COVID-19, MCOs, Market Change, and Uncertainty

The impact of the COVID-19 outbreak on managed care organizations (MCOs) has been swift and pointed as fully insured, Medicare, commercial, and self-insured plans have had to deal with the massive disruption caused by the pandemic. Most routine utilization management programs were taken off the table immediately and will likely be suspended through the plan year 2020. Prior approval and coverage policies have changed, and telehealth use has expanded at rates never seen before. The cumulative effect has scrambled traditional MCO cost management. Moreover, providers who have lost significant revenues are now seeking guidance - and relief. Employers who have similarly see revenues almost vanish are also seeking premium or service fee relief along with guidance through the most severe public health crisis of our time.

At the same time, the COVID-19 has required public and provider partnerships to form in unique ways that no one dreamed of. The speed with which this has happened makes it even more remarkable.  Collaborations had been already emerging rapidly between MCOs and employers in providing value-based administrative-services only (ASO) services. Market trends among MCOs over the past two years had already shifted more lives into ASO programs, a trend that would have continued into 2021 were it not for the outbreak. Now Smaller self-insured plans may move back into fully funded plans, and employers may restructure their workforce so they rely on contractors and have smaller headcounts going into 2021.

Fundamentals of the insurance market remain, but a higher level of business uncertainty has altered change that inched along. Instead change has moved into a rapid cycle to address healthcare matters faster along with more innovation. Issues like eliminating cost concerns or removing barriers to care are driving decisions by MCO clients to ask for different services or support.

As a result of COVID-19, businesses that have taken a huge financial hit range from relatively small ones - restaurants, corner stores, bakeries - to the jumbo-size employers - the Walmarts, hotel chains ,and airlines. Uncertainty doesn’t even begin to describe the outlook. Because of cash flow or worker retention, considerations of when and how fast to reopen a business necessarily includes talk of benefits. Alarming for MCOs is that marketplace uncertainty is leading employers to ask questions or think anew benefit options, alternate offerings - or moving to allowable insurance structures where limited-to-no benefits are required for operating their business going forward.

It’s the economics of insurance as a risk mitigation tool that is driving decisions more than other factors for the moment. 

COVID-19 has also forced plan sponsors to contemplate a new future - a future reshaped by the COVID-19 outbreak. Will work-for-home be a new normal and how might that change benefit design? What kind of new offerings will be needed and wanted? Telehealth has almost certainly gained traction after years of halting, slow uptake. How does it get baked into coverage decisions exactly? 

How MCOs will respond to COVID-19 remains an open question. How that gets answered may result in a totally new set of players leading managed care in the decade ahead.

F. Randy Vogenberg, PhD, is a principal at the Institute for Integrated Healthcare and
board chair of the Employer-Provider Interface Council in Greenville, South Carolina.