Latest / Becker’s Healthcare Podcast / Payer Recovery, AI Investment, and ACA Market Turbulence with Jakob Emerson

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Payer Recovery, AI Investment, and ACA Market Turbulence with Jakob Emerson · Becker’s Healthcare Podcast

• 0:00
  This is Scott Becker. I am joined today
• 0:02
  on the Becker's Healthcare podcast by Jacob Emerson.
• 0:05
  Jacob is literally about the smartest person I
• 0:08
  get to deal with regularly.
• 0:09
  He's particularly expert in following the payer industry
• 0:12
  and what's going on there today. He's gonna
• 0:14
  talk to say about, really, a couple different
• 0:16
  things. One, recent payer results, which have ticked
• 0:19
  in the right direction a little bit, prior
• 0:21
  authorization reform,
• 0:23
  AI investments being made by payers, and then
• 0:26
  we'll touch on what's going on with the
• 0:27
  ACA marketplace.
• 0:29
  Jacob, let me have you take it away.
• 0:31
  What are you watching in terms of payer
• 0:32
  results,
• 0:33
  preauthorization,
• 0:35
  reform, as well as AI investments?
• 0:37
  Yep. Good to talk with you, Scott. I
• 0:39
  appreciate you teeing me up there.
• 0:41
  So you're you're right. We've got all the
• 0:42
  earnings calls,
• 0:44
  financial data, and the transcripts out from all
• 0:46
  the executives running these companies now out on
• 0:49
  the record. And it's pretty clear that though
• 0:52
  that I think the corner has been turned
• 0:54
  from the financial distress that much of the
• 0:56
  industry was in last year,
• 0:58
  especially around
• 1:00
  managed care with with Medicare and Medicaid,
• 1:03
  really dragging down on on financial results. And
• 1:05
  I also just think that that the that
• 1:08
  the strategy over the last decade or so
• 1:10
  of blockbuster
• 1:11
  growth has real had really come home to
• 1:13
  roost for the big insurers. And so it's,
• 1:16
  clearly, the the strategy of margin recovery is
• 1:19
  working,
• 1:20
  for for most of the big guys,
• 1:22
  especially with United, of course, being being the
• 1:24
  biggest one there too as well. It's pretty
• 1:26
  clear that Medicare Advantage pressures, though, they're gonna
• 1:29
  keep
• 1:30
  being an issue.
• 1:32
  Even though the the payers were pretty satisfied
• 1:34
  with what CMS gave them pay wise,
• 1:37
  they're just saying it's not enough based off
• 1:38
  of current utilization levels,
• 1:40
  just how much it costs
• 1:42
  to deliver senior care. And so it pretty
• 1:44
  much seems like right now, everybody is on
• 1:47
  on the track of prioritize margin recovery, don't
• 1:50
  take on a bunch of new members,
• 1:52
  actually
• 1:53
  exit markets and, have your membership decline in
• 1:56
  Medicare overall. The only one really going a
• 1:58
  different direction there is is probably Humana, and
• 2:01
  they are taking on a lot of new
• 2:02
  members. But that's really what we're seeing there
• 2:04
  with Medicare, Scott. On Medicaid side of things,
• 2:07
  we've known for
• 2:09
  multiple years now that Medicaid rates at the
• 2:12
  state levels were just not keeping up again
• 2:14
  with the cost of
• 2:16
  providing services. And so,
• 2:18
  the largest Medicaid company, Centene, said that they're
• 2:21
  finally starting to see, some of the pressures
• 2:23
  easing there. Sounds like better conversations
• 2:26
  with, with the state Medicaid programs.
• 2:29
  That all being said, even if there are
• 2:32
  signs that those pressures are alleviating,
• 2:34
  you know, with that HR one coming down
• 2:36
  the pipeline
• 2:37
  starting next year, Some states have already started
• 2:40
  rolling out Medicaid work requirements,
• 2:42
  more,
• 2:43
  redeterminations
• 2:44
  of who's eligible for Medicaid going on around
• 2:46
  the country. So, you know, I think the
• 2:48
  payers are just keeping a watchful eye on
• 2:50
  Medicaid because,
• 2:51
  it could get pretty shaky all over again.
• 2:54
  Let's come back to the payer results because
• 2:56
  you had mentioned payer results
• 2:58
  sort of after a couple really challenging years.
• 3:01
  Both CVS
• 3:03
  had a great earnings call. Their stock's up
• 3:05
  about 9% year to date.
• 3:08
  UnitedHealthcare
• 3:08
  also up about 11% year to date. And
• 3:11
  your point is so well taken. It's no
• 3:13
  longer growth at all cost.
• 3:15
  It it's much more careful growth and trying
• 3:17
  to look back and retrenching in certain areas.
