Insurance companies may become extinct by 2020

Two former health and public policy advisers in the Obama administration predict that by 2020, insurance companies will be replaced by Accountable Care Organizations, according to an opinion article in the New York Times.

According to the article, ACOs will make insurance companies unnecessary.   Already, 60 percent of Americans have employer-provided health insurance, where the employer assumes the financial risk, and insurance companies simply process the bills.  For individuals and small businesses who are covered by insurance companies, the fee for service model forces insurers to impose barriers and limits in order to keep costs down. 

With the ACO model, physicians will be paid not fee for service, but for keeping patients healthy and meeting quality goals.  ACOs will be responsible for the full range of medical care as well as the financial risk for all patients, and payments can flow directly from the employer to the ACO.  Some insurers see this coming, Wellpoint, for example, bought the clinic operator CareMore to make the transition into the A.C.O. business.  The authors conclude that insurance companies that want to stay in business will need to find a new business to be in.

(Sources: The Advisory Board Daily Briefing, http://advisory.com, January 31, 2012; The New York Times, http://opinionator.blogs.nytimes.com, January 30, 2012)