The growing PSP trend: Greater risk, greater reward
Provider-sponsored plans (PSPs) are growing – both in terms of the number of PSPs in the market and the members they manage. In just the last year, 26 new PSPs were created, according to the 2016 AIS Directory of Plans. And, the PwC Health Research Institute noted that 50 percent of U.S. health systems have applied – or intend to apply – for an insurance license.
So what is behind the sudden rise of PSPs? We believe its part of a larger trend, as the health insurance market shifts from traditional fee-for-service to value-based care, providers are willing to take on more financial risk. Accountable Care Organizations (ACOs) also have seen significant growth. Although different in structure, ACOs and PSPs are both focused on bringing down healthcare costs while offering patients the best care available. As providers and health insurers experiment with different payer-provider models, the trend is moving toward providers taking on more financial risk.
There are different ways for providers to approach becoming a PSP:
- Create a new health plan.
- Align with health plans that they own, but operate independently.
- Buy or merge with a health plan, such as the case with Memorial Hermann and the Scott and White Health Plan, which joined forces to become the Memorial Hermann Health Plan.
- Establish a joint venture. Several provider systems can go to market as one new, integrated entity. This is exactly how Benevera Health was created, when Dartmouth-Hitchcock, Elliot Health System and Frisbie Memorial Hospital entered a joint venture with Harvard Pilgrim Health Care.
PSPs are well positioned to thrive in today’s health insurance marketplace. As Mitch Morris, MD, Vice Chairman and Global Leader, Health Care Sector at Deloitte, said earlier this year in his report “Provider-sponsored plans: The innovation health care needs,” PSPs “have at their fingertips the very levers that are needed to be successful in the post-transformation world.” These levers he refers to include quick and reliable access to claims and clinical data, strong brands and customer loyalty, and an ability to innovate quickly compared to traditional insurers.
Studies also show that healthcare consumers are most satisfied with their care and experience when the network of healthcare and health insurance organizations are integrated. A recent J.D. Power survey showed that integrated plans have an average overall satisfaction score of 746, which is 63 points higher than that of non-integrated plans. And, since consumers are more likely to trust their medical provider than their health insurer, the strong trust factor can extend to the PSP. This logic was a major reason that Bluegrass Family Health, the insurance arm of Baptist Health system, was rebranded as the Baptist Health Plan last year.
Despite the many advantages of PSPs, there are, of course, challenges. To be successful in the long run, PSPs will need to:
- Build and diversify membership base – The primary goal for PSPs is building their membership. Just like traditional insurers, PSPs must diversify their business. PSPs are increasingly offering both group and individual plans to help them scale, according to the latest AIS data. In 2014, 43 percent of PSPs with more than 10,000 members had both group and individual business, and it grew to 53 percent in 2015.
- Monitor and influence member behavior – There’s a historical paradox between the goals of the hospital system and those of the health plan. Payers are incentivized to reduce hospital stays, emergency room visits and expensive testing – all the ways that hospitals and physicians make money in the fee-for-service system. For a PSP, however, the health system assumes financial responsibility for insured members’ health, and therefore, they are financially incentivized to keep their members healthy. The PSP has a unique opportunity to serve as the front door to the health system for new members. PSP members can sign up for wellness programs or other programs that help them manage chronic health conditions. The PSP also can establish thoughtful member health monitoring systems. Doing so enables the PSP to intervene in a timely manner, minimizing the need for urgent care, which reduces costs and results in better health outcomes.
- Seamlessly integrate with the health system – The member’s experience should be seamless whether he or she is interacting with the payer or provider. Through a private exchange, the PSP can personalize the shopping experience for each member based on clinical data collected from the health system. The member, the health system and the insurer all benefit when insurance is tailored to each individual’s specific needs. By supporting this type of personalization, consumers can evaluate plans based on payment preferences, utilization expectations and provider and formulary preferences. But this personalization requires a strong ecommerce platform, which can show consumers the plans that make the most sense for them and can educate them on their various options.
Unlike traditional insurers, which are encumbered by legacy technology systems, PSPs have the freedom to implement the technologies that best meet their needs. As PSPs consider which technology solutions to invest in, a private exchange ecommerce platform should be an option they seriously consider. These platforms enable PSPs to maintain high levels of consumer satisfaction, help keep patients as healthy as possible and cultivate strong member-for-life relationships.
The undeniable trend of moving to PSPs offers both risk and reward. As payers and providers think about how to navigate this transition, PSPs – in whatever form they take – provide a powerful opportunity to vertically integrate the value chain by bringing the clinical, financial and operational aspects all under one roof, and delivering exceptional, personalized healthcare to consumers.