For a long time now I’ve been writing things like “the balance of market power between insurers and providers determines health care prices” or “consolidation among insurers can offset hospital monopoly power.” I’ve used the term “insurers” a lot. So do many others. But it’s not really the right term in most cases. Here’s why:
About 45 percent of workers are covered by fully-insured plans. That’s a plan for which an insurance firm is at risk for the costs. The other 55 percent of workers are covered by self-insured plans. That’s a plan for which the employer takes on the risk of financing plan costs. In the case of self-insured plans, strictly speaking, there is no “insurer.” Loosely speaking one could say the employer is the insurer but that’s a misuse of the term “insurer” since in most cases the employer is not an insurance company.
This fully-insured/self-insured distinction really matters to some people and in some respects. To me it never has because I’ve been thinking about how prices are set and the term “insurer” was just a stand in for the bargaining unit that opposes the hospital or provider. That is, prices are set in the marketplace via negotiation between two entities. My generic term for one entity was “provider” (sometimes just “hospital” if I wished to exclude physicians). My generic term for the other entity was “insurer.” I was OK with that.
But not everyone is, nor need they be. I can do better and make thinks clearer. What I really think is going on (and this is confirmed by some colleagues with whom I corresponded on this) is that “plan brokers” bargain with providers. A “plan broker,” as I am defining it, is any entity that serves as an insurer or an administrator of a self-insured plan or both. Plan brokers likely leverage their entire portfolio of policyholders when they negotiate with providers. That is, all lives covered via the fully-insured and self-insured plans a plan broker administers is a determinative factor the prices paid by plans offered by that entity.
So, I’ll stop using “insurer” when I mean the bargaining unit that opposes providers. I’ll use “plan broker” for now, but I’m not confident the meaning of that term is well understood. I worry it will be confused with insurance brokers. Is there a better, clearer term? “Plans” is not right since a firm can offer multiple plans. The plan is not the bargaining unit. The firm is. But “firm” is too generic. What type of firm? Answer: A firm in the business of selling health plans, whether fully-insured or to self-insured employers.
Still with me? Got suggestions?
UPDATE: My colleague Steve Pizer suggests that I should just use the term “plans” and clarify on first use that I mean the firms that offer plans, either fully-insured or administered self-insured ones. He thinks that “plan brokers” is too close to “insurance brokers.” I agree. I need to avoid “broker” and “insurer” and “firm” is too vague. That leaves “plans.” Still, we really need a better term for this bargaining unit. Got ideas?
UPDATE 2: Another reader informed me that firms refer to their self-insured business as Administrative Services Only (ASO).