Medicare Advantage

According to Modern Healthcare, CMS has increased oversight of Medicare Advantage (MA) in ways that have impacted health insurers' bottom lines. For example, the agency reduced the benchmark payment rate for next year, implemented limits on marketing, and restricted prior authorizations.

"We're continuing to watch regulatory changes and litigation in MA, where it feels like programmatic change is the only constant," said Advisory Board’s Mallory Kirby.

Moving forward, "plans must prepare for ongoing changes by reinvesting in operational excellence and investing in the long-term sustainability of their product offerings to protect against financial headwinds," said Advisory Board's Mallory Kirby.

At the same time, CMS is dealing with complaints from providers that MA plans are imposing significant administrative burden without appropriate reimbursement, which has led to a major increase in contract disputes between providers and MA plans, Kirby said.

Advisory Board is researching ways to address administrative burden and other pain points that lead to plan-provider abrasions.

Individual market

Currently, enhanced federal subsidies for health insurance exchange customers are set to expire at the end of 2025 unless Congress decides to extend them. If these larger tax credits expire, insurers that sell plans on exchange marketplaces could lose a lot of business.

For example, Alessa Quane, chief insurance officer at Oscar Health, estimated that the company would lose 18% to 20% of its exchange members if subsidies reverted to their original amounts. Remaining members may also switch to less expensive, less comprehensive plans.

Advisory Board is currently updating its individual market outlook, which is slated to come out in August. The main topics of focus are the federal subsidies and the connection to the small group market, especially through individual coverage health reimbursement arrangements. If you're interested in participating in the study, contact Sally Kim at kimsal@advisory.com.

Advisory Board is also looking at how the Medicaid unwinding has impacted the individual market.  While it hasn't impacted many members so far, plans will have to adjust accordingly to these new members, Kim said. 

Artificial intelligence

According to executives, health insurance companies are incorporating artificial intelligence (AI) into their workflows — but are doing so at their own pace.

Acacia Reed, COO of L.A. Care Health Plan, said that many insurers currently use AI for administrative functions and are carefully considering applications that could more directly impact providers and policyholders.

"We do leverage some opportunities with machine learning to really understand the health and involvements of various populations," Reed said. "But when you're using it to make substantive decisions about that population — possibly placement, possibly care, possibly diversion of care — then you start running into problems."

According to Advisory Board research, many insurers are currently aggressively exploring AI tools in various facets of their business. "The potential efficiency gains and cost savings associated with successful use of these tools mean these organizations are heavily incentivized to implement these tools," said Advisory Board's Ty Alderhold, noting that adoption has not been limited to just back-end administrative functions.

"We believe health insurance companies are not going to slow their pace of investment and implementation into AI, but we do think it is promising that more and more of these organizations are bringing up messages of responsible use of AI," Alderhold said.

Drug costs

According to Modern Healthcare, rising pharmaceutical prices received significant criticism at the conference. For example, AHIP president and CEO Mike Tuffin criticized drugmakers for extending patent exclusivity and blocking generic competition.

Similarly, Merith Basey, executive director of Patients for Affordable Drugs, also pushed back on pharmacy benefit managers, saying that they're "part of the problem that's keeping prices high."

Many executives also focused on GLP-1 drugs, such as Ozempic and Mounjaro, with Highmark CMO Timothy Law saying that high costs have made insurers out to be the "bad guys" when they attempt to moderate utilization.

Advisory Board's Regina Lohr said it's not surprising that high drug costs were a major focus of the conference since drug costs feel impossibly high yet central to member well-being. However, "with all of the discussions about who are the real 'bad guys' when it comes to high-cost drugs, we may be overlooking important questions of patient care," Lohr said.

Advisory Board's most recent research has looked at what it takes to ensure patients can access treatments in a way that truly benefits them. For example, discussions on GLP-1s often focus on whether to allow access to the drugs, rather than what it looks like to provide quality care for patients living with obesity.

"By collaborating around this second question, we can change the framework for the first question in a way that might very well leave all patients better off," Lohr said.

Similarly, Lohr said that discussions on how to pay for cell and gene therapies have "obscured a needed conversation about whether provider organizations can even afford to deliver them."

Retail healthcare

According to Advisory Board's Eliza Dailey, several retailers have pulled back from the healthcare space recently. For example, Walgreens closed many of its VillageMD primary care clinics earlier this year, and Walmart Health recently shut down all of its clinics. CVS has also closed some Minute Clinics.

"Retailers still have a large pharmacy business, but they are struggling to find their footing in primary care," Dailey said. "It's challenging to turn point solutions — like flu shots, COVID-19 testing, antibiotics — into a longitudinal patient relationship."

"These retailers have robust brick and mortar presence, but being close to patients doesn't guarantee consumer access or utilization," she added. "Incumbents still own the patient relationship."

However, even with these setbacks, retailers say that they are still invested in the healthcare space. For example, Mary Langowski, president of Walgreens' U.S. healthcare operations, said the company remains "bullish" on retail healthcare.

"What you're seeing is a lot of evolution around not whether it'll exist; it's a lot of evolution around what's the right model going to be," Langowski said.

Marc Watkins, CMO of Kroger Health, also predicted that demand for healthcare services will increase in the coming years. Currently, the company is looking to extend its grocery services, such as delivery, pickup, and personal shopping, to its healthcare business. "Those who can adapt and meet people where they are will benefit," Watkins said. (Berryman, Modern Healthcare, 6/14)