The outlook for the health care industry is expected to remain stable through the end of 2018, with policy changes not taking effect until 2019, according to Brendan LaCerda, assistant director and economist for Moody’s Analytics.
“Generally, when we look across the health care space, everyone seems to be doing pretty well because the general economy is doing well too,” LaCerda said. “I haven’t seen any indications that there are particular weak spots in the health care market.”
According to LaCerda, while previous years have been characterized by medical costs increasing at a faster pace than the consumer price index, that rate of growth is slowing. This is in part because health insurers have become more profitable within the past year after raising premiums, he explained. “They are all reporting that they are making profits on the exchanges, which is a real turn of events compared to the last few years. But a big part of it makes sense: they were raising premiums,” he said.
A May report by the Kaiser Family Foundation found that insurers experienced better financial results in 2017 than in any other year under the Affordable Care Act (ACA). Health insurers’ gross profit margins per enrollee increased from an average of $14.36 in 2016 to $78.52 in 2017, according to the report. The reason for this growth was that premiums increased by 22% over that time period.
Some uncertainty has been caused by an “exodus” of insurers leaving the individual health exchanges, according to LaCerda. “When the ACA first started, they were averaging about six health insurers per state. And . . . for 2018 they were down to about three-and-a-half insurers per state on average,” he said. “There was this fear that this exodus was going to intensify. But that seems to be not playing out.” A recent survey of the 30 largest insurers by the consulting firm Oliver Wyman found that none planned to leave the exchanges, he noted.
Regulatory changes won’t affect the industry this year, but could stand to have impacts in 2019, according to LaCerda. In 2019, the individual mandate to purchase insurance is being tossed out as part of tax reform legislation passed this year. While there is speculation that the removal of the mandate could cause many enrollees to leave the exchanges, thereby causing health insurers to raise premiums on remaining enrollees, LaCerda was skeptical of such a scenario.
“The research I have done has always shown that removing the individual mandate isn’t the deal breaker that’s going to cause the individual markets to unwind – especially because the way that Obamacare structures the premiums, most people are insulated from those premium increases because the rules state that, if you make less than a certain amount of money, you only have to pay a certain fraction of your income towards your health plan,” LaCerda said. “So as the individual mandate goes away and say people stop buying insurance and leave the market, if premiums go up people aren’t going to feel the effect of that, which would really be the main force that would cause the markets to unwind.”
Next year, small businesses will have the opportunity to create association health plans, which allow them the opportunity to band together with other businesses and individuals within a region to obtain health care rates and services similar to those of large employers. LaCerda noted that these plans do not have to cover all 10 health care benefits deemed essential by the ACA. “The tradeoff is the plans are less expensive, but they just don’t offer as much,” he said.
Hospital and medical service provider executives who submitted to this section pointed to a focus on population health as an industry driver moving forward. This focus has resulted in an expansion of partnerships between health care organizations and community groups, as well as of outpatient ambulatory care centers – trends expected to continue through 2018.
John Bishop
CEO, MemorialCare Long Beach Medical Center,
Miller Children’s & Women’s Hospital Long Beach
Healthcare in the past was characterized by caring for people when they were sick and injured, mostly in inpatient hospitals settings. Today’s focus is on keeping people healthy, and driving expansion into community, value-based care. We’re part of an era that focuses on attaining and sustaining a lifetime of health to prevent and/or lessen the impact of disease and increase the length and quality of life. Our more than 200 outpatient facilities include surgery, medical imaging, urgent care and dialysis centers, physician practices, and programs that supplement services at Long Beach Medical Center, Miller Children’s & Women’s Hospital Long Beach and other MemorialCare hospitals. These facilities – including comprehensive centers at Los Altos, Douglas Park and throughout Greater Long Beach – shift services into less expensive, more convenient settings. Many patients needing surgery, for example, are increasingly referred to outpatient surgery centers, receiving high quality care without overnight hospital stays, thanks to advances in minimally invasive procedures and other techniques. Additionally, strategic partnerships with employers, schools and local organizations transform health care, create efficiencies, broaden population health and benefit communities. These include alliances with Cedars Sinai, UCLA and others in value-based programs and health plan offerings. Our partnership with Boeing provides a customized health plan option at lower cost. Collaboration with UCI, UCLA, USC, Cal State Long Beach and others result in physician and nurse training programs and healthcare innovations to benefit our communities. And an affiliation between Miller Children’s & Women’s and UCLA Mattel Children’s Hospital enhances access to highly trained specialists and children’s healthcare services.
