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The Keckley Report

The Widening Gap between Health Insurance Coverage and Consumer Recognition of Value

By August 15, 2022March 1st, 2023No Comments

Last week, a federal judge in Alabama approved a final settlement of $2.67 billion with Blue Cross Blue Shield companies in a 2012 lawsuit over alleged anticompetitive behavior that negatively affected members. The deal allows Blue Cross Blue Shield Association health plans latitude to diversify their businesses and operate across state lines including targeted offerings to employers in other states.

The settlement came as no surprise to the 34 BCBSA affiliated plans and their competitors: preliminary approval for the settlement had been granted by the judge in 2020. Now fully approved, it takes effect after 30 days unless plaintiffs like Home Depot and others dissatisfied with the judgement force delay.

It marks the end of an era for Blue Cross plans that collectively cover 109 million Americans: while enjoying brand distinction recognized by consumers and preferential coverage agreements in some states’ employee and Medicaid programs, the final agreement gives BCBS plans wider latitude to compete against the major nationals (aka United, CVS Aetna, Humana, Cigna, Centene), 128 provider-sponsored health plans offered through health systems/integrated medical groups (Priority Health, Marshfield Clinic, Kaiser et al) and emergent insurtechs scrambling for market acceptance and scale (Clover, Bright, Alignment Health, et al).  The final approval comes on the heels of Blues’ plan consolidator Anthem’s rebranding as Elevance June 28 and notable diversification announcements by Cambia, HCSC, GuideWell and other ‘Blues.’

My take:

The immediate implication for increased competition in the health insurance sector resulting from this ruling will be minimal: The fine, which will be prorated across the 34 plans, is already cooked into enrollee premiums as “administrative expense” including $627 in legal fees and $41 million in litigation costs. Notably, the legal fees are being challenged by the plaintiffs in a separate filing. Every Blues plan and their competitors anticipated this final agreement. No surprises,

Tension between hospitals, medical groups and Blue Cross plans will intensify, especially in the 12 states where Blue Cross plans dominate coverage. Hospitals accuse BC plans of heavy-handed reimbursement negotiations, medical groups despise health insurer’ utilization reviews and under-payments and BC plans decry provider wastefulness, inefficiency and consolidation to gain contracting leverage. Hospitals and physicians believe they’re under-reimbursed for essential work and insurance exec’s overpaid for non-essential tasks. Tension is growing.

The longer-term issue for insurers is the value proposition of private coverage for individuals.. The traditional value proposition for health insurance coverage is predicated on protections against financial ruin for households. At the end of 2021, 30 million American’s lacked health insurance coverage of any kind—down from 49 million in 2010. A 3-year extension of subsidies allowing up to 13 million households to purchase coverage was included in the Inflation Reduction Act that passed Congress. But premiums for private health insurance are increasing faster than wages for most Americans, and employers are shifting more out-of-pocket restrictions to their employees. And competition in 37 states where 3 or fewer plans control 80% or more of the private coverage contribute to higher premiums for consumers and lower reimbursement to providers. Census Bureau data show 19% of US households have medical debt (median $2000): 40% of these have private coverage. The problem for insurers including the Blues is loss of trust that coverage is an effective hedge against burdensome medical debt.

The court’s final approval of the settlement is the most significant change in the history of the Blue Cross Blue Shield plans since they merged in 1982. While jealously protecting their brand, influence and market dominance, the BCBSA restrictions enabled others to invest, diversify and grow more successfully. What’s next for traditional BCBS plans is unknown, but what’s clear is the value-gap is widening between individuals, families and employers and private insurers.


