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Becker’s Healthcare Podcast
Inside the Payer Shift: Prior Auth Reform and the Rise of ICHRAs with Jakob Emerson
00:14:20
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- [00:01]
Beckers Healthcare
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- [00:38]
Scott Becker
This is Scott Becker with the Becker's Healthcare Podcast. I'm thrilled today to be joined by payer guru and brilliant journalist Jacob Emerson. Jacob helps head up the editorial team at Becker's Healthcare and talks to us regularly about issues in the payer area that he's following. Jacob, why don't you take it away? What are a couple of the stories that you're following currently in the payer world and what are you seeing out there?
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Jacob Emerson
Yeah, Great to talk with you Scott. So earlier this week on on Monday the wider insurance industry announced some prior authorization reforms that they are promising to enact over the next few years or actually about 18 months. So we can dive into that and what that entails and what we're already hearing from providers in terms of doubt being cast on insurers ability and overall commit to actually implementing those reforms. And then I thought we could talk about an interesting story based on an interview I did with WellStar Health System down in Georgia and a new insurance model that they're investing in as a way to what they say is to prep for how they think their their payer mix will change in the next few years.
- [01:54]
Scott Becker
No, thank you very very much. Can I ask you one more question before we get started? RFK was recently talking about there was some news about him trying to get rid of pre authorization and saying Americans hate it etc. And obviously Americans hate it just like they hate paying rent. But can he really dictate that they get rid of pre authorization and how does that look in reality? Have you followed that issue a lot?
- [02:19]
Jacob Emerson
Yeah, I mean and that's what I was going to talk a little bit about today because I think some of these reforms with prior author was done in tandem with HHS because HHS and the CMS administrator held a press conference about this and these reforms. So it sounds like a lot of these conversations happened together. But in terms of could HHS get rid of prior authorization across the industry? No. I mean these are private companies that you know, are using their own policies to do this. So you would probably have to, you know, enact a law in Congress, if that was something that we were ever going to do. But I think on, on the flip side, you know, the, this, this, this process, prior authorization, it exists because saves insurers a lot of money. They, if they control how much care is administered and, and things like that, then they, at the end of the day, for a lot of these publicly traded companies get to keep those, those dollars. So they, they'd certainly fight that if that was something that the government tried to pursue.
- [03:27]
Scott Becker
Yes, and there's certainly sort of like the, the good, the bad, the ugly. Preroth came out originally because of concerns about people doing things that weren't needed. It then became what feels like beyond that, more of an economic tool and a policing mechanism to sort of stop care from giving being given. And at least it bleeded over. And people cite all these stats that 93% of things that were originally denied ultimately get put forward as positive. But, but at the end of the day, some kind of policing of what providers do is needed. It just feels like it went overboard, at least from the provider standpoint.
- [04:09]
Jacob Emerson
Sure. You mean the, the payer standpoint.
- [04:12]
Scott Becker
Exactly, exactly.
- [04:14]
Jacob Emerson
No, I mean, I, I, I would agree. And you know, I think everything you said is, can be true all at the same time. The extent of which I think probably depends on which industry stakeholder you're talking to. But from the insurer's perspective, yes, prior into place to control the cost of care, to prevent what we know some providers do do, which is overprescribe or certain services or unnecessary services. But on the flip side, you know, these are publicly traded companies. This is a tactic to preserve their, their premium dollars and, and to make money for shareholders. And, and you know, we know physicians, not even the trade groups, but individual physicians say it's a total burden administratively. They have to, to go through these processes, which every insurer has a different process. So I think it's all true that it's a complete headache. It's a waste of time and money for the providers a lot of the times, but that insurers do use this as a cost control method. But then you also look at cost trends over the last few decades and has it really controlled the cost of care? Well, probably not really, given that the cost of care goes up every single year. So in terms of what was announced this week, we've got 15 insurance companies from across the country, both private or nonprofit, and, and then the large publicly traded guys committing to more streamlined prior authorization processes. So they're going to implement standardized electronic submission processes by 2027 and they're aiming for 80% real time approval. So the provider would know immediately whether that, that prior AUTH has been approved or denied, which as we know right now can sometimes take. And then starting in 2026, plans are going to have to reduce the amount of requirements for these for these prior AUTH requests. They're going to have to honor existing authorizations when a patient transfers plans. So for example, if I had Blue Cross at my one job and I got prior author approval and then I switched a job and I have United Healthcare Insurance, UnitedHealthcare is going to have to honor the prior author approval from Blue Cross, if that makes sense. And then they're just, they're going to have to provide clear decision explanations for why they made these decisions. Better appeal. And this is going to apply across commercial Medicare Advantage managed Medicaid. So about over 250 million Americans in theory will be affected by this, these announcements.
- [06:46]
Scott Becker
No, it's fascinating. Of course this is intended in part by the big payers to preempt some of the regulation. And of course what you'll see from the provider community is feeling like it doesn't go far enough. I'm sure that that will be their perspective.
- [07:02]
Jacob Emerson
Well, and I think the, the main point here though, Scott, is this is all completely voluntary. There's no new laws here, there's no new rules or requirements being put into place by the government. And insurers have made many promises before in the past on, on prior authorization alone that don't ever come to fruition. And so I think that's really the key question is how do you fulfill these commitments that they're making while also maintaining the financial status quo that they, that they owe their shareholders. So, so we'll see what happens. But I've already heard providers talking about how this is really just cost shifting the administrative burden that, that there will be new revenue streams for repairs through, maybe you'll have to pay for a prior authorization request or there'll be increased retrospective denials. So yes, you get the, the prior authorization approved and the claim approved, but then the insurer claws back the money a few months later, which they are allowed to do. So you know, we'll see what happens. But again there's been promises made in the past that have not been kept by, and again this is all very much voluntary commitments. So I think we'll have to just see how this plays out.
