Are ACOs the Future of the Exchanges?

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Consider an ACO as a self-contained provider network. What better partner for a managed care company seeking to offer a policy for sale on the Exchanges? After all, the premium cost listed on the Exchange is one of the most important elements of the buying decision made by individual shoppers. So if an ACO can serve as a low-cost provider network for a managed care company, the company could lower its monthly premium charge, right?

Stethoscope on newspaper financial chartWell, it doesn’t appear to be working that way. Atlantic Information Services (AIS) reports there are very few ACOs serving as the network partner for plans sold on the exchange. There could be many reasons for this, including:

  • Why advertise a cost-cutting network of providers? A consumer probably wouldn’t see that as an attractive feature. Again, the most important feature consumers look at is the premium payments they have to make every month. After the premium is paid, any cost cutting benefit offered by the ACO goes to the managed care company, not the consumer
  • Most consumers probably don’t understand what an ACO is. If the Mayo Clinic is an ACO and is in a health plan’s network, it is more attractive to advertise the “Mayo Clinic” feature than the “ACO” feature
  • As reported by AIS, Exchange products featuring ACOs are actually trending to be higher cost options

Analysis

ACOs do in fact offer the potential to lower health care costs. However, the best way to realize this cost benefit is to cut the managed care company out of the buying cycle and let the ACO offer the insurance policy directly to the consumer. It is still too early for most ACOs to have gained the expertise necessary to predict health cost costs and price a health insurance policy accurately. But that day will come. When it does, we will see ACOs like the Mayo Clinic, Geisinger, and Banner Health offer attractively priced policies on the Exchanges. Their price advantage will come from being able to retain the 15% of costs that a managed care company usually consumes for its operations and profits. In other words, all premium dollars will flow directly from the consumer to the providers in an ACO, allowing the ACO to use money that otherwise would have gone to the managed care company to trim costs.

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