Federal judge gives final approval to $2.67B BCBS antitrust settlement

AHIP July 2022 Mental Health Survey AHIP August 4,2022


Census Bureau: Healthcare is biggest employer but labor force productivity lags: The healthcare workforce is 22 million workers and accounts for 14% of all U.S. workers. Retail is #2 with 16 million workers. Per the US Department of Labor, the average annual increase in productivity from 1987-2020 was 5.4%; workforce productivity in healthcare settings lagged: hospitals +.4%, labs +2.5%

Census Bureau’s 2019 American Community Survey (ACS)

Primary care workforce changes to 2030: Changes in Total Supply, Additional Demand and Projected Adequacy in 2030:

·        Family physicians – 6% increase in supply, 13% increase in demand

·        General internal physicians – 13% increase in supply, 22% increase in demand

·        Geriatric physicians – 8% decrease in supply, 50% increase in demand

·        Pediatric physicians – 2% increase in supply, 5% increase in demand

·        Nurse practitioners in primary care – 107% increase in supply, 16% increase in demand

·        Physician assistants in primary care – 42% increase in supply, 15% increase in demand

Bureau of Labor Statistics: Primary care workforce: 2018

Study: private equity-owned physician practices deal activity: This cross-sectional study examined geographic variations in PE penetration of US physician practices (share of physicians in PE-acquired practices) across 6 specialties: dermatology, gastroenterology, ophthalmology, obstetrics/gynecology, orthopedics, and urology. Findings:

·        In 2019, 97, 094 physicians practiced in the 6 specialties; of these, 4738 (4.9%) worked in PE-acquired practices. Private equity penetration was highest in dermatology (7.5% [851 of 11 324]), followed by gastroenterology (7.4% [845 of 11 484]), urology (6.5% [492 of 7609]), ophthalmology (5.1% [741 of 14 493]), obstetrics/gynecology (4.7% [1352 of 28 493]), and orthopedics (1.9% [460 of 23 891]).

·        Among 200 HRRs with PE penetration, a mean (SD) of 5.6% (6.3%) physicians were in PE-acquired practices. Private equity penetration was highest in the Northeast (6.8% [1270 of 18 708]) and lowest in the Midwest (3.8% [638 of 16 613]). Twelve states and Washington, DC, had an above-average share of physicians in PE practices; 11 states had no identified acquisitions. Washington, DC (18.2% [188 of 1031]), Arizona (17.5% [326 of 1866]), New Jersey (13.6% [464 of 3409]), Maryland (13.1% [195 of 1488]), Connecticut (12.6% [212 of 1688]), and Florida (10.8% [741 of 6852]) had the highest PE penetration.

Singh et al Geographic Variation in Private Equity Penetration Across Select Office-Based Physician Specialties in the US JAMA Health Forum August 3, 2022;3(4):e220825. doi:10.1001/jamahealthforum.2022.0825

JP Morgan: disparities widespread in employed population: Disparities across chronic conditions, maternal health and behavioral health are widespread among enrollees with employer-sponsored coverage.

·        60.4% of Black enrollees had high blood pressure, as compared to 40.7% of Asian enrollees, 44.2% of Hispanic enrollees and 46.0% of white enrollees.

·        Black (13.4%), Hispanic (13.3%) and Asian (14.1%) enrollees were more likely to have diabetes than white enrollees [(8.8%)

·        The overall rates of serious psychological distress, anxiety and depression among enrollees were 9.5%, 13.3% and 14.1%respectively. –

·        19.8% of enrollees use tobacco, 30.1% report heavy alcohol use and 18.8% use illicit drugs.

·        11.9% find it difficult to pay medical bills

·        9.8% cost-related Rx non-adherence.

·        6.9% delayed medical care due to cost.

JP Morgan Chase & Company, Health Disparities in Employer-Sponsored Insurance, July 2022


CPI unchanged in July, health costs up: The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3% in June, the U.S. Bureau of Labor Statistics reported Last Wednesday. Over the last 12 months, the all-items index increased 8.5% before seasonal adjustment. Key changes for the month: gasoline index fell 7.7%, energy index fell 4.6 %, food index increased 1.1%, home index rose 1.3%, medical care index rose 0.4% in July after rising 0.7% in June, hospital services increased 0.5% and indexes for physicians’ services and for prescription drugs both increased 0.3% in July.

