person, me. Several people gave their take on the topic, and finally it was my turn. I said, I had the only formula that would actually work. I had their total attention, colored with some disdain since I was only one of those policy peddlers. I said that my plan was: Government takeover of the whole of the medical system. All hospitals, regardless of non-profit status and otherwise will become government operated. All physicians, become salaried employees of the government. The Pharmaceutical Industry becomes nationalized, with no high cost recapture of R & D, as will medical equipment manufacturing, Nursing Homes and Long Term Care facilities. Malpractice will be a thing of the past, and finally there will be no private Health related insurance. Everyone’s ox is gored, and both the lawyers and the health insurance folks will find another way to earn a living.

    The discussion ended almost immediately, and it was a while before I was invited back to future gatherings. Wonder why???

  3. Alan, I’ve been feeling very much like what you said in your blog. Yes, the system had to change. It’s very hard being in the position of a broker because we see the declines everyday in the IFP market. I always field underwrite before I have a client complete a form (or use my web site for Anthem). I have to say that 90% don’t qualify and of what’s left half are so shocked by the price, they never complete the process. Is it fair that almost everyone gets decined? No way.

    I’m not sure how I would have designed it, but some of the PPACA ideas aren’t bad. As I write my own blog and tell my clients more and more about what changes PPACA is bringing, I become overwhelmed with the information.

    My biggest concern of course is the funding. There is no money for this. I think we should make coverage available to everyone, but everyone should have to pay for it.

    A couple of blogs back you wrote about the huge increases the hospitals are charging, but they have to make up the difference that they no longer receive from medicare. See, someone has to pay for that too and that someone is us.

    • Had the government truly been interested in fixing our healthcare system rather than messing with the existing health insurance system they would have looked back in time to two successful programs the Works Progress Administration and the Peace Corps and they would have set up a program that could have acomplished a great deal. Right now we have a tremendous amount of surplus commercial real estate in many parts of this country. If the government rented or purchased some of this property at a fair price carpenters; electricians; painters and many others could have been hired to retro fit these properties to make them in to first class government healthcare facilities. While this process was going on, medical personnel could have been recruited at all levels to staff these facilites.People who entered the government system as staff would sign on for a number of years – say four. When their enlistment was up they would be given the option of remaining with the government or moving on to their own practice. If a perso decided to leave – they could be given very favorable terms for government loans and malpractice insurance. I am going to eliminate some details here in the interest of space BUT – once opened every citizen of the US would have access to thse facilities on a means tested basis. As these facilities would be from the government there could be no issue about pre existing conditions but there would be no guarantee about when a person would be seen either. Doctors would be paid a salary and the government would be the provider of things like malpractice insurance. Necessary medical items could be purchased by the government on a mass basis so some economies of scale could occur.If a patient under this system of mine had private insurance they could move freely between the government system and the private one. Keep in mind under PPACA the penalties for not having insurance are not so large that everyone currently uninsured will run out and buy coverage as soon as the law takes effect so potentially there could still be many people going without.

  4. Alan, I appreciate your realistic point of view. In my opinion, the need to adapt is nothing new. I agree that the way business was conducted in 2009 has changed for good. Unfortunately, many agents are burying their heads in the sand and hoping for a return to the good ole days. I’m afraid that the insurance companies only wanted and excuse to cut agent’s commissions. It has been coming for years, the MLR of the PPACA was just the excuse they wanted.

    I know that agents have no choice but to adapt. It is just that with all the political uncertainty in the nation, even if we adapt to the law today, it will change between now and 2014 somehow and we will have to adapt to that or die.

    Personally, although my practice has been with individual major medical policies, I have had to redo my blog and web site to focus more on Medigap and LTCI. It is not my first choice but health insurance agents have to be flexible at least until the politicians decide how an industry that they know nothing about will operate.

  5. Alan:

    this post is like a matador waving a red cape at an enraged bull. Let’s say that we overlook the unintended consequence of PPACA displacing thousands of people that up until now were able to earn a living working in the sales and service of health insurance. The Adapt or Die reference brings me back to my days in high school Biology where we learned ABOUT survival of the fittest and Darwin’s theory of evolution. The species that developed ( often times through genetic mistakes) characteristics that made sense interms of getting along in a hard;cruel world were the ones that thrived and lived to see another day. If we do ( all apologies to people who don’t buy Darwin’s theory of evolution) a comparison betwen Man and Monkey we see that most of the basic equipment is pretty much the same – two legs – two eyes – to ears -.On the other hand, monkeys are more fleet of foot; much better at climbing;and pound for pound much stronger than their cousin Man. So how is it that Man seems to rule over monkey – I don’t really know – Maybe the answer can be found in a Planet of the Apes movie. The one thing I can say is that man is capable of articulating his thought through both the written and spoken word while the ape does not seem to be so capable. Point is…PPACA has within it a lot of words but most of those words do not accomplish the goal of making healthcare more afordable or better in any fundamental way so I can only say it is a genetic mistake not one that will add an improvement to the species. Many of us actually feel that PPACA has a poison pill in it that is designed to crash the existing system so that single payor can take over. PPACA has already stripped the ” insurance ” part of the phrase health insurance out of the equation because how can it be insurance if there is no provision for underwriting? You correctly avoid use of the phrase insurance company and instead chose to call the entities ” providers”. In fact when PPACA gets through with these guys all they will be is government sub contractors providing administrative services which the individual policy holder rather than the government will be paying for. In effect – a tax increase. We might as well have single payor instead of wasting all this time and energy.

    • Thanks for the comment Jerry. Wasn’t one of the more fun ones to write. Just wanted to clarify: when I referred to providers I was talking about doctors and hospitals. They’re going to have to adapt, too.

      You may be right about the PPACA reducing insurance coverage to the equivalent of a heavily regulated utility. I don’t think so, however. I suspect the private sector will be more resilient than many folks are giving them credit for now. Yes, there will be exchanges (because both Democrats and Republicans support them). But just because they exist doesn’t mean they’ll “win” in the marketplace. Some states (say, California) will tilt the playing field even further than the PPACA does to favor the exchanges, but even with some advantages, I’m not convinced a government-run program will be adriot or even customer-focused enough to dominate a market. Government programs tend to be as concerned about implementing “good public policy” than meeting consumer demand. And while they’ll have some advantages, they’ll have some disadvantages, too.

      The purpose of this post was to point out that regardless of how good or bad someone views the PPACA, the need for brokers, carriers, providers, and others to adapt their business models was inevitable. As anyone who has read this blog for awhile knows, the PPACA is not how I would have changed the system, but that the status quo was going to change was unavoidable.

      • Alan,

        For a certain segment of the population, how can the exchanges lose when it’s where a consumer must go to qualify for a subsidy.

        For those who won’t qualify for the subsidy, let’s hope there will be good options outside the exchanges. Particularly here in CA, given the legislation our Legislature just passed, that’s our only hope of writing any IFP business.

    • Very interesting analogy, Jerry.

      I totally agree with your poison pill theory. I have been saying for a long while that a clear purpose of this bill was to set up the insurance companies for failure, and as premiums continue to rise unabated, people would be screaming for the gov’t to come to their rescue. No doubt the cavalry would ride in with single payer in hand.

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