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Linda Collins Blogger

Consolidation is a Side Effect of Health Care Reform

Posted by Linda Collins | September 01, 2012

Last week Aetna announced the acquisition of Coventry Health Care, a provider of Medicare Advantage and Medicare Part D programs, as well as Medicaid managed care plans, group and individual health insurance. The deal will add more than 5 million customers to Aetna’s 36.7 million members, including 250,000 people on Medicare health plans and 930,000 on Medicaid. The investment means 30 percent of Aetna’s revenue will come from federal-backed plans for elderly Medicare enrollees and low-income Medicaid patients, compared with the current 23 percent. Aetna joins competitors WellPoint Inc. and Cigna Corp. in making acquisitions over the past year as the U.S. government expands medical coverage.

Why are the big health plans expanding their presence in managed Medicaid and Medicare Advantage? The current health-care law will add as many as 17 million patients to Medicaid programs across the US. Medicare managed-care plans are among the fastest-growing products for health insurers as Americans age Health care reform will likely decrease insurers’ profits margins because they will no longer be able to deny individuals with pre-existing conditions, and because the law limits how much they can raise their rates. On the other hand, more members means the health plan can more easily spread out costs over a larger population.

So, what does this mean for our industry? More patients will be covered by a managed Medicare or Medicaid plan. This might mean patients have less financial responsibility in copays and deductibles. The Medicare programs will be required to follow the coverage guidelines outlined by CMS, which are openly published. However, it also means that the managed care plans might be able to limit which providers are in a given network available to patients. Also, managed plans typically have reimbursement rates significantly below standard Medicare rates.

Managed care plans will continue to diversify their business and branch out into Medicare, Medicaid and workers compensation programs. As a provider, you will have to decide for yourself if you want to participate as an in-network provider with managed care plans. If so, now is the time to start cultivating those contractual relationships and reviewing the fee schedules. Being proactive and having a strategy of diversification will help you remain competitive in the field of health care.

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