After signing a letter of intent in late May, St. Louis, MO-based BJC HealthCare and Kansas City, MO-based Saint Luke’s Health System announced on Wednesday that they have signed a definitive merger agreement, having received the necessary regulatory approvals.
Based on opposite sides of the “Show-Me State,” the systems’ markets do not directly overlap. The merger, expected to close on Jan. 1, 2024, will create a $10B revenue, 28-hospital system spanning Missouri, southern Illinois, and eastern Kansas. The two systems plan to retain their respective brands and will be dually headquartered in St. Louis and Kansas City.
The Gist: BJC and Saint Luke’s are following in the footsteps of other recent mergers involving large health systems with no geographic overlap, which regulators have allowed to move forward. However, recent history shows there’s more to closing a deal than just passing regulatory muster.
Both the Sanford-Fairview and UnityPoint-Presbyterian mergers were called off earlier this year for non-regulatory reasons, including the concerns of local stakeholders.
Given the difficult financial environment and the growing threat of vertically integrated payers, health systems looking to pursue scale strategies must ensure they will actually realize the promise these combinations may hold.
At UnitedHealth Group’s (UHG’s) 2023 investor conference, Optum Health CEO Amar Desai, MD, revealed that Optum has added nearly 20K physicians in 2023, bringing its total physician count to nearly 90K.
None of these acquisitions were formally disclosed, including this year’s largest known pickup, Crystal Run Healthcare—a Middletown, NY-based group with over 400 doctors—which only became public after an internal email was shared with the press. Optum was already the nation’s largest employer of physicians by far, and its nearly 30 percent growth in 2023 only extends its lead.
The next two largest physician employers, Ascension and HCA Healthcare, manage a combined total of around 100K. Optum also employs or affiliates with an additional 40K advanced practice clinicians.
The Gist: Optum’s physician acquisition binge continues at a stunning pace: it has tripledits physician ranks since 2017, and now controls nearly 10 percent of all physicians in the US. But now that it has amassed a veritable physician army, there are emerging signs that it’s turning attention to right-sizing and rationalizing this massive portfolio.
Recent layoffs at the Everett Clinic and the Polyclinic in greater Seattle suggest an end to Optum’s more hands-off initial approach to integration. While each of Optum’s myriad medical group acquisitions has been too small, relative to total company revenue, to trigger regulatory review, the proposed updates to federal merger reporting requirements could put a damper on its unfettered provider buying spree.
According to a Wall Street Journal exclusive published this Wednesday, Bloomfield, CT-based Cigna and Louisville, KY-based Humana, two of the nation’s largest health insurers, are exploring a merger that could close as soon as the end of this year.
With Cigna valued at around $83B and Humana at roughly $62B, their potential combination would be the largest domestic merger of the year, not just in healthcare, but across all industries.
According to anonymous insiders, the companies are discussing a cash-and-stock deal, but nothing has been finalized. Should an agreement be reached, the merger is expected to receive close attention from antitrust authorities. Both Humana and Cigna have attempted to merge with rival insurers over the past decade, only to see the deals blocked on antitrust grounds.
The Gist: This would be a blockbuster deal, putting the combined entity on par with CVS Health and UnitedHealth Group.
Though Cigna and Humana have relatively little direct overlap in their health insurance businesses—Humana recently announced it will exit the commercial group business to focus on its more successful Medicare Advantage (MA) offerings and Cigna, mostly a commercial insurer, is reportedly shopping its much smaller MA business—their respective pharmacy benefit managers (PBMs) may be an antitrust sticking point. (By market share, Cigna’s Express Scripts is the second-largest PBM, while Humana’s CenterWell Pharmacy is fourth.)
Given the Biden administration’s focus on targeting potentially anticompetitive healthcare mergers, as well as rising Congressional scrutiny around PBMs, this potential merger is sure to face many hurdles prior to closing.
November 2023 marks seven months since the federal government began unwinding Medicaid’s pandemic-related continuous enrollment guarantee. Because Medicaid coverage is associated with improved access and better health outcomes, stabilizing enrollment throughout the public health emergency was a vital public health measure. Now states must grapple with the challenge of returning to normal operations, which means reviewing eligibility for more than 90 million beneficiaries.