Carolyn Caldwell
President & CEO, Dignity Health St. Mary Medical Center
Over the course of my first year as the President and Chief Executive Officer at St. Mary Medical Center, I’ve been truly impressed with the level of collaboration among so many organizations committed to improving the health and wellness of our Long Beach community. It is a community where St. Mary Medical Center has been providing high-quality, compassionate care for more than 90 years. To work for an organization rooted in a mission focused on taking care of all patients with respect and dignity is a wonderful experience and a privilege.
Health care organizations are also business enterprises, and long-term financial viability is critical to continuing to live our mission. St. Mary Medical Center is no different in this respect, and must deal with the reality of declining reimbursements for care. We are, however, embracing the challenge of transitioning from traditional “transaction-based” treatment to a more holistic approach to population health, which focuses on understanding and addressing the health needs of an entire community, as well as those of the individual.
There are a number of exciting things on the horizon for St. Mary Medical Center. This includes the expansion of a number of our key areas of treatment, including women’s health, cancer care, imaging, robotic surgery, and cardiovascular services. We are also adding new physicians to our medical staff to address the growing demands for medical care in the community.
It is an exciting time at St. Mary Medical Center and I look forward to sharing our continued growth as we continue to serve all those in Long Beach who come to us for care.
Amar A. Desai MD, MPH
President, HealthCare Partners California
Eight years since the passage of the healthcare reform, differential quality, distinctive clinical outcomes, and affordability are still paramount in the minds of consumers and purchasers.
While it’s hard to predict what will happen next, healthcare organizations with care delivery in their DNA, including HealthCare Partners in the Long Beach area, are well positioned to develop a compelling value proposition to consumers. These delivery networks are able to offer higher-quality healthcare that is more affordable to patients looking ahead to 2019.
While spending growth on healthcare has slowed since its peak in the mid-2000s, it still projects to grow at an unsustainable 5-6% rate annually. Policymakers have tried to address premium increases in exchange products with various policy levers, including embracing association health plans. Recently, JP Morgan, Amazon and Berkshire Hathaway announced a joint venture allowing them to offer better value to their employees through an independent healthcare company.
Within the healthcare marketplace, there has been a massive shift towards consolidation and acquisitions across traditional industry silos. Both Cigna’s purchase of Express Scripts and the Aetna-CVS merger may create new opportunities, but the impact on consumer choice and economics is still unclear.
As consumers become more sophisticated purchasers of healthcare, their expectations are evolving to demand more convenience and on-demand access. In response, the venture capital and private equity communities have funneled substantial investments into digital health, including areas like telemedicine, which holds the promise to innovate the patient experience by creating more convenient, on-demand access to healthcare while also helping reduce costs.
Dr. J. Mario Molina
President, Golden Shore Medical
The future of the health care industry for the remainder of 2018 is bright.
According to consulting firm PricewaterhouseCoopers, health care cost trends have stabilized at about a 6% annual increase after declining steadily for the past decade. Depending on where you sit in the health care market, this could be good news.
For employers, costs are increasing at a rate above the annual rate of inflation of 2%. Health insurance costs have been increasing at the lowest rate in the past two decades. Still, according to actuarial firm Milliman, annual costs for employers to cover a family of four are about $28,000. Employers pay about 69% of the costs with employees paying the rest. This is generally good news, but employers still need some relief.
Republicans are again talking about allowing insurance companies to discriminate against people with pre-existing conditions, but existing rules in California will protect people with pre-existing conditions for at least 12 months. Individuals buying insurance through Covered California can expect to see premiums rise, but because most receive Federal subsidies, most of the increase will be picked up by Uncle Sam.
Finally, there is a chance that Long Beach Community Hospital will remain open. The City and MemorialCare are negotiating an agreement that would allow a new operator to take over the lease and operations. The goal is to keep the emergency room open and maintain essential services on the site while making changes to meet earthquake requirements. There is more to come on this front.
Chris Wing
CEO, SCAN Health Plan
Nationally, it has been an extraordinary year for senior healthcare. At the federal level, Medicare Advantage plans have earned bipartisan support, with more than 360 members of Congress pledging to preserve the Medicare Advantage program. This year we’ve seen that commitment result in permanence for Special Needs Plans and regulations that allow increased flexibility of Medicare Advantage benefits.
On a local level, we are continuing our work with the City of Long Beach, CSULB and other community partners to improve senior services centered around health and independence. During Aging Reimagined 2.0 this past spring, the city revealed findings of a SCAN-funded gap analysis report that highlighted gaps in senior health and wellness services within the local community, including access to in-home support, mental health care, transportation, housing and more. We’re confident this public-private sector collaboration will improve the quality of life for seniors, and contribute to Long Beach’s status as an age-friendly city for all.
Looking ahead, I’m excited by the ability we have to meet members’ needs in new and creative ways. Having greater flexibility to meet the changing needs of a growing membership will enable us to do our part in keeping seniors healthy and independent not only in Long Beach, but in all the communities we serve.