- [08:14]
Scott Becker
Yes, and so Many of these insurance companies are so sophisticated and so technologically deep too, that they can work with these things and try and fit the right calibration to make it work for them. But almost whatever they do is going to be aimed at policing care delivery. And no matter what they do, the providers are going to bristle at that some, but they're trying to at least shortcut some of the regulation by saying they're good actors and they're doing this and we'll see how that plays through fasting. Tell us about wellstar and what they're doing.
- [08:41]
Jacob Emerson
Yeah, totally. So the investment arm of wellstar, which is technically a separate company, it's called Catalyst by wellstar, they've invested in Venter, which is a digital health startup that administers individual coverage health reimbursement arrangement plans, which are colloquially called ICRAs. And we've had Venter actually speak at our conferences. It's a really interesting company. And you and I have talked about this new model before, Scott, but it's really starting to gain steam and it's only existed for about five years now. Created by the Trump administration under the broader structure of the ACA where basically instead of the employer going to the health insurance company and buying a policy for all their employees, the employer gives tax free money to their employees who can then turn around and go purchase an individual ACA plan on their state's marketplace, which we've been told, you know, offers a lot more customers, organization. You can, you know, find a plan that fits better for you. It's not a one size fits all model that you would get under a traditional group policy. And the thing about this is it's, it is booming. I mean, we're seeing employers of all size across the country take up this new model because it is cheaper a lot of the time. And adoption of this new model has grown by a thousand percent since 2020 alone. And now there's, we, we know that there's about 13,000 businesses across the country offering some kind of coverage like this. And it's broadly estimated that up to a, across the country are enrolled again in some kind of coverage like this. It's a, it's a little bit of a sticky numbers. We're not sure entirely just because of the, the incohesiveness of it all. But that's generally what this market looks like right now, only five years in. And so health systems, you know, they're not blind to this. They're seeing that this could change their payer mix. Given that you're having Patients go from traditional employer sponsored commercial coverage to these, to these ACA plans. And so they're trying to figure out how does that work for us, how does that impact, you know, the patients we're seeing? How does that impact the services we're providing and overall the top line of the health system. And so we talked to wellstar about this. That's exactly why they're investing. They want a piece of this market, but they also want to get better insight into how this is going to affect them in the years to come. And that's exactly what they told us when we asked them, you know, what would you tell other health systems out there about how to prep for this? And they said explicitly, the CEOs and the CFOs, the RC, LCM teams, the payer contracting teams at these health systems, they need to take a look at this and they need to really understand what is coming down the pipeline. And if this structure continues to gain market share, which it is, it is expected to do, and it will only be boosted by the, by the Republicans budget bill because there's some changes in there around ICHRA as well. If all this comes to fruition or continues to grow, it means big changes, reimbursement wise for hospitals. And so that's why wellstar is getting in on this early and literally putting money behind some of these startups.
- [11:44]
Scott Becker
No, that's amazing. And we had talked to one, we had talked to one company in the space called Thatch, which is one of the early actors in it, run by a CEO called Chris Ellis who was on the podcast. And so this was a educational experience as to what you're seeing here. Just fascinating to see the growth in these types of businesses and areas. No, fascinating, Jacob.
- [12:08]
Jacob Emerson
I agree. And it's, it's, we're witnessing basically the, the commercial insurance market change before our eyes. So you know, how that will all, you know, shape out in terms of what the big payers will do in this space. We'll see Ventures actually received was a seed money from UnitedHealthcare. But you know, we've heard from payers that they're worried that this will cannibalize their other, their, their traditional commercial lines of business. So some of them are a little bit more hesitant to jump in on this business but, but others like Centene are full speed ahead. And we've, we've interviewed their new ICHRA president, their first ever ICRA president on the Payer podcast. So, so we'll see. You know, they all have different strategies, but it's it's definitely changing the market as we know it.
- [12:51]
Scott Becker
It'll be fascinating to watch and what you said is fascinating there too. It'll be interesting to see not just how the payers go after it, but how employers go after it. If employers start to find that this is a much easier way to do business, then you'll see them very, very much jumping into this and going all in on it. If it's easy to eat, easy to sort of implement, if administratively it works, and if it doesn't create tremendous, you know, if their employees like it. If their employees like it, then you'll see more and more of this. Yeah, employees feel like they can get coverage at a reasonable cost out there for it turns out they're getting money from their employer and they can't translate into coverage that they can understand. Or if the market for coverage becomes so impossible to navigate, then it'll be harder to move in this direction.
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Jacob Emerson
Yeah, that's how these companies, startups sell themselves, that they are the platforms that help the companies and the employees navigate through this new system. But what I'm hearing, Scott, is, you know, small businesses that really have never offered insurance before, who couldn't afford it, that's who is the main, the main market here. But what is, is to watch is when we start to see some of the large, you know, 20 to 50,000 employee companies start to transition towards this kind of model, which we are hearing there is interest out there and it's starting to happen. That's when it seems like the snowball will really begin.
- [14:07]
Scott Becker
And that makes a ton of sense. Jacob, again, I want to thank you for joining us today on the Beckers Healthcare podcast. I always learn something. Thank you so much for joining us.
- [14:17]
Jacob Emerson
Thank you, Scott.