Black Swan-Is there one in our pond

Black Swan events allude to events that occur that are totally unexpected. Listening to Dr. Paul Markham's discussion, they are events like the oil crisis that occurred and all of sudden people weren't interested in large vehicles that GM and Ford were selling. No, they were interested in smaller vehicles that came from Japan. Then, Japan moved into the medium sized car luxury class, Luxury Export to the U.S., i.e., Lexus. It's these events that spur innovation and market disruption because it causes all of us to step outside of the norms that have been established, and think entirely differently. 

I believe PPACA was a really type of Black Swan event because for years the world of health care was dominated by large provider systems and large insurance companies, and health care seemed to exist in a silo-or so the health care marketplace-arena thought so. But as we all learned, that norm wasn't true.  Health Care access, payment, payment system models, and overall health care economics in the country underwent significant and dramatic change. The majority of the employers across the country, really didn't have an idea as to the change(s) that ACA would bring. But they learned soon enough. And as the ACA changed through a myriad of amendments, we learned more and more.  No doubt, the ACA law was never intended to be a stationary model or event. It was a law that was built to change. The changes in terms of interpretations, amendments and clarifications became greater and greater. Now we realize that the entire intent of the law was not just to change health care, but the American Economy overall as to tax revenues, corporate responsibilities, corporate accountabilities, and a shifting of wealth whereby those companies providing benefits would ultimately take on more indirect debt by paying for, and funding for those people who were working, but didn't have access to health care. The law took on an insidious character whereby, not only the HR staff at companies but also the CFOs and the CEOs had to take notice as to the impact the law was having not just on their benefit plans but also on their overall business plan.   Providers on the other hand promoted the law because they saw and realized the tremendous opportunities for them. Not only, through the mandates, were they guaranteed payment for services, the provisions in the law, i.e. the ACO provision, took the handcuffs off of them in terms of the pursuit of monopolistic behavior.

Now, especially in Wisconsin, another Black Swan event is gearing up to take place. Think about this, how much of the health care economic dollar spent is represented by the summation of revenues of the following: UW Systems, Advocate-Aurora, Froedert-Medical College, Ascension, and soon to be recognized, Life Point? Could we guess $.85-$.90 of every dollar? Now, keep in mind that this discussion has said nothing about the big insurance carriers-BUCHA's as we refer to them. Why? Because the landscape and ground work is NOT about them anymore.  The Black Swan event coming is the shifting of economic leverage from the carriers to the providers. Who get's squeezed in between, of course, the payers.  As the contracts between these major providers and the carriers comes about in 2019-2020 (when most of them come due), we'll see more and more market chaos again.  No longer with certain large carriers be able to "sell" their proprietary "discounts." Although, I often say to "reps." -"Excuse me, I don't care about what your 'discount' is, I care what, at the end of the day, the spend is. So, what I want to know is: Of the money your discounting from the provider charge, how much of that money is going back into your administrative system, how much is going back into your underwriting, and finally what is the 'real' spend discount my client will realize?" Most often, 42% up front, ends up at around 28% in the final detail. Then, when we consider the Wisconsin marketplace at somewhere between a 200%-400%+ reciprocal of Medicare, my response to the final 28% spend is, "So what!" But it does explain why, employers continue to realize "trend" increase after "trend" increase. It is because the discount they bought up front really wasn't what it was purported to be. And for that, I'm sorry, all of you who are in my business out there, I humbly admit, "shame on all of us."

Therefore, what is the Black Swan coming? It is the change in strategy and "game plan" taking place on the provider side. It is also the continuing strategy of merger and acquistion by providers taking place, that will soon mean, providers will be in the position to take on much more risk themselves.  Note: 5 or 6 years ago, Ascension didn't even exist in Wisconsin. Who are they now? The second largest provider system in the state. They are, and will continue to be through growth, the largest provider system in the country with revenues at almost 70 billion per annum.  Also, have you noticed the "risk taking" acquistions that have been made by large providers over the last 4-5 years?   Ask yourself, who's Network Health Plan owned by? Who's Exceedent Owned by? What ACO products are out there owned by Aurora and now Advocate Aurora? If we pervade the Madison arena, which is totally different than the Milwaukee arena, who owns what there? Providers own the major risk taking entities-insurance plans. 

So, what does this all mean for us and for the employers out there? Time to find new and more innovative alternatives!! The magic of third party networks is that they are far more transparent than the BUCHA's and their contracts are nearly as good as the large carriers. Essentially, when we compare the spend and the real contracts between the third party networks and the large carriers, the end of the day spend is better because the contracts are much more transparent whereby the total real discount comes directly back to the payer.   There is even a network that assumes the consumer debt and relieves the provider as well as the payer, on self-funded groups, from chasing the participant to pay the service debt.    This business model is receiving updated and much better flat rate provider contracts as we speak.    

So, when we combine an independent network with a high quality third party administrator that practices "real" population management, not only do we see a more integrated solution, but a more reliable and transparent one as well. The Question then becomes, to the TPA's across the midwest marketplace, "What are you doing in terms of population management to bring about a flat or nearly flat medical trend? What has been your medical and Rx trend over the last 3 years? Five years?"   Then, compare the competitiveness of the TPA administrative fees with that of the large carriers, as well as the access to many more re-insurance entities, and a new piece of daylight might just appear in your horizon.   

Here's my pitch-we have been studying and essentially qualifying a Best of Best class of TPA's, networks, population management, and wellness companies over the last 3 years. We have all the pieces with the capability to bring to self-funded clients a totally seamless model. Soon, we will be annoucing a totally new, innovative, and trademarked model to the marketplace.  It will bring together best of class entities that will present to the marketplace an entirely new approach in terms of benefits and choice for your employees.  Looking for a new model that will help you attract and retain employees, call us at the Starr Group. We'll be happy to give you the details-it's one-1 hour appointment-what do you have to lose? But you do have a "ton" to gain.  Especially when you consider: The Black Swan is coming. 

Thanks-Greg

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