In the new year, payers with an abundance of capital resulting from deferred care amid the pandemic will look to make investments in technology and ramp up acquisition activity in the primary care arena, a PwC expert predicts.
Amid the Covid-19 pandemic, fear of contracting the deadly new coronavirus has kept scores of Americans from getting the medical care they need. While this has spelled financial disaster for many healthcare facilities, it has placed health insurers in a strong capital position for 2021 — providing them more cash on hand that they can use for investments. A leader from consultancy firm PwC predicts that payer investments will be concentrated in mergers and acquisitions activity and technology implementation.
As of June 30, around 41% of U.S. adults reported having delayed or avoided medical care during the pandemic because of concerns about Covid-19, including 12% who reported having avoided urgent or emergency care, data from the Centers for Disease Control and Prevention shows.
As a result, payers’ risk-based capital ratios — which indicate the percentage of capital an entity has on hand over and above the minimum amount required for it to support its overall business — have ballooned amid the pandemic.
DistilINFO Healthplan Monthly Intelligence Report
Your monthly roundup of the US healthplan industry.
In the second quarter of 2020, nearly a quarter of health insurers had risk-based capital ratios of 800% or higher, according to a report by PwC’s Health Research Institute which polled 128 health plan executives in August and September. The report also shows that the average risk-based capital ratio for the payer sector grew from 616% in 2019 to 690% in the second quarter of this year.
These figures are far higher than the average risk-based capital ratio of 200% that most states require health insurers to maintain, the report states.
“This indicates that [payers] have an additional cushion, additional capital that would be available for a whole host of things, one of which could [be] increased deal activities,” said Nick Donkar, health services deals leader at PwC, in a phone interview.
As health insurers move into 2021, they are likely reviewing their growth strategy. According to Donkar, there are three fundamental tenants that all payers ascribe to when they think about their strategy for the future:
In keeping with these tenants, Donkar expects payers to eye acquisitions that would streamline or improve access to care. Payers may look to acquire primary care practices or other care facilities in areas they are already operating in or, potentially, in areas where they want to gain a foothold. Payers will be especially interested in primary care providers that are looking to enter into value-based care arrangements, he said.
Another area Donkar expects payers to invest in is technology — especially solutions that support virtual care, remote patient monitoring and cost mitigation.
“A lot of payers right now, based on our understanding of the current market, are looking at these advanced technologies to facilitate the execution of the three strategic [tenants mentioned above],” Donkar said.
About half of the payer executives surveyed for the PwC report said that their organization is investing in digital product support and educational tools, such as mobile apps, to improve the member experience.
Though payer organizations tend to be hesitant to make the first move with regard to new investments, it would behoove them to take a more urgent approach in the year ahead, Donkar said.
“In this case, there are going to be assets — like primary care and technology-related assets — all across the board that are going to be accelerated deal-making opportunities, and so it’s going to warrant quick and swift and smart strategic decisions by executives,” he added.
Source: Medcity News