Mark Lutes Quoted in Article, "Self-Funded Plans Will Help Drive ACO Trend in 2012, Insiders Predict"

Some industry insiders say that the self-funded employer space is the market to watch for emerging trends in health system delivery reform.

"On the commercial side, if you ask yourself who is bearing the most incidence risk or true insurance risk at this point in systems outside of CMS, it's quite frequently the self-funded employer," Mark Lutes, an attorney in the health care and life sciences practice at Epstein Becker & Green, tells ABN. For that reason, "there should be increasing interest in self-funded employers" in value-based purchasing and other health system delivery reforms, he says.

Employers will definitely continue to get into the mix next year, Bruce Merlin Fried, a partner in the Washington, D.C., office of law firm SNR Denton US LLP, tells ABN. Very few employers have the mass — in terms of the number of lives covered in a particular community — to drive an ACO. "But an employer group where many employers are aggregated — in the right markets they're going to be able to drive the kind of care coordination and the kinds of performance that ACOs are all about."

Employers Are Exploring Options in Calif.

At least in California, Diane Stewart, senior director at the Pacific Business Group on Health (PBGH), confirms to ABN that employers want to explore opportunities to take advantage of cost savings that ACOs might offer within the self-funded space.

"Pretty much all of our PBGH members are interested in what we have to say about the ACO product, and where it might take us. No one has made commitments, but there are a number that are exploring" this, Stewart says.

The California Public Employees' Retirement System (CalPERS), a PBGH member, has been participating in an ACO-type risk model with Blue Shield of California and several providers that has shown some early success in reducing hospital readmissions and elective surgeries while cutting costs (ABN 9/11, p. 12) "so our other members are watching what CalPERS does," Stewart says.

She acknowledges that health plans in California "are out ahead on ACO development within the fully insured space." Purchasers are beginning to get their plan administrators to develop them, "but most of the action we've seen in California is plan-driven, insured PPOs. I think employers on the self-funded side will catch up, but the concern that they have is around market concentration, that ACOs create a single dominant system within a particular geography, and that in turn could lead to higher prices."

To address those concerns, PBGH, on behalf of its members, has been promoting private exchanges, which essentially create a market for ACOs that is probably not too dissimilar from the health reform law-mandated health insurance exchanges that will be operated by states or the federal government. The design PBGH has in mind is "when a health plan, a Cigna or an Aetna, for example, is an administrator for one of our members, instead of offering a single rate for PPO coverage, it would offer two separate rates, each for a separate ACO system that the employee would choose between. So it's creating competition at the care system level" on price and quality in the self-funded space, she says.

PBGH has received "requests for information" (RFIs) from the health plans in California. Stewart says the group is collating information from those RFIs and arranging meetings with individual health plans this month "to sharpen product design."