By early November, at least 10,135,000 people had been disenrolled. Overall, two-thirds of people had their coverage renewed while about one-third lost eligibility.
The rate of disenrollment during renewal varies greatly, depending on a state’s underlying Medicaid eligibility rules, capacity to process renewals, and strategies for simplifying the process and reducing risks of error. Illinois showed a disenrollment rate of less than 10 percent, while Florida’s rate was one-third. Disenrollment of children appears to be happening at a high rate, even though they should be protected because of the relatively generous eligibility standards governing children’s coverage under Medicaid and the Children’s Health Insurance Program (CHIP).
Among those disenrolled, more than 70 percent lost coverage for procedural reasons, like failure to return forms or an inaccurate mailing address. High procedural disenrollments also likely reflect agency error (e.g., miscalculating earnings information), but available data do not track the proportion of procedural disenrollments that result from such mistakes.
The high procedural disenrollment problem is exacerbated by the speed at which some states are acting — far faster than required under the federal 12-month unwinding timeline allowed by Congress.
Compounding matters, anecdotal evidence suggests that people terminated for procedural reasons are also being turned away from the health insurance marketplace because states close cases without determining if beneficiaries are truly ineligible for Medicaid. This is happening even though marketplaces and Medicaid agencies are supposed to coordinate activities to ensure that people losing Medicaid can obtain marketplace coverage if eligible.
Disenrollment rates are the result of a complex process, excessive speed, and overtasked workers, along with states’ underlying eligibility rules for low-income children and adults. If these rules are more restrictive, they increase the disenrollment rate. In states that have not adopted the Affordable Care Act (ACA) expansion, the potential for major coverage loss is far higher. In nonexpansion states, the rules for poor adults (who had coverage throughout the pandemic, including postpartum women or teenage children who have now reached young adulthood) require an extremely low income level — 16 percent of the federal poverty level in Texas or about $4,000 annually for a family of three in 2023. As stated previously, the disenrollment of children has been far higher than expected, affecting even newborns during the first year of life when enrollment is guaranteed.
The ACA streamlined and simplified Medicaid’s historically complex enrollment and renewal process by eliminating in-person interviews, automating data collection functions, and instituting an ex parte process, in which the state performs reviews without placing unnecessary renewal burdens on beneficiaries. In addition, a historic 1970 Supreme Court decision governing due process protections for people receiving means-tested public assistance benefits requires states to fully and comprehensibly explain in writing why coverage is ending and gives beneficiaries the opportunity to contest a termination decision before it takes effect. These constitutional safeguards are especially crucial to Medicaid because termination implicates not only coverage, but access to health care itself.
In 2022, long after the ACA simplification reforms were instituted, the U.S. Department of Health and Human Services (HHS) concluded that of the 15 million people estimated to lose Medicaid during the unwinding process, nearly 45 percent would lose coverage because of procedural issues associated with navigating the renewal process. HHS also foresaw that children and younger adults (including very poor parents) would be disproportionately affected. The evidence appears to be bearing both predictions out.
The federal government and advocates have begun to take action to mitigate erroneous coverage loss. The 2022 unwinding legislation empowers the HHS Secretary to impose corrective action plans in states showing excessive procedural disenrollments. In states that fail to comply with such plans, HHS would “require the State to suspend . . . terminations of eligibility for medical assistance . . . that are for procedural reasons until the State takes appropriate corrective action.” Under this special power, HHS has urged states to guard against improper disenrollments without an individualized ex parte review and also ordered reinstatement of a half-million children and adults disenrolled simply because other family members were no longer eligible. The agency has ordered states to halt disenrollment until corrective action is taken.
In a first-of-its-kind case, beneficiaries in Florida who have lost coverage without required constitutional protections have sued for reinstatement and to halt further disenrollment. Plaintiffs include children (some with serious disabilities) and adults. The complaint describes state notices that are incomprehensible by people with average education and that fail to convey which family members are losing coverage, why coverage is being lost, and the right to a pre-termination hearing. Beneficiaries in other states may follow suit.
The current unwinding situation presents a unique challenge for states, health care providers, and above all, millions of beneficiaries who depend on Medicaid. It is important to remember that continuous enrollment enacted during the pandemic was a response to three structural limitations that are part of everyday Medicaid: first, highly restrictive eligibility limits, particularly in states that do not cover low-income working-age adults; second, the lack of annual guaranteed enrollment for all beneficiaries, regardless of age or basis of eligibility; and third, a redetermination process that, despite improvements, continues to face enormous operational challenges.