• 3:20
  Reminds me a little bit of Mark Zuckerberg
• 3:22
  a couple years ago with Meta Platforms Facebook,
• 3:24
  the year of efficiency. You you've now got
• 3:26
  one of the headlines I saw today was
• 3:29
  CVS stock breaks out on earnings due to
• 3:32
  ACA exit, you know, getting out of some
• 3:34
  ACA markets and premium hikes. And and the
• 3:37
  story is not that different at United.
• 3:39
  They're being more careful about what markets they're
• 3:41
  going after they're staying in, and and they're
• 3:43
  staying in more profitable markets and and thus
• 3:45
  starting to move the pendulum back in the
• 3:47
  direction they wanted to move in even though
• 3:49
  they still had face a tremendous amount of
• 3:51
  political pressure over prior authorizations
• 3:53
  and and the AI investments. It's not political
• 3:55
  pressure, but AI investments Yeah. That have to
• 3:57
  go into what they're doing. But but let
• 3:58
  let me take you back to now
• 4:00
  prior authorizations and so forth.
• 4:03
  Well, and I would just add to your
• 4:04
  to your point there. They've all got way
• 4:05
  different strategies. I mean, Cigna has sold off
• 4:08
  Medicare. They've exited ACA. They're very clearly focused
• 4:11
  on commercial insurance and then basically becoming a
• 4:13
  pharmacy company. You know, United has almost entirely
• 4:16
  new leadership from just over a year ago.
• 4:19
  And so they've all just taken, I I
• 4:21
  think, different strategies to get to a more
• 4:24
  stable place.
• 4:25
  Same with Aetna. They've got new leadership over
• 4:28
  these last few years as well and CVS
• 4:30
  overall too.
• 4:31
  The prior authorization reform, it it really seems
• 4:34
  like every day there's new announcements either from
• 4:37
  individual payers, from CMS,
• 4:40
  on in terms
• 4:41
  of new regulations,
• 4:42
  new promises, new
• 4:44
  achievements on how much they've reduced by our
• 4:47
  authorization requirements,
• 4:48
  all either stemming from industry wide voluntary commitments
• 4:52
  that started really coming together last year alongside
• 4:55
  the government and then new regulatory requirements
• 4:58
  that are now coming into effect from CMS,
• 5:02
  all kind of centered around
• 5:04
  more transparency
• 5:05
  of prior auth, why things are getting denied,
• 5:07
  how often things are getting denied by who,
• 5:09
  which kind of payer,
• 5:11
  and then, you know, just reducing the volume
• 5:14
  of those requirements overall because, you know, this
• 5:16
  is, of course, something that providers have been
• 5:18
  shouting about for for years about how much
• 5:20
  of a pain point it is for them.
• 5:22
  I think, you know, my main
• 5:25
  question here, and your concern within our finance
• 5:27
  teams, you're gonna be talking with RCM and
• 5:29
  and the hospital finance teams over these next
• 5:31
  few months, Scott, is, while prior authorization exists
• 5:34
  for a reason, it does
• 5:36
  control the cost of care when it might
• 5:38
  not be medically necessary, at least from the
• 5:40
  insurance perspective. So if they're giving up prior
• 5:42
  authorization volumes, I don't wanna say it's a
• 5:45
  PR spend because there are genuine reductions going
• 5:48
  on, and they are meeting CMS regulations.
• 5:50
  But money has to be made elsewhere if
• 5:53
  it's not being controlled through prior auth and
• 5:55
  and, utilization management.
• 5:57
  So or or maybe it was with claims
• 5:59
  that hardly required prior auth at all in
• 6:01
  the first place, and they're just putting in
• 6:03
  press releases. Well, now they don't require it.
• 6:05
  So, you know, these these stories, I think,
• 6:07
  could be a little bit tricky, and they
• 6:08
  can be tricky with the public relations perspective.
• 6:11
  And I also just think from from the
• 6:13
  accounting perspective,
• 6:15
  you know, insurance companies are not charities. And
• 6:17
  so
• 6:18
  if they give up money here, they will
• 6:20
  be making it back somewhere else, whether that's,
• 6:22
  you know, clawbacks,
• 6:24
  re adjudication of claims,
• 6:26
  slower payments, whatever it is, reduced benefits. The
• 6:29
  the money has to be made up somewhere
• 6:30
  else.
• 6:32
  It it couldn't be more true. Couldn't agree
• 6:33
  with that anymore. Talk about what you're seeing
• 6:35
  on the AI investment side.
• 6:37
  What's going on there? Is that is that
• 6:39
  huge? What's happened in there? Tell us about
• 6:41
  that. Yeah.
• 6:43
  And then and it's nearing what we've been
• 6:45
  hearing from the hospital systems as well. Starting
• 6:48
  maybe one and a half, two years ago,
• 6:50
  everybody is piloting
• 6:52
  new AI tools,
• 6:54
  now especially with the with the broader population
• 6:56
  getting their hands on these these large language
• 6:59
  models.
