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Health reform forcing insurers to retool from risk selection to risk management

With the coming end of medical insurance underwriting in 2014 under the Patient Protection and Affordable Care Act (PPACA), payers are retooling their business models to enable them to manage medical risk posed by high utilization patients.  These are people with complex, chronic conditions whose needs for care and medications rank them in the top one percent of all patients.  In risk management terms, these are “catastrophic” risks payers will soon no longer be able to avoid.  Instead, these patients will have to be managed to minimize utilization.  Daniel Malloy of the healthcare consultancy IMS Health explains in this New York Times article earlier this week:

Insurance companies will be required to enroll millions of new customers without the ability to turn them away or charge them higher premiums if they are sick. They will prosper only if they are able to coordinate care and prevent patients from reaching that top 1 percent, Mr. Malloy said. “The insurance model is fundamentally changing,” he said.

The Times article notes insurers are becoming increasingly sophisticated at identifying high utilization patients and those likely to develop serious complications. “It’s important to know who they are and manage their conditions,” Dr. Pat Courneya, the medical director for the health plan offered by HealthPartners, told the newspaper.

Managing costs posed by these high risk patients could also require a holistic medicine approach that treats the whole person — both body and psyche.  The Times article reports that “insurers are also still grappling with their understanding of human nature — why some people simply don’t take care of themselves or take their medicine or go to the doctor, even when it is clear that they should.”

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