Health care sharing ministries (HCSMs) claim to offer health coverage: members follow a common set of religious or ethical beliefs and make monthly payments to help pay the qualifying medical expenses of other members.
These products often appear comparable to insurance, but they lack the consumer protections and benefit standards that apply to comprehensive coverage. HCSMs are under no obligation to pay members’ claims and often require members to negotiate discounts or seek charity care from health care providers.
Massachusetts and Colorado have begun to fill these gaps, and the data they have obtained are revealing. The Massachusetts marketplace began requiring HCSMs to report key data in 2020; and last year, Colorado became the first state to require comprehensive data from all HCSMs enrolling Colorado residents. The state’s first report provides a detailed look at HCSMs selling memberships in Colorado.
What’s in Colorado’s First Report?
The data show HCSMs have grown to include far more members than previously understood and shed light on risks for consumers who pay monthly fees with an expectation that their membership will cover health care claims.
Greater than expected enrollment. National enrollment for the HCSMs included in the Colorado report is larger than previously recognized: 1.7 million people. In Colorado alone, HCSM enrollment (at least 68,000) is equivalent to 30 percent of marketplace enrollment. Because HCSMs often exclude essential health services and are therefore more attractive to people who are relatively healthy, enrollment of this size, relative to marketplace enrollment, may increase premiums for marketplace plans.
It also means a significant number of people have forgone comprehensive coverage and federal subsidies to buy this alternative arrangement that does not guarantee health care costs will be paid.
One HCSM recently surveyed its members and found 42 percent had incomes under 200 percent of the federal poverty level (about $50,000 annually for a family of three). Individuals and families at this income level would likely be eligible for low- or no-cost coverage in the marketplace or Medicaid.
Broker-driven marketing. Seven HCSMs reported using brokers to market their plans; some said they rely heavily or exclusively on brokers to grow membership. About one-third of all enrollment in these seven HCSMs was attributed to brokers.
Because HCSMs pay substantially higher commissions (15% to 20%) than marketplace insurers (2.6%) typically do, brokers have an incentive to place consumers in these arrangements.
Unpaid claims. Though their members submitted about $362 million in claims during the reporting period, the HCSMs asserted that only one-third of this amount — about $132 million — was eligible for payment. During the same time period, HCSMs brought in about $97 million, resulting in an apparent shortfall of $35 million. The low share of eligible claims is attributable in part to the HCSMs’ strict rules that disallow reimbursement for various types of care.
In addition, HCSMs have broad flexibility to refuse sharing of a claim even if it otherwise meets the rules. For example, HCSMs often require their members to negotiate their own discounts or seek charity care from health care providers before their claims will be eligible for sharing.
Essential care ineligible for sharing. HCSMs reported they exclude from sharing any expenses for certain essential health care, including costs related to preventive care, mental health care, and substance use disorders, and exclude coverage for many preexisting conditions, including asthma, autism, cancer, diabetes, and hypertension. Alternatively, comprehensive insurance must cover essential health benefits and all preexisting conditions.
Getting Uniform Data Is Challenging but Essential
The first-year report shows the challenges of obtaining data from HCSMs that are not subject to any of the standards or oversight that apply to comprehensive health insurance. Regulators determined that several HCSMs marketing memberships in Colorado had failed to report data and getting complete and accurate data from those that did was difficult. A second report, recently released, indicates those challenges continue, making it impossible to draw comparisons between the two years. Still, by requiring HCSMs to use templates and state-defined terms to submit data in a uniform way, Colorado regulators seem to be on the path to a clearer understanding of how HCSMs are working, their financial solvency, and their effect on state residents and the health insurance market. Indeed, data in the second report show the risks to consumers described above persist.
Looking Ahead
Colorado’s annual requirement to share data will help regulators better understand HCSM operations and finances and, with improved compliance to data submission requirements, should allow for comparisons across HCSMs and from year to year. Data can help point regulators to HCSMs that warrant closer scrutiny and identify for policymakers ways to better protect consumers who may lack a clear understanding of the financial risks of HCSM membership.
HENRY KOTULA 