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Hospitals, Insurance Companies in Tug of War

Hospitals, Insurance Companies in Tug of War August 25, 2016

Marketing, research and business development consultant in healthcare, human services and senior living.

tug of war - healthcare dollar

Hospitals and insurance companies are in a tug of war over – you guessed it – dollars! A recent report suggests that health insurance organizations are losing money.  Another recent report states that hospitals are profitable. For how long do we think this tug of war can continue?

tug of war - healthcare dollar
Tug of war between Insurance and Healthcare

Hospitals obviously have negotiated effective contracts with the insurance providers. But with health insurers like Aetna withdrawing from Obamacare exchanges, state insurance commissioners will be under pressure to intervene to keep the required minimum of two insurers operating in each exchange. State officials will have the unenviable task of intervening to increase payments to hospitals by insurance providers, improving insurance companies’ medical loss ratios to plump up their bottom lines. This will cause hospitals to cry “foul” and reach for all of their substantial political and public relations clout. After all, the public loves hospitals and hates insurance providers, right?

What’s occurring in Massachusetts is important for the country because of “Romneycare” – the 2006 legislation, which established the first Obamacare model in Massachusetts. With 86% insurance penetration, Massachusetts this model is a bellwether for what occurs in the rest of the country. It is absolutely logical and inevitable that greater insurance coverage means higher insurance premiums. In the opaque world of hospital pricing, it has never been less clear why hospitals are paid as they are. Despite regulatory and legal mandates for “transparency” uncovering the true charges for any given procedure in any given hospital in in Massachusetts or elsewhere remains extraordinarily difficult. What happens in Massachusetts is a harbinger of what will occur in the rest of the country.

The tug-of-war between and among hospitals, the state insurance commissioner and insurance companies is farther along in Massachusetts, whereas in the rest of the country it is just beginning. From a business sustainability point of view, the key issues are profit and return on investment. It’s no accident that insurance companies on all the big buildings and hospitals are engines of economic growth in virtually every community.

Where does the consumer stand in this tug-of-war? At the bottom of the pile, paying for it all. Our taxes subsidize 60+ percent of the total healthcare services expenditures, and we are shouldering a progressively greater burden of both out of pocket direct costs for care and insurance premiums. Does anybody think this is a good system? Let’s ask the CEO’s of Aetna and Mass General.

Marketing, research and business development consultant in healthcare, human services and senior living.

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