It’s hard to be an insurer. Integrated Delivery Networks (IDN) have waves of popularity where hospital systems usually try to become an insurer. Occasionally insurers try to become hospital systems. We hear about Kaiser, Geissenger and a few other case examples on a regular basis as they should be able to align payer-provider incentives in a more coherent fashion as well as building deep, rich data sets which should power useful but non-obvious insights. I worked at UPMC Health Plan, part of a profitable IDN, before I came to Duke.
The Robert Woods Johnson Foundation recently released a review of the IDN’s that were created in the first half of the decade.
provider systems established 37 new health insurance companies and acquired five existing health plans….
it is not unusual for a startup health plan to lose money in its first years, only four of the new plans were profitable in 2015. Some
reported significant losses, and five have gone out of business. It has generally been a difficult time for health plan startups, as demonstrated by the demise of most of the health insurance cooperatives formed under the ACA and the large losses posted by companies like Oscar and Harken Health…..
Being an insurer is hard. Being both an insurer and a provider is even harder. The National Academy of Social Insurance looked at IDN’s in 2015 and made the following point:
There is scant evidence in the literature of either societal benefits or advantage accruing to providers from IDN formation. From the societal perspective, there is little evidence that integrating hospital and physician care has helped to promote quality or reduce costs….
From the provider perspective, the available evidence suggests that the more providers invest in IDN development, the lower their operating margins and return on capital…..
Moreover, there are few or no scope economies within health plans, hospitals, or physician groups —let alone between these lines of business contained within IDNs. Provider-sponsored insurance plans face similar problems regardless of whether they were formed by hospitals or physician groups: poor capitalization, lack of actuarial and underwriting expertise, limited marketing capability both to
employers and consumers, adverse selection risk, and an inability to reach minimum sufficient scale of enrollment.
To be a successful insurer, there is a chicken and an egg problem for open to the public IDN systems.