Why Health Insurance Exchanges Unnerve CFOs

Karen Minich-Pourshadi, for HealthLeaders Media , October 1, 2012

"It's probably going to be industry-specific to some extent. And in certain industries they may say, My competitor is doing it and since they've already opted to use [an exchange], then I don't have to fear losing my employees if I do it as well," says Coley.

"I wouldn't be surprised if we see some municipalities who have highly unionized workforces also dump their people into exchanges because they need to get out from under their costs, which are crushing the state budgets," adds Michael T. Burke, CFO, senior vice president, and vice dean at NYU Langone Medical Center, a three-hospital system in New York, NY.

Not only will a state's industry's response dictate the degree to which hospitals and health systems may be affected by health insurance exchange, healthcare finance leaders at the HealthLeaders Media CFO Exchange believe the state offerings will influence their response.

"I know in Massachusetts, the exchange-offered products which were almost tied to the Medicaid HMOs and were run by Cambridge Health Alliance, Boston Medical Center, and places like that …  did allow you to access care at other institutions and to be paid at a certain rate, but it was always a Medicaid base type of payment rate, which isn't necessarily great. It could be a huge reduction in reimbursement for some [if it happens like that elsewhere]," says Burke.

Though at one time Medicaid reimbursement rates weren't very appealing to organizations, with the addition of insurance exchanges, financial leaders at the HealthLeaders Media CFO Exchange say they may be wishing for those rates in the coming years. But can they survive on them?"There's no way," says Freas. "Not on Ohio's [Medicare reimbursement] rates."

"Or California's rate either," adds Coley. "If reimbursement on a commercial side goes, and you don't have this cross-subsidization happening anymore, it's going to be a game changer."

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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3 comments on "Why Health Insurance Exchanges Unnerve CFOs"

joe davis (10/2/2012 at 7:46 PM)
Sorry, I misquoted a number in an earlier post that has not yet been posted. CBO did assume that 6 million people would enroll in the HIX by 2019 who previously had insurance. This is 6 million out of 24 million expected enrollees. 3,5 of the 6 would be the result of employer "dumping." 1.5 would have employer insurance but would meet the income limits to make them eligible. And, another 1 million would drop their non- group coverage. In any event, while some few analysts are throwing out very high estimates of likely employer dumping into the HIX or just termination of coverage, (which has been a slow but steady trend) there is no good evidence or a clear logic to the alarm. Did not happen in Massachusetts. Pretty hypothetical fear.

Joe Davis (10/2/2012 at 2:46 PM)
With all respect to the CFOs and experts quoted, one of whom is a friend, where is the evidence? Massachusetts did not experience a high rate of employer dumping. The CBO original estimates were higher and assumed that half of all currently insured people would come from employers who dropped coverage. But, that is about six of twelve million people. 30% of ALL CURRENTLY insured employers. I don't think so. And the industry is absolutely scared about being paid less in the future. From everyone. There may be a few states that create an environment for restricted price negotiation...but they will be the BIG exception. It's all about negotiation. That is why the idea of narrow networks and tiered networks are resurfacing. And homegrown ACOs will feed into this, Fewer credible observers expect HIX to lead to Medicare or medicaid rates unless the provider is in that range already with commercial insurers. When you run the numbers, many systems are clearly better off in relation to HIX. And, there will be some interesting opportunities. But, the fog of uncertainty about the future has to create fear.

Drew Joyce (10/2/2012 at 10:15 AM)
Have I missed a development? Why would CFO's believe that individual insurance sold through the exchange will be contracted at Medicaid or Medicare rates? I think everyone expects difficult reimbursement discussions but wouldn't such a major step require more legislative action? There will be more care reimbursed at Medicaid rates in States that opt in, but there should also be a great increase in commercial reimbursement due to expanded enrollment in subsidized individual coverage.




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