• 7:00
  But now it's gone into full on enterprise
• 7:02
  wide ailing of these tools. And the the
• 7:06
  amount of money that's being poured into this
• 7:07
  is is pretty intense, Scott, with United putting
• 7:10
  in a billion and a half this year,
• 7:12
  another billion and a half in AI next
• 7:14
  year. Outlaw Advance putting in a billion dollars
• 7:17
  in AI
• 7:18
  capabilities
• 7:19
  both internal and for members
• 7:21
  this year. So these companies are pouring billions
• 7:24
  of dollars in in not just into, like,
• 7:27
  what we think of with insurance of, like,
• 7:28
  claims and apps and things like that, but
• 7:30
  also for internally with their employees and all
• 7:32
  their different systems that they had, different companies
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  that they have under their umbrellas to try
• 7:36
  to, I think, merge everything together a little
• 7:38
  bit more seamlessly.
• 7:40
  And then, of course, these are massive conglomerates.
• 7:43
  So they're launching new AI products for hospitals,
• 7:45
  products for other payers, PBMs, pharmacies, other kinds
• 7:49
  of providers.
• 7:50
  They're basically becoming technology companies as well. And
• 7:52
  so they're rapidly trying to develop new AI
• 7:56
  powered solutions
• 7:57
  to sell to.
• 7:59
  And we're really seeing that with, with CVS,
• 8:02
  with, with United through Optum.
• 8:05
  So that's just another whole area of revenue
• 8:08
  generation that the payers,
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  if that's what we can even call them
• 8:11
  anymore, are are now pursuing in terms of
• 8:13
  AI.
• 8:15
  Thank you. And and and take a moment
• 8:17
  on the ACA and what you're seeing there
• 8:20
  because there is tremendous changes going on there,
• 8:23
  retrenchments,
• 8:24
  people moving away from the ASC ACA markets.
• 8:26
  Tell us what you're seeing there. Yep. Just
• 8:28
  volatility.
• 8:30
  You know, Aetna exited the ACA market last
• 8:32
  year. Cigna announcing just this past week that
• 8:35
  they're going to be doing the same by
• 8:37
  the 2026.
• 8:39
  And, you know, and then beyond just,
• 8:42
  entire exits, UnitedHealth saying it's it's planning to
• 8:45
  exit markets cut down on a third of
• 8:47
  its ACA membership.
• 8:49
  Centene had its membership drop by 2,000,000 year
• 8:53
  over year,
• 8:54
  since since, '25,
• 8:56
  down to three three and a half million
• 8:57
  members.
• 8:59
  I think Evance reported a little bit of
• 9:01
  growth there, but,
• 9:03
  but overall, you know, the the ACA market
• 9:06
  is just it's spiraling. The expiration of the
• 9:08
  enhanced tax credits,
• 9:10
  you know, didn't didn't didn't, I think, was
• 9:12
  the,
• 9:14
  a nail in the coffin, if not the
• 9:15
  final one. People the data overall for us
• 9:18
  country, people are shifting to bronze plans, away
• 9:20
  from silver and gold. So
• 9:23
  more expensive plans, higher deductibles.
• 9:26
  And and so we'll see what happens in
• 9:28
  terms of acuity. Some of the payers are
• 9:29
  being a little bit, I think, optimistic about
• 9:32
  about the overall acuity of the market. But,
• 9:35
  overall,
• 9:36
  you know, enrollment's going down, payers are pulling
• 9:39
  out the big ones, alright, and small ones
• 9:41
  as well.
• 9:43
  I think it mirrors a lot of what
• 9:44
  we saw in the beginning days of the
• 9:46
  ACA back in, like, twenty eighteen ish era.
• 9:49
  And so, you know, it could always rebound,
• 9:51
  but I would say as of right now,
• 9:52
  the the ACA is clearly on a on
• 9:54
  a downward decline.
• 9:57
  Absolutely fascinating. Jacob, it's always a great conversation,
• 10:00
  great to hear what's going on. The ACA
• 10:02
  marketplace, what it mess, the payers reporting better
• 10:05
  results,
• 10:06
  the prior authorization issue, a great question as
• 10:08
  to whether that's really gonna make a difference.
• 10:10
  And then, hopefully, people get returns on investments
• 10:13
  and usefulness from the AI, and it doesn't
• 10:15
  get just get used as another tool
• 10:18
  to to fight with providers, but but actually
• 10:20
  used for useful things. Anyways, Jacob, thank you
• 10:22
  so much for joining us on the Becker's
• 10:24
  healthcare podcast. You're fantastic. Thank you so much
• 10:26
  for joining us. Thank you, Scott.