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Hospitals Increasingly Consider Becoming Insurers

As insurers consolidate, hospitals are looking to keep money in house

Insurer consolidations, such as the recent deals between Aetna and Humana and Anthem and Cigna, are expected to draw scrutiny by U.S. antitrust regulators and Congress in the coming months. As such mergers take place, hospitals are examining their own prospects as insurers.

Reuters interviewed more than a dozen hospital executives and industry consultants. While hospital and physician groups say the mega-mergers announced this past summer could drive up premiums and limit choices for consumers, insurers believe the combinations will give them more leverage to negotiate discounts for medical care, Reuters reports.

Plans offered by large health care systems such as Kaiser Permanente in California and Geisinger Health System in Pennsylvania have been around for decades. But new private insurance exchanges created under President Barack Obama's health care law have made it easier for a local hospital to offer a health plan and compete with the large national carriers. Many hospital systems have also been buying up individual doctor practices as well as rehabilitation and skilled nursing facilities, which give them a broader network of services.

In a December survey of 45 large health care systems by the Advisory Board Company, one-third said they already offered an insurance plan. Among the remaining respondents, three-quarters said they had either made the decision to start one in the next three years or were considering it.

Hospitals need a large enough network of doctors to attract consumers, and they would also take on the risk of setting monthly premium rates sufficiently high to account for the needs of their sickest patients. That includes arrangements with other providers should a patient require a specialist outside of a hospital's own system. A new health plan should aim for an enrollment of at least 100,000 to spread the risk, said Ray Herschman, president of xG Health Solutions, a Geisinger spinoff launched two years ago to help other hospitals develop insurance plans.

Source: Reuters, October 13, 2015.

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