The Little-Known Way Obamacare Could Revolutionize Insurance

How ACOs could affect the insurance landscape over the long term.

Mar 9, 2014 at 12:15PM

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 Building

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.

 

Keith Speights has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers