The Little-Known Way Obamacare Could Revolutionize Insurance

In a recent article in New Republic, Dr. Ezekiel Emanuel said that you should "be prepared to kiss your insurance company goodbye forever" because health insurers "as we know them are about to die."

If Dr. Emanuel's diagnosis proves to be correct, the landscape of the U.S. health care industry is headed for even bigger changes than we have seen in recent years. How will this upheaval impact you?

WellPoint's Blue Cross of California Headquarters-Source: Wikimedia Commons 

Changes to ACOs
Dr. Emanuel believes that the Accountable Care Organizations, or ACOs, promoted by Obamacare, along with hospital systems, will elbow health insurers out of the picture. These ACOs bring physicians, hospitals, and other health care providers together to provide coordinated care to patients.

Already, hundreds of ACOs operate throughout the nation. Emanuel maintains that the quality of care provided by these organizations will increasingly improve over the next few years. He predicts that ACOs will either develop or buy the only part of the health care puzzle that they don't currently possess but the health insurers do -- actuarial skills to manage financial risk. Once ACOs master the actuarial side of the business, there won't be a need for insurance companies.

This seismic shift perhaps won't impact Americans as much as you might think. Over 9 million people already use Kaiser Permanente's integrated health care delivery system. If Dr. Emanuel's view is on target, premiums will be paid directly to ACOs or hospital systems instead of insurers. Essentially, only the name you write on the check will change.

There will likely be a catch that could impact you, though. By definition, ACOs represent a restrictive group of health care providers. If you don't like limited provider networks that are currently part of health insurance plans, you might not be thrilled with the prospects of obtaining health care through an ACO or directly from a hospital system. 

Postmortem analysis
This doesn't mean that insurance stocks may collapse overnight (or at all if this prediction doesn't come true). Even Emanuel thinks the extinction of insurance companies -- if it occurs -- will take several years.

More importantly, many health insurers aren't sitting around just waiting to kick the bucket. Some are scooping up provider networks. Humana (NYSE: HUM  ) , for example, bought Concentra in 2010 and Metropolitan Health in 2012. Concentra claims 300 health clinics located in 40 states, while Metropolitan Health operates a network of physicians and other clinical professionals.

WellPoint (NYSE: ANTM  ) also made a big provider acquisition in 2011. The health insurer spent close to $800 million for CareMore Health Group, which operates a network of clinics in California, Arizona and Nevada. At the time, WellPoint noted that the deal represented a "longer-term strategic bet" on an integrated delivery system comprised of both insurer and providers.

The nation's largest health insurer appears to be taking a two-pronged approach. UnitedHealth Group (NYSE: UNH  ) jumped into the provider arena in 2011 with its purchases of several physicians groups in California, including AppleCare Medical Group, Memorial HealthCare Independent Practice Association, and Monarch Health Group. UnitedHealth also markets services including analytics and risk management to ACOs, hospital systems, and other health care providers through its Optum business unit.  

Additionally, all three of these big health insurers participate in ACOs or very similar organizations. Humana signed an accountable care agreement with St. Luke's University Health Network in Pennsylvania last year. WellPoint includes ACOs in its list of models with which the company is experimenting. UnitedHealth has made ACOs an important part of its strategy.

What will the future hold?
I remember another prediction of a fatality decades ago that didn't pan out like some thought it would. MTV picked "Video Killed the Radio Star" as its inaugural video. But video really never killed radio. Radio stations are still very much alive and kicking -- with many of them showing videos on their websites. MTV itself doesn't show that many videos anymore on its flagship network. Instead of the new model killing off the old model, they both flourished -- and both changed along the way.

Kiss your insurance company goodbye forever? Probably not. The industry is surely changing, and changing rapidly, but rumors of insurers' deaths are greatly exaggerated.

How healthy will your finances be under Obamacare?
Insurers can take care of themselves, but what about the rest of America? Will your financial position be helped or harmed by Obamacare? The health reform law seems complex, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.


Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2014, at 7:50 PM, RLMerrell wrote:

    Or cause a revolution......

  • Report this Comment On March 10, 2014, at 5:43 AM, cvdf3476hy54 wrote:

    Obama supporters will go hysterical over this well sourced list of 573 examples of his lying, lawbreaking, corruption, cronyism, etc.

  • Report this Comment On March 10, 2014, at 8:52 AM, TGS wrote:

    Liberals want to destroy our private health care system and go to a one payer system paid for by Americans who work and actually pay federal income tax.

  • Report this Comment On March 10, 2014, at 9:21 AM, AZreb wrote:

    Just more "collateral damage" for the people. Of course, before this happens. we can look for the $5.5 BILLION bail-out for the insurance companies.

  • Report this Comment On March 10, 2014, at 12:11 PM, Michaellaborde wrote:

    Insurance will be put out of business by Obamacare.

  • Report this Comment On March 10, 2014, at 12:27 PM, xasf wrote:

    ACOs are just another creative form of HMOs and prepaid systems similar to Kaiser. If HMOs did not save that much money while improving care, what made ACOs able to accomplish such goals?

  • Report this Comment On March 10, 2014, at 2:36 PM, Leftofcenter wrote:

    Never heard of ACA's however if they can lead to an evolution into a single payer system then they are a good thing. Japan, the UK, Canada, Italy, Norway, Sweden, Finland and others have single payer systems. Japan has the lowest cost per capita healthcare and are the healthiest people in the world. There are better more beneficial ways to invest than in the parasitic Health insurance companies.

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Keith Speights

Keith began writing for the Fool in 2012 and focuses primarily on healthcare investing topics. His background includes serving in management and consulting for the healthcare technology, health insurance, medical device, and pharmacy benefits management industries.

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