Consumer Price Index Summary August 10, 2022


Study: 38% of Americans delayed care in last 6 months due to costs: 98 million Americans chose to delay or forgo health care treatments, cut back on routine expenses, or borrow money to cover their medical expenses, according to a new survey of 3001 US adults conducted in June by West Health and Gallup. Notably, in June, Key findings: the health care inflation was half the overall national inflation rate at 4.5%.

·        26% of people surveyed reported delaying or avoiding medical care or buying prescription drugs due to higher health care prices

·        62% of respondents from households earning less than $24,000 a year, and 51% of respondents from households with an annual income between $24,000 and $48,000 took steps to cut household spending.

·        59% said they were driving less, 30% said they were cutting back on utilities, and 21% said they had delayed or skipped medical care or prescription drugs to address inflation concerns.

·        39% said they were “extremely concerned” or “concerned” about being unable to pay for care, including 33% of Democrats, 44% of Republicans, and 42% of independents.

Four in 10 Americans Cut Spending to Cover Healthcare Costs Gallup August 4, 2022

YouGov poll: consumers search insurer websites for healthcare prices: The March survey of 2026 US adults conducted online released in July: findings:

·        36% have researched prices for healthcare services. Of these, 60% would look to their insurance provider for pricing information, with nearly half (44%) reporting they would look on the websites of health insurers, and more than a quarter (29%) would call their health insurance company.

·        39% would visit a physician or hospital website and 34% would call their physician or hospital for pricing information

·        32% would access a patient portal for the information

·        29% would call their insurance company

·        44% of survey respondents say their health insurance company does not provide pricing information for local healthcare providers, and 34% don’t know if this information is available.

Survey Finds 36% of Americans Have Researched Healthcare Service Prices, 60% of Those Who Do Would Look to Health Insurance Companies for Pricing AKASA July 21, 2022


California Judge holds Walgreens responsible for opioid epidemic in San Francisco: Last Wednesday, a federal judge found that Walgreens helped worsen the opioid epidemic in San Francisco. U.S. District Judge Charles R. Breyer said in a 112-page opinion he found the company liable “for substantially contributing to the public nuisance,” the opioid epidemic, in San Francisco. Walgreens pharmacies dispensed hundreds of thousands of suspicious prescriptions in the city between 2006 and 2020 concluding that pharmacists weren’t given enough resources to perform the necessary steps to prevent this.

The civil lawsuit was brought by the city and county of San Francisco in 2018 against Walgreens and a number of other companies, including manufacturers Teva Pharmaceuticals and Allergan and distributor Endo Pharmaceuticals Inc. It also named distributors McKesson Corp., AmerisourceBergen Corp., and Cardinal Health Inc., as well as drugmaker Johnson & Johnson

Walgreens Helped Fuel San Francisco Opioid Epidemic, Judge

Prescription Drugs

Study:  DTCA ads for cardiovascular drugs produce favorable impressions but limited behavior change: In this cross-sectional study of 2874 individuals at risk of cardiovascular disease, participants in the treatment groups viewed 5 minutes of prescription drug advertisements while those in the control group viewed advertisements for other consumer products. Findings:

Participants in the treatment groups were more likely to report favorable perceptions of pharmaceutical manufacturers and medication-related behavior intentions, such as switching medications, though there were no statistically significant differences in behavior intentions for diet and exercise between the treatment and control groups.

Eisenberg et al Association of Direct-to-Consumer Advertising of Prescription Drugs with Consumer Health-Related Intentions and Beliefs Among Individuals at Risk of Cardiovascular Disease JAMA Health Forum August 12, 2022;3(8): e222570. doi:10.1001/jamahealthforum.2022.2570


Study: switchers from traditional Medicare drove MA growth pre-pandemic: Background: In Medicare Advantage (MA), private insurers receive capitated payments to cover enrollees’ health care needs. Enrollment in MA doubled from 2011 to 2020, with 42% of Medicare beneficiaries (>26 million people) enrolled in MA plans in 2021. Recent growth has been greater for Black and Hispanic beneficiaries and those with low income compared with White beneficiaries and those with higher income.

