This is a presentation on my MBA capstone research paper from Wilkes University.

1. Christopher Hetkowski
Wilkes University
This presentation was prepared for MBA 592, taught by Dr. Jennifer Edmonds

2.  History of Health Insurance in America
 The Affordable Care Act and its effect on:
 Policies and Regulation
 Quality of Care
 The Future Evolution of the Health Insurance Industry
 Conclusion
 References
 Questions?

3.  Prior to the 1940’s, a majority of individuals paid for their own health insurance
 This changed during World War II when Congress passed wage and price controls to
control inflation
 Health insurance was a given an exemption from this legislation so employers
marketed their offering of it as an added benefit (Lindquist, 2010)
 From there, it quickly morphed into the system we have today where there is an
expectation for employers to offer health insurance to employees
 As of 2015, it is estimated that approximately 290 million individuals had some kind
of insurance, of which nearly 156 million are covered through an employer (Amadeo,
2017)
 A total of $3.3 trillion, or $10,348 per person, was spent on all healthcare costs in
2015. This was an increase from the 2010 total of $2.6 trillion (27%) (Amadeo, 2017)

4.  The health insurance sector was segmented into four broad markets:
 Medicare (Federal program- primarily for the geriatric population)
 Medicaid (Federal program- primarily for the low-income population)
 Large group market (insurance offered though one’s employer)
 Individual and small-group market
 Tom Baker, Law and Health Sciences professor at the University of Pennsylvania,
used the analogy of a “Four Legged Stool” to the health insurance industry (Baker,
2011)
 If one of the legs are “wobbly”, it could jeopardize the entire system
 All were “steady” with a reasonable distribution of risk throughout their members except
for the individual and small group market
 Additionally, costs the the entire healthcare system and health insurance premiums
were spiraling out of control. The system was broken

5.  Signed into law in 2010, the Affordable Care Act (ACA) represented the most
sweeping regulatory overhaul of the American healthcare system since the
enactment Medicare and Medicaid in 1965 (OurDocuments.gov, n.d.)
 The ACA sought to:
 Regulate the health insurance sector by legislating the type of medical services covered
under a required minimum health insurance plan and the eligibility requirements of those
covered
 Reimagine the health care services sector in order to reduce costs and rethink the way
positive healthcare outcomes are judged
 Provide health insurance to all Americans

7.  Individual Mandate
 Required individuals to purchase policies that
meet the government’s definition of “minimum
essential coverage” or risk a penalty (Kocher,
Emanuel, & DeParle, 2010)
 Was a seismic shift in the thought of health
insurance from the individual need to the
collective need
 Was repealed in the tax reform bill in 2017
(Radnofsky, 2018)
 Employer Mandate
 Required all employers with over fifty full-time
employees offer health insurance with minimum
essential coverage to those employees or face
paying a penalty (Baker, 2011)

8.  Children covered under parents plan until
age of 26 (Sommers, Buchmueller, Decker,
Carey, & Kronick, 2013)
 No longer able to impose lifetime limits on
benefit payouts or drop individuals who
become sick- also known as “rescissions”
(Rosenbaum, 2011)
 Insurers must maintain a medical loss ratio-
the ratio of benefits paid to what was
collected via premiums- of 85% for large
group markets and 80% for individual and
small group markets (Rosenbaum, 2011)
 No longer able to deny covered due to pre-
existing conditions (Tanner, 2014)

9.  Health Insurance Exchange- a pool acting as a third-party, matching individual
consumers to a variety of plans to choose from
 It gave the individual market the same benefits as the large group market- that of
economies of scale in terms of distribution of risk and pooled administrative costs (Schoen,
Doty, Robertson, & Collins, 2011)
 Subsidies and Medicaid Expansion
 Increased funding and expanded government-run programs, such as Medicaid and the State
Children’s Health Insurance Program (SCHIP) (Schoen, Doty, Robertson, & Collins, 2011)
 Based on income criteria, subsidies are available to assist in reducing the cost of premiums
through the marketplace
 Long-Term Costs- from 2010-2019 the Congressional Budget Office estimated the ACA
to cost $938 billion over 10 years. More recent models are projecting an actual cost
of $1.8 trillion in costs over 10 years from 2013-2023 (Tanner, 2014)

11.  Accountable Care Organizations- “An ACO is a network of doctors and hospitals that
shares financial and medical responsibility for providing coordinated care to patients
in hopes of limiting unnecessary spending. At the heart of each patient’s care is a
primary care physician” (Gold, 2015)
 Shift from fee-for-service operating model to an outcome-based operating model
 Fee-for-service model encouraged over-utilization of services in order to increase billings
and, thus, profit (Kocher & Adashi, 2011)
 In the outcome-based model, ACO’s and primary care physicians get a portion of the
savings as a back-end bonus or reward when keeping patients healthy or penalized when
preventable illnesses or diagnoses are not properly managed (Gold, 2015)

