We have been doing a little series called "The Inches Are All Around Us," digging out waste in the $5.6 trillion healthcare sector where half an inch of waste can equal billions of dollars.
I'm going to right now introduce another series that is complementary but has a slightly different focus. And we will toggle kind of back and forth between these two series coming up here for a bit.
I'm gonna call this other series our "No Market" series, as in, in general, there is no healthcare market; and that is material because anyone who is relying on a market and the invisible hand or any principle of capitalism, frankly, to constrain costs or raise quality … yeah, bad strategy.
Or what did Julia Roberts tell the shopkeeper ladies in Pretty Woman? How'd she put it? "Big mistake. Big. Huge."
For a full transcript of this episode, click here.
Do not rely on a market to keep vendors in line when there is no market. Whatever you accomplish, you gotta do it yourself. But the results are there for those who pick up the baton. There's just so many success stories, so many examples of how someone cut 15% of costs and actually raised quality for their health plan members. There's so many examples of that.
So, yeah, it's just one of these areas where if you don't actively not get taken advantage of, you will actively get taken advantage of. Don't kill the messenger.
So, I'm doing a Take Two of the show with Jacob Asher, MD, about why the carrier market—now he's talking specifically about California, but this is not limited to California—just why the carrier market is so boring, why it never changes. It's completely stagnant.
And I'm doing this—resurfacing the show from three years ago—because it is both a great follow-on and also a great prelude for episodes past and future, and also, three years later, it's still completely boring. Nothing has changed. Giant spoiler alert.
But the reason the carrier market is so boring sort of fundamentally is, again, because there is no market here. What I mean is no one is competing on the strength and quality and affordability of their provider network.
And while there is an obvious fetish for discounts, as has been discussed deeply in many shows but most thoroughly maybe in that episode with Jonathan Baran (EP483) about flywheels, discounts do not automatically equal lower prices. In fact, discounts plus gamed shared savings goings-on often equate to perversely higher prices paid, irrespective of what the contract says. In short, no market.
Now look (and this is exciting), there are some new TPAs (third-party administrators) inching into the market, but if I'm just talking in general, this no market business is devastatingly material. Elizabeth Mitchell talked at length about this in the episode that I reprised recently (EP436). It's called "Let's Talk About TPA and Health Plan Inertia Instead of Jumbo Employer Inertia." So again, that was with Elizabeth Mitchell from the PBGH (Purchaser Business Group on Health). It was a really popular show. So, if you haven't listened to that, go back and do so.
So, yeah, while the commercial payer/commercial carrier marketplace is completely boring because there is, in fact, no market to spice it up with any action whatsoever, the reasons it's boring and there's no market are, frankly, not boring.
So, let me walk you through this conversation that follows with Jacob Asher, MD. First, we establish that the relative number of each carrier's commercial members in California specifically doesn't seem to change year over year. And this has been true for years, and it's still pretty much true. When you rank order carriers by member count, the song remains the same. It is Groundhog Day.
Then Dr. Asher and I dissect what anybody's actually doing to cut into Kaiser's market share or try to grab share from the two big Blues plans, if anything, these three being the biggest plans going.
Why did I ask Dr. Jacob Asher to participate in this particular conversation? It was because he was a full-time health plan chief medical officer for, first, Anthem, then Blue Cross, then Cigna, then UHC (UnitedHealthcare). Now he's retired and kind of reflecting back on unsolved and unaddressed issues within healthcare, such as, why is the commercial marketplace as boring as it appears to be?
After I had this conversation with Dr. Asher, I did a little reconnaissance, a little reconnoitering, meaning, I called up Wendell Potter—who everybody probably already knows, but if not, listen to episode 384—and I also called up Lauren Vela from episode 406. And I learned a few things from the two of them that really helped me frame my thoughts on some of the issues that surfaced in the conversation that I had had at that point with Dr. Asher.
So, why doesn't the relative market share of the biggest payers change year over year over year in the commercial space? May I present six reasons for the lack of market. And again, we're talking about California, but same rules apply across the entire country.
Here's Reason 1: Everybody I talked to—Dr. Jacob Asher, Wendell Potter, Lauren Vela—first thing right outta the gate that practically everybody mentioned is employer inertia, which is, by the way, the topic of the show with Lauren Vela (EP406). Just trying to get an employer to switch carriers is like trying to pull Excalibur from the stone.
And not surprising because employer starts talking about changing, someone will bring up the D word, as Claire Brockbank calls it, the disruption word. It's obnoxious for employees and also benefit teams if the carrier is switched all the time. You could also listen to the show with Lee Lewis coming up about the beliefs of many CEOs that also adds up to this inertia.
Reason 2 for the boring no market when it comes to carriers and their networks: EBCs (employee benefit consultants). They have deals with carriers and others, and they also have a lot of power over employers. Listen to the show with AJ Loiacono (EP379) and Paul Holmes (EP397) for a whole lot more on this.
Reason 3 for the no market: In many states, the real money for carriers is not in the self-funded ASO (administrative services only) market, so they don't really care much about aggressively competing for market share. It's a little bit less true today, but it still is a factor.
But what is undeniably maybe even a bigger factor here relative to what the carriers are up to, it's the pretty obvious negotiating strategy where carriers use higher self-insured employer rates and prices as a lever to get themselves lower Medicare Advantage rates.
Let's not forget in the commercial markets, self-insured employers are spending the money, right? The carrier is administrative services only. They're just moving self-insured employers' money around. So, it's not their money they're spending; it's the employers'.