The objective of this cross-sectional study was to understand trends in enrollment growth from 2012 to 2019 and characteristics of individuals who newly enrolled in MA or switched from TM.

·        From 2012 to 2019, the proportion of new MA enrollees who switched from TM increased from 65.9% to 71.1% and the proportion of new enrollees who selected MA increased from 18.1% to 24.7%. Switchers in 2019 were older (mean [SD] age, 68.4 [10.9] vs 63.5 [5.3] years), less likely to be Hispanic individuals (10.5% vs 14.6%), and more likely to be Black individuals (14.9% vs 11.9%), to be dually eligible for Medicaid (29.0% vs 19.3%), to have a disability (30.5% vs 16.6%), and to die within 2 years of enrollment (7.2% vs 2.4%).

·        From 2013 to 2019, the proportion of returning enrollees who selected MA each year increased from 27.6% to 37% and the proportion of beneficiaries who switched from TM to MA increased from 3.5% to 5.5%.

·        Between 2012 and 2019, newly enrolled beneficiaries who selected MA were more likely to be Black individuals (11.9% vs 9.4%) and dually eligible for Medicaid (19.3% vs 12.8%). Five years after enrollment, 77.1% of those who switched to MA were still enrolled in MA compared with 85.2% of new enrollees.

Meyers et al Trends in the Source of New Enrollees to Medicare Advantage From 2012 to 2019JAMA Health Forum August 12. 2022;3(8):e222585. doi:10.1001/jamahealthforum.2022.2585


FTC publishes advance notice about changes in data procurement, consumer protections, healthcare data a primary focus: Last week, the Federal Trade Commission (“FTC”) is released this advance notice of proposed rulemaking (“ANPR”) to request public comment on the prevalence of commercial surveillance and data security practices that harm consumers. Specifically, the Commission invites comment on whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive.

“… companies’ growing reliance on automated systems is creating new forms and mechanisms for discrimination based on statutorily protected categories, including in critical areas such as housing, employment, and healthcare.”

The APNR includes a list of 95 questions that comment letters should address The Commission will hold a public forum on Thursday, September 8, 2022, from 2 p.m. until 7:30 p.m. eastern time. In light of the ongoing COVID-19 pandemic, the forum will be held virtually, and members of the public are encouraged to attend virtually by visiting 43

FEDERAL TRADE COMMISSION 16 CFR Part 464 Trade Regulation Rule on Commercial Surveillance and Data Security

Study: variation in state health spending: The Institute for Health Metrics and Evaluation analyzed data from the government’s State Health Expenditure Accounts state-specific per person:  Findings:

·        Spending ranged from $7,250 to $14,500. After adjustment for inflation, annualized per person spending growth for each state ranged from 1.0& in Washington, D.C., to 4.2% in South Dakota between 2013 and 2019.

·        The factors that explained the most variation across states were incomes (25.3%) and consumer prices (21.7%). Medicaid expansion was associated with increases in total spending per person, although the median of spending in expansion states showed slower growth in out-of-pocket spending than the median in non-expansion states.

Johnson et al Varied Health Spending Growth Across US States Was Associated with Incomes, Price Levels, And Medicaid Expansion, 2000–19 August 2022


Study: hospital manager compensation: Per Modern Healthcare’s annual Management and Executive Compensation Survey conducted by Sullivan Cotter:

·        Nearly 40% of healthcare organizations said they have increased efforts to recruit more executives over the past year,

·        Human resources executives saw the highest bump in median base pay across all health systems, rising 7.3% from early 2021 to 2022.

·        At systems with less than $1 billion in net revenue, chief information officers—tasked with leading IT initiatives—had the highest year-over-year increase in median base salary at 8.4%.