12.  ACO’s force independent physicians and smaller community-based hospitals to
merge with larger networks due to economies of scale (Fisher, Staiger, Bynum, &
Gottlieb, 2007)
 In 2014 alone, there were 95 hospital mergers and acquisitions (Makary, 2015)
 In 2014, over 150 California-based healthcare organizations (comprised of
independent and affiliated physician groups, locally owned hospitals, and
multihospital systems) were studied (Robinson & Miller, 2014)
 It was found that patient costs were 19.8% higher for physician groups apart of
multihospital groups compared with independent physician groups with no affiliation
 In similar economies to America, 50% to 60% of physicians practice in the primary
care disciplines. In the United States this number is 30% with the other 70%
concentrated as specialists (Goodson, 2010)

13.  Reduction of 30-day re-hospitalizations- for Medicare purposes, the a goal was a 20%
reduction in hospital readmission rates by the end of 2013, thereby potentially
preventing 1.6 million hospitalizations and saving an estimated $15 billion (Kocher &
Adashi, 2011, p. 1794)
 Community-Based Care Transition Program (CCTP)- a 5-year $500 million program
that targeted specifically toward the 30-day hospital re-admissions. It did this by
“targeting the quality and safety of care transitions between the inpatient and
outpatient arenas” (Kocher & Adashi, 2011, p. 1794)
 Electronic medical records (EMR)- approximately $25 billion in incentives for
independent physicans and ACO’s to use EMR (Kocher, Emanuel, & DeParle, 2010)

14.  It was estimated that as many as 37% of
young adults ages 19-26 were uninsured
(Antwi, Moriya, & Simon, 2013)
 7.8 million new young adults are enrolled
through their parent’s plans (Blumenthal
& Collins, 2014)
 At February 2015, 11.7 million
Americans selected a health insurance
plan from the marketplace (Abrams,
Blumenthal, & Nuzum, 2015)
 Of those individuals, 87% received a
subsidy through meeting income
guidelines.
 An estimated 30 million new individuals
have health insurance- through the ACA-
who would have not had it previously

16.  Similar to healthcare services with accountable care organizations, mergers and
acquisition have become commonplace in the health insurance industry
 Examples:
 Blue Cross of Northeastern Pennsylvania (out of Wilkes-Barre, PA) and Highmark Blue Cross
Blue Shield (Allegheny, PA) in 2015 (Billger, 2015)
 In 2017, UnitedHealth Group, Inc. announced it was acquiring DaVita Medical Group
(Mukherjee, 2017)
 Also in 2017, CVS Health Corp. proposed a $69 billion acquisition of Aetna Inc. (Terlep,
Wilde Mathews, & Cimilluca, 2017)
 The ACA forced companies to, not only, look internally to maximize operational
efficiency but also externally to other complementary companies that could help
them gain a competitive advantage in the market

17.  America has a long tradition built on ingenuity and innovation. They have constantly
sought to improve their quality of life and improve on existing processes
 In response to the ACA, it was out of necessity that the attention of some of the greatest
minds of our generation from other sectors of the economy are on healthcare
 In March 2018, Walmart Inc. announced it has entered into preliminary negotiations
to acquire Humana Inc. (Mattioli, Nassauer, & Wilde Mathews, 2018)
 If this deal is completed, it would forever change both Walmart and the health insurance
industry
 Amazon.com Inc. will be partnering with Berkshire Hathaway and JP Morgan Chase &
Co. to create a company to reduce healthcare related costs for their combined
employees (Lombardo, Stevens, & Friedman, 2018)

18.  The Affordable Care Act was the Federal government’s attempt to legislate the
American healthcare system into the 21st century
 While many Americans gained access to insurance who would have not had it in the
past, it has been ineffective in addressing the ever-increasing costs associated with
providing care to patients and the cost health insurance premiums
 The ACA’s focus on intensifying a patient-centered, outcome-driven model is a
positive transitionary step for the healthcare and health insurance industries. But it
is just that- a step
 But much more needs to be done in order to improve and fix the broken American
healthcare system and reduce related costs

