Analysis and outlook provided by Vachette CEO Mick Raich:
Lately, the insurance world has been on a march for cost savings. In our world of providers and revenue cycles, it seems every day we hear a new negative. This insurance is closing networks, another is ending clinical pathology payments and yet another has come out a lowered their rates across the board to historical lows. So, this is one side of the proverbial cookie.
The other side of the cookie is the political world. We have seen various states over the years build laws saying you cannot balance bill out of network. Next came the surprise laws stating you have to take the insurance plans “maximum allowable” if you are out of network. (FYI: these allowable amounts aren’t vetted or approved; they are simply made up by the insurance plans. That seems fair…) Now there is a push for a national surprise billing law, The No Surprises Act. This will be the death knell. But, why?
The whole plan aims to prevent providers from having the ability to actually negotiate rates. If you have a law that says you have to accept the rates the insurance plans offer, then they basically have a monopoly on what they can pay. If you don’t accept their offer, which I guarantee won’t be much more than their “maximum allowable”, then you are out of network in which case … you get paid the maximum allowable. You can’t balance bill the patient, which in many cases was the only way you had any leverage in a negotiation.
So, in summary, if you can’t balance bill patients and you cannot negotiate the rate, I guess you’ll get insurers’ allowed rates. And, since there is nothing regulating these rates, my bet is to invest heavily in insurance stock. If the No Surprises Act passes, you will see a huge change in healthcare in the next 24 months. Many private providers who have held out and maintained their autonomy will be forced into joining health systems, and in time, only the biggest health systems will have the economy of scale to survive in a market driven down to the lowest common denominator.