Second in a
With alternative funding trickling down market for group health plans, the expectation for
On Monday, we made five predictions about the hottest trends in this growing marketplace. Today we will round out those observations with five more predictions concerning developments that will be
They include subscription-based care seen in
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1. Subscription models continue growth with the rise of DPC-centered insurance products
More Americans are opting into DPC subscription-based models, which allow them to pay a monthly fee directly to their primary care physician in exchange for appointments and often, other laboratory, Rx and clinical services. While a DPC plan is designed to foster a more personalized relationship between patient and physician, it does not typically cover specialized medical services or hospitalizations.
The increasing popularity of DPC has led to a rise in DPC-centered insurance products. Characterized by high deductibles and lower premiums, such plans provide coverage for potential crises as the DPC model covers everyday health needs. This combination is particularly cost-effective for younger, healthier individuals who require less frequent, lower acuity medical care. We anticipate a greater emphasis on DPC and DPC-centered insurance products as members of Gen Z age out of their parents' health plans and SMBs continue to shift toward alternative options.
2. Alternative funding continues to increase adoption, tracking to more than 60% by 2030
Alternative funding may not be alternative for much longer! The past five years have seen alternative funding solutions move closer to the mainstream. For example, the rate of captive participation has been rapidly rising since 2020 and the percentage of SMBs adopting level funded plans
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3. Innovative provider organizations increase their role in D2E products and service offerings
If you haven't noticed, the emergence of alternative healthcare models is a major theme running through our list of predictions. In line with this is the rise of the aforementioned D2E trend. A D2E plan is one in which a self-insured employer and healthcare provider organization (such as a hospital, health system or physician group) collaborate to provide healthcare services to employees via a direct contract with favorable provider reimbursement rates due to the concentration of commercial patients. Whereas D2E rates may be lower than commercial insurance rates, they are still typically 125% to 175% of Medicare rates.
Innovative providers are embracing D2E plans as an opportunity to improve margins by retaining revenue in-house instead of passing it through an external health plan and improving administrative overhead due to provider-centric claim management. D2E also gives providers a strategy to gain new commercial patients. Some providers are pushing even further into the employer space, establishing onsite or near-site facilities on large employer campuses. We expect to see more provider ingenuity like this combined with more provider risk-sharing and expect the 300-plus provider-sponsored health plans to grow even more.
4. Class-action chaos as more employers face off with employees claiming breaches of fiduciary duty, CFOs assessing personal liability
Last year saw several employers navigated class-action lawsuits stemming from breaches of fiduciary duty regarding employee health plans. Employee Retirement Income Security Act (ERISA) plan sponsors have always been responsible for ensuring reasonable plan costs and selecting and monitoring service providers, such as pharmacy benefit managers. The spate of lawsuits is due to the recent introduction of transparency laws that more closely scrutinize the reasonableness of prescription drugs and other health plan costs. Considering how many plan sponsors are not evaluating and monitoring aggregate costs or the actions of service providers administering plan benefits, we foresee more class-action lawsuits of this nature in the near future. Now is the time for CFOs to assess their personal liability and perhaps look to transition to more transparent alternative health funding solutions.
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5. Direct contracts find broader product-market fit with newly self-funded plans and their localized staffing models
Traditional health plan networks have failed to standardize reimbursements for the same medical intervention within the same community or service area. Inconsistent pricing based on individual contracts makes it difficult for self-funded health plans to anticipate and control claim costs. With more SMBs moving away from fully insured plans to self-funding models, direct contracting under the growing D2E umbrella is gaining traction that might propel it to increased popularity.
In a direct contract arrangement, self-funded health plans, or a group of plans, work directly with medical providers to set a direct reimbursement contract. Often, the self-funded health plan pays the medical provider directly for services received by their members, circumventing the traditional health insurance networks. However, some direct contracts are facilitated by a TPA who acts as an intermediary between the self-funded health plans and the provider. In either case, direct contracts can lead to more consistent health plan pricing, faster cash flow for the provider and better access to quality care for members.
Given how localized some SMBs are, they are ideal clients of direct contracts since they don't have to solve for employees in distant regions that are not served by the sponsoring provider organization. Systems and attitudes are in place to build a healthcare landscape that offers more options and greater transparency for SMBs and their local provider organizations.