·        Health systems’ top operations executives, defined as those handling three or more significant clinical and support functions, saw the highest increase in median total cash compensation across all system sizes, with a 21% jump.

·        Median total compensation for health system chief operating officers rose by 7.6% year-over-year; it went up almost 14% for support services executives.

Sullivan Cotter

Study: philanthropy increasingly concentrated in higher income givers: Per the Gilded Giving 2022 report on U.S. philanthropy:  

·        2000 to 2018, the proportion of households giving to charity has dropped from 66% to just under 50 %.

·        Following the passage of the Tax Cuts and Jobs Act, the proportion of taxpayers who itemized their charitable giving fell from 25%in 2017 to just 10% after the bill took effect in 2018. And the effect stuck: just 9% of households claimed charitable deductions on their returns in 2019.

·        In the early 1990s, households earning $200,000 or more accounted for less than 25%%of all charitable deductions. By 2019, the most recent year available, this group accounted for 67%.5

·        The top two charitable causes of ultra-wealthy donors in 2021 were their own private foundations and donor-advised funds. Third are colleges and universities ($2.6 billion) and fourth hospitals/medical centers ($981 million).

Gilded Giving 2022 Institute for Policy Studies National Office 1301 Connecticut Ave NW, Suite 600, Washington, DC 20036 | Web:

Study: most cancer centers non-compliant with price transparency rule: Researchers examined the the websites of all 63 hospitals with NCI-designated cancer center status, Findings:

·        Of the 63 included hospitals, approximately two-thirds (42 of 63) provided some information on negotiated rates. However, fewer than one-third (20 of 63) were fully compliant with the current law. Compliance varied across criteria; the majority of violations were because hospitals did not (1) post the file in a machine-readable format (n = 12, criteria 1) or (2) provide all 5 price parameters (n = 10, criteria 5).

·        Comprehensive cancer center–designated hospitals had higher compliance than those with clinical cancer center designation (74% vs 33%)) and those in the West were generally better than those in the South (86% vs 57%)).

·        Few hospitals (range, 15-18) provided payor-specific DRG payments for gastrointestinal cancer operations. There was large variation in minimum and maximum payments for different payors both within and across hospitals across all 3 DRGs.

Childers et al Compliance of National Cancer Institute–Designated Cancer Centers with January 2021 Price Transparency Requirements JAMA Surg. Published online August 10, 2022. doi:10.1001/jamasurg.2022.3125


Pitchbook assessment: seed strong, VC slipping, PE strong for biggest players: Per Pitchbook’s analysis:

·        Seed: “The median pre-money valuation for seed in 2022 has reached $12.0 million, 33.3% above 2021’s full-year figure of $9.0 million. The median seed valuation generated in Q2 was $12.2 million. Aiding this growth has been a continued presence of large, multistage firms and nontraditional investors in the seed stage, alongside a growing number of micro-funds (637 closed in the last 18 months) that continue to drive competition in the market.”

·        Venture capital: “The Q2 median pre-money valuation for early-stage VC was $52.0 million– a 16.1% decrease from the Q1 2022 median pre-money valuation of $62.0 million. We’ve recorded only 10 exits via public markets for companies valued over $1 billion in the first half of 2022, relative to the 102 that closed during 2021. This is a critical gap in liquidity for the growing population of startups that have reached or are near that valuation threshold in the private markets.”

·        Private equity: “Financial volatility and a paused IPO market have combined to challenge the resilience of the sector—only 13 VC exits were completed last quarter…At least 10 US PE-backed healthcare provider platforms will list publicly, breaking 2021’s record. VC investment in the information security space took a hit in Q2, dropping 44.6% on a quarterly basis to $3.2 billion. The healthcare provider industry is undergoing widespread transformations on several fronts, thus making vanguard companies attractive to public investors. Another important theme is the consumerization of healthcare, in which healthcare providers are using technology to provide more convenient and patient-centric experiences— particularly in primary care.

2022 US Private Equity Outlook: H1 Follow-Up August 8, 2022