Risky contracts for covered lives

by Frank Tiedemann on March 18, 2013

Recently the State of Illinois announced that 16 companies will offer 165 health plans for individuals and small companies on their new health insurance exchange. Imagine the choices and the confusion facing individuals and small companies during open enrollment. Of course hospitals face their own confusion in deciding what pricing strategy to offer these health plans on sale for the first time this October.

Do you offer every plan the same discount? Do you offer the largest plans favorable discounts to capture the greatest volume? Do you offer favorable pricing to health plans that currently provide you with the greatest patient volume? Do you limit your best price to a handful of the largest national plans with the best name recognition? Do you provide favorable pricing to the health plans that enter into a commercial ACO relationship with you?

In the absence of an ability to underwrite the risk associated with an undefined population, health plans are demanding deep discounts from hospitals in the range of 30% off best pricing. The obvious danger is that this new pricing becomes the ceiling not the floor for future managed care contracts. Hospitals are making very risky bets in the hope of capturing covered lives under these circumstances.

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