19.  Amadeo, K. (2017, October 26). The Rising Cost of Health Care by Year and Its Causes. Retrieved from
The Balance: https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878
 Antwi, Y., Moriya, A. S., & Simon, K. (2013). Effects of Federal Policy to Insure Young Adults:Evidence
from the 2010 Affordable Care Act’s Dependent-Coverage Mandate. American Economic Journal:
Economic Policy Vol 5, 1-28.
 Baker, T. (2011, June). Health Insurance, Risk, and Responsibility after the Patient Protection and
Affordable Care Act. Faculty Scholarship. Paper 342, 1577-1622.
 Billger, A. (2015, June 2). Highmark Inc. Closes Merger With Blue Cross Of Northeastern Pennsylvania.
Retrieved from Blue Cross Blue Shield: https://www.bcbs.com/news/press-releases/highmark-inc-closes-
merger-blue-cross-northeastern-pennsylvania
 Blumenthal, D., & Collins, S. R. (2014). Health Care Coverage under the Affordable Care Act — A Progress
Report. New England Journal of Medicine Vol 371, 275-281.
 Center on Budget and Policy Priorities. (2016). Policy Basics: Where Do Our Federal Tax Dollars Go?
Retrieved from Center on Budget and Policy Priorities: http://www.cbpp.org/research/federal-
budget/policy-basics-where-do-our-federal-tax-dollars-go
 Fisher, E. S., Staiger, D. O., Bynum, J. P., & Gottlieb, D. J. (2007). Creating Accountable Care
Organizations: The Extended Hospital Medical Staff. Health Affairs 26, No 1, 44-57.
 Gold, J. (2015, September 14). Accountable Care Organizations, Explained. Retrieved from Kaiser Health
News: http://khn.org/news/aco-accountable-care-organization-faq/

20.  Goodson, J. D. (2010). Patient Protection and Affordable Care Act: Promise and Peril for Primary Care. Annals of Internal
Medicine, Vol 152, No 11, 742-744.
 Kocher, R. P., & Adashi, E. Y. (2011). Hospital Readmissions and the Affordable Care Act. Journal of American Medical
Association, Vol 306, No 16, 1794-1795.
 Kocher, R., Emanuel, E. J., & DeParle, N.-A. (2010). The Affordable Care Act and the Future of Clinical Medicine: The
Opportunities and Challenges. Annals of Internal Medicine, Vol 153, No 8, 536-539.
 Lindquist, R. (2010, July 7). History of U.S. Health Insurance - Why Most Americans Get Health Benefits from
Employers. Retrieved from PeopleKeep, Inc.: https://www.zanebenefits.com/blog/bid/97285/History-of-U-S-Health-
Insurance-Why-Most-Americans-Get-Health-Benefits-from-Employers
 Lombardo, C., Stevens, L., & Friedman, N. (2018, January 30). Amazon, Berkshire Hathaway, JPMorgan Join Forces to
Pare Health-Care Costs. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/amazon-berkshire-
hathaway-jpmorgan-to-partner-on-health-care-1517315659
 Makary, M. (2015, April 19). The ObamaCare Effect: Hospital Monopolies. The Wall Street Journal.
 Mattioli, D., Nassauer, S., & Wilde Mathews, A. (2018, March 29). Walmart in Early-Stage Acquisition Talks With Humana.
Retrieved from The Wall Street Journal: https://www.wsj.com/articles/walmart-in-early-stage-acquisition-talks-with-
humana-1522365618
 Mukherjee, S. (2017, December 6). UnitedHealth Is Buying a Major Doctor Group on the Heels of the CVS-Aetna Deal.
Retrieved from Fortune: http://fortune.com/2017/12/06/unitedhealth-davita-cvs-aetna/

21.  OurDocuments.gov. (n.d.). Social Security Act Amendments (1965). Retrieved January 17, 2018, from
OurDocuments.gov: https://www.ourdocuments.gov/doc.php?flash=true&doc=99
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Retrieved from The Wall Street Journal: https://www.wsj.com/articles/the-new-tax-law-the-individual-
health-insurance-mandate-1518541795
 Robinson, J. C., & Miller, K. (2014). Total Expenditures per Patient in Hospital-Owned and Physician-
Owned Physician Organizations in California. Journal of the American Medical Association, Vol 312, No
16, 1663-1669.
 Rosenbaum, S. (2011). The Patient Protection and Affordable Care Act: Implications for Public Health
Policy and Practice. Public Health Report Volume 126, 130-135.
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Reduce The Number Of Underinsured US Adults By 70 Percent. Health Affairs 30, No 9, 1762-1771.
 Sommers, B. D., Buchmueller, T., Decker, S. L., Carey, C., & Kronick, R. (2013). The Affordable Care Act
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 Tanner, M. (2014). Obamacare- What We Know Now. Policy Analysis N0 745, 1-49.
 Terlep, S., Wilde Mathews, A., & Cimilluca, D. (2017, December 3). CVS to Buy Aetna for $69 Billion,
Combining Major Health-Care Players. Retrieved from The Wall Street Journal:
https://www.wsj.com/articles/cvs-to-buy-aetna-for-69-billion-1512325099