Remember HMOs?

Paul Levy posted an intriguing piece (read here) on his blog yesterday entitled, "W(h)ither health insurers?"  Clever title sure, but also an interesting theory which can be summed up in these two sentences, taken directly from the post:

The talk around the country among health insurance companies is that their insurance business is dying.

The result is that health insurance companies will become financial services organizations more than insurance entities.

I recognize that this may not fascinate you nearly as much as yesterday's seat belt post, but I read it with great interest as I spent over eleven years of my career working directly for two fine health insurers (Harvard Pilgrim Health Care and Neighborhood Health Plan) and would say that the predictions of their demise seemed premature back then... and still do now.

First, a word about back then.  Both of my former employers were founded by innovative individuals driven to improving health care quality and outcomes while effectively managing costs (Harvard Pilgrim) and serving the traditionally underserved (Neighborhood).  Their missions and identities were wrapped up in advancing those distinct objectives, though both missions have been sorely tested through the years.  I was at Harvard Pilgrim during the legendary (i.e., difficult) merger of both former organizations and a battle waged between those who felt as though the best course of action would be to focus on the insurance functions while others fought to keep the initial provider and health care management drivers intact.  Ultimately, when that organization spun off what would become Harvard Vanguard Medical Associates, the insurance-company-as-primary-function types claimed victory... and they were essentially right.  At Neighborhood Health Plan, as its founding community health centers faced increasing funding cuts, many turned to the health plan as a source of new funding (through better rates for providing services and/or direct grants for special projects aimed at improving efficiencies or expanding access to services).  But then downward pressure hit Neighborhood Health Plan, severely testing its ability to continue to meet its mission and serve the provider system that underlies it.

Both of these examples have, for me, shown that there has been and will remain, great pressure between those who are charged with providing exceptional care and those who are charged with controlling the costs associated with that care.  That tension can sometimes become uncomfortable, but it is often quite healthy.  Generally speaking, providers expand and improve services and payers require them to prove effectiveness while creating market dynamics that tend to favor the better performers.  Mr. Levy's premise in his post that insurers are being commoditized (requiring greater scale to survive and compete) is right on, but his suggestion that health insurers will go the way of financial services institutions does not seem right to me.  Organizations such as Harvard Pilgrim and Neighborhood Health Plan employ physicians, nurses and others who develop systems of care and methodologies designed to manage health care costs and to maximize efficiencies (while hopefully driving better outcomes).  If they become merely financial institution commodities, only passing through funds like large exchanges or clearing houses, they will summarily drop their investments in such systems and methodologies. 

Accountable care organizations are attempts to merge the historical "provider mentality" with the "payer mentality", much as provider-based health plans attempted to do in the 1990s (with very little success).  The question remains as to whether the systematic elimination of what I've described here as the healthy tension is ultimately a good thing or not.

I say not.