In the Medicare Advantage market, it's the carrier's money, right? Neat trick. You go into a negotiation, and you trade lower rates for yourself for higher rates for your commercial members.
I hear about this happening all the time, but again, it adds up to stagnation—like, nobody is aggressively trying to cut costs in order to gain market share. There's Medicare Advantage incentives, much more attractive than trying to lower commercial rates so that you're competing for employer business. You see what I'm saying?
Reason 4 for the no market: Kaiser excluded, all of the rest of the California payers have what amounts to largely the same provider network. I'm exaggerating slightly here, but largely the same hospitals, the same consolidated integrated delivery networks. It's tough to have market forces leveling up network quality or affordability when all the providers in the network are largely the same.
Reason 5 why the market is so boring and there is no market: Because of this same provider business, traditional carrier negotiating power all boils down to how many members they have because the bigger the promised volume to any large corporatized consolidated health system, the higher the discount you probably can finagle.
The market remains stagnant with the big staying big because they can probably promise the best discounts for those who are buying discounts.
Reason 6 for the no market total stagnation going on in the carrier space: As Dr. Asher mentions in the show today, he never saw an employer buy on quality. Again, if everybody's focused on discounts, the biggest plans maintain their market share.
Another nuance I would not lose track here is the stuff that Brennan Bilberry talks about in episode 395, and this is health systems who have anticompetitive contracts with carriers—and that has implications that undermine a carrier market as well.
Okay … so, these are your six reasons for the no market, very boring stagnation situation. There's a lot of ramifications to this, but the show cannot be seven hours long.
I will just mention, though, the adjacent shows in our "No Market" series coming up here. We have an upcoming show where Ivana Krajcinovic, PhD, she talks a lot about the impact of what she calls lazy networks, carrier networks. I also speak with Leo Spector, MD, MBA; Adam Stavisky; and Ryan Wells (Ryan is from Health Here) about how to go around the networks and enable providers and purchasers to directly collaborate together.
I talk also with Ryan Jacobs from Marathon about the payer perspective on advanced primary care and just kinda like how the non-market has an impact here.
So, yeah, here is my conversation with Dr. Jacob Asher.
This podcast is sponsored by Aventria Health Group, and also we got an assist from Payerset, who I could not thank enough. Those guys over there are great. Check 'em out.
Also mentioned in this episode are Jonathan Baran; Elizabeth Mitchell; Purchaser Business Group on Health (PBGH); Mark Weber; Aligned Value Advisors; Wendell Potter; Lauren Vela; Claire Brockbank; Lee Lewis; AJ Loiacono; Paul Holmes; Brennan Bilberry; Ivana Krajcinovic, PhD; Leo Spector, MD, MBA; Adam Stavisky; Ryan Wells; Health Here; Ryan Jacobs; Marathon Health; Aventria Health Group; Payerset; Gloria Sachdev, PharmD; Chris Skisak, PhD; Shane Cerone; and Kada Health.
You can learn more by connecting with Dr. Asher on LinkedIn.
Jacob Asher, MD, completed a residency in otolaryngology–head and neck surgery at the University of California, San Francisco, after receiving degrees from Brown University and the Boston University School of Medicine. Dr. Asher then practiced as an ENT (ear, nose, and throat) surgeon with Kaiser Permanente in Northern California and also served on the board of directors of The Permanente Medical Group, where he focused on physician compensation reform, member satisfaction initiatives, and retirement benefits.
After transitioning to full-time health plan management, Dr. Asher served as a California commercial market medical director between 2008 and 2022 for Anthem Blue Cross, Cigna, and UnitedHealthcare. In those roles, he supported membership growth and retention in both fully insured and self-funded product lines and promoted value-based reimbursement, including capitation.
He has led utilization management teams, collaborated with internal and external population healthcare advocates, and worked to develop clinical initiatives that sought to achieve the Triple Aim. In his role as the clinical face of the health plan to the local market, he worked with network colleagues on accountable care organization partnerships and hospital and physician contract renewals with integrated pay for performance, supported Obamacare exchange participation, engaged in quality improvement collaboratives, and supported regulatory compliance efforts.
Currently, Dr. Asher is serving as a mentor for the Stanford Master in Medical Informatics program while exploring innovative solutions to healthcare delivery.
00:00 Introduction to the episode.
00:42 The "No Market" series.
01:51 Why is the carrier market boring?
04:26 A breakdown of what follows.
05:48 Six reasons why a marketplace doesn't actually exist.
10:04 Upcoming episodes in the "No Market" series.
10:41 The conversation with Dr. Jacob Asher.
11:01 What is the competitive picture of California's health plans?
11:03 Understanding the California health plan market.
12:28 What the competitive landscape looks like to get market share in California.
12:55 Challenges in market competition.
13:14 What are micro markets and market drivers?
15:14 How brokers and consultants shape the marketplace.
15:49 Why is it difficult to take market share?
16:56 Who was Dr. Asher pitching to and why?
18:56 How is Kaiser's position in the marketplace unique?
19:29 Did employers ever buy plans for quality?
23:23 What does this look like from the payer perspective?
27:42 What improvements have there been to engagement in health plans?
29:47 Have plans gotten better at communicating with employers?
31:19 Why is it hard to compare the Kaiser world to the non-Kaiser world?
31:19 Dr. Asher's final thoughts and reflections.
33:40 EP390 with Gloria Sachdev, PharmD, and Chris Skisak, PhD