Contributor: Sheri Sellmeyer
Topic: Medical loss ratios

Health plans owned by hospitals and physicians have long competed against insurers with deeper pockets, larger networks and better-known brands.

But for all the disadvantages these provider-owned plans face, they do have at least one important ace in the hole: they are already spending a higher percentage of their premiums on medical care, a key tenet of healthcare reform.

Kenneth Lewis, the president of FirstCarolinaCare Insurance Company in Pinehurst, N.C., pointed out in a recent letter to Kaiser Health News that his company has a voluntary cap on profits (1.5 percent of operations) that has been in place since 2005, and it pays back money to members when it exceeds that cap.

That’s exactly what healthcare reform will force all health insurers to do. The law requires health plans to spend 80 percent of the premium dollar on medical care for individual and small-group lines and 85 percent for large businesses. If the plans do not meet those standards, they will have to pay rebates to consumers beginning in 2012.

A look at several provider-owned plans across the country shows them well within the law’s requirement. Dean Health Plan and Security Health Plan, owned by a hospital system and physician group, respectively, in Wisconsin, have achieved MLRs in the low 90s over the past several years, according to HealthLeaders-InterStudy. Southeast Indiana Health Organization has kept its MLR in the 86 to 90 range, and Scott & White Health Plan in Texas has had an MLR as high as 95 in recent years. (All MLRs noted are for HMO business.)

The number of provider-owned plans has steadily declined over the past 15 years as they are snatched up by larger plans eager to increase market share. But the surviving ones are still here for a reason: they often have a reputation for being physician-friendly and patient-centered, and they are ranked among the top plans in the country by the National Committee for Quality Assurance and the Commonwealth Fund.

FirstCarolinaCare’s Lewis argues that hospital-owned health plans have provided value to communities with their low margins and low administrative fees; he notes that taxes meant to reduce the profits of large carriers will hurt these smaller plans.

Small, provider-owned plans have survived the recession and competition from much larger plans. Whether they can remain independent through healthcare reform is a big question. With their strength in coordinated care, they may be a tasty acquisition morsel for a much larger fish.

Contributor: Jane DuBose
Topic: Consumer Driven Health Plans

Consumer-driven health plan enrollment represents anywhere from 10 percent to 13 percent of the employer-sponsored health benefits market and it’s been growing at a good clip through the recent recession. If healthcare reform continues as planned and if estimates are to be believed, CDHP enrollment could be half of the private insurance market by 2019.

There are a few “ifs” in that scenario, but the numbers were particularly relevant to a conference workshop at America’s Health Insurance Plans conference in San Francisco on June 16. New research from the University of Southern California verified what many other studies have shown—that healthcare spending dramatically slows for those enrolled in CDHPs.

The USC researchers studied data from 3,000 health plans, 800,000 U.S. households and from more than 50 large employers. It found that healthcare costs for those in CDHPs dropped by 20 percent in their first year of switching from traditional to high-deductible coverage. There were also moderate declines in consumers getting preventive tests, such as mammography, cervical cancer screenings and childhood immunizations, among other things.

The study is important for two reasons: first, it is perhaps the first large comparison of claims data that looks at a group of enrollees in traditional coverage versus the same group of enrollees in CDHP (most studies simply compare one group of CDHP enrollees to another group of traditional); and it indicates—for whatever reason—a reluctance among enrollees to seek medical care even though some of the preventive services may have been available for free. “It seems consumers weren’t making wise choices even when the deductible was waived,” said Neeraj Sood, Ph.D, an associate professor at USC who led the four-year study.

He says if the first-year spending patterns held true for the long term and that 50 percent of the market is in CDHPs by 2019 (through exchanges or their employer plans), the system would save $57 billion.

Some might say that’s great news—consumers in charge of their own dollars reined in unnecessary spending. The other side is that maybe they reined in too much. Did some of those women really need a mammography and missed the chance for an early diagnosis of breast cancer? Will children who missed an immunization develop the disease?

Sood says he still needs to look at the second-year CDHP data to determine whether spending constraint lasted. But one thing is abundantly clear, CDHPs are making an impact.


 

Contributor: Jane DuBose
Topic: State insurance exchanges

There were hundreds of people in the room at the opening of America’s Health Insurance Plans’ session on health insurance exchanges this week. It took only about an hour for the elephant to show up.

That happened when someone asked if the millions of dollars and months of time will all go down the tube should U.S. courts rule against the Affordable Care Act’s individual mandate and support states that have sued the federal government. The speaker dodged the question, as well she should have, because no one in the room really knew what would happen should the 2010 law start unraveling.

One thing is for sure—it would be a big mess. A big part of the U.S. economy has been operating on the assumption that the ACA will survive court challenges because it has no choice but to do so. The federal government has spent more than $300 million just in implementation grants to states that are ahead of the curve on the health benefits exchanges. More than a dozen states have laws in place for exchanges and are starting to build infrastructure to accommodate them.

The ACA requires states to offer benefits exchanges to help individuals and small-business employees to connect to insurance. While the exchanges are set to begin operating in 2014, states must have them in place in 2013.

Word at the AHIP conference in San Francisco this week was that the federal government would be coming out with detailed rules on exchanges within the next two weeks. That will be a relief to state boards and agencies trying to work out details on how the exchanges will work. It will also give direction to health plans trying to decide whether to play in that marketplace.

While every state’s approach is looking unique, several speakers in San Francisco stressed that the exchanges will be more than a portal for commercial insurance, but will also connect to Medicaid and other state-sponsored programs. If health plans aren’t in the Medicaid markets already, now they may have another reason to do so.

The exchanges promise to be complicated, costly and changeable. And if the courts rule against the Obama administration, changeable may be the one word to sum it all up.

 

Contributor: Bill Melville
Topic: WellPoint acquiring CareMore

It’s been a while since a WellPoint purchase made a major splash as it did with the Anthem merger in 2004 and the WellChoice acquisition the following year. More recently WellPoint’s focus has been on adding skills and capabilities to its operating platform, such as an imaging company and data analytics acquisition.

WellPoint’s announcement this month that it is purchasing CareMore, a cutting-edge Medicare Advantage HMO in three western states, adds a new layer of expertise and a departure from the company’s core business of managing for-profit Blue Cross plans.

While WellPoint is involved in multiple state Medicare markets, it is outgunned by UnitedHealthcare, Humana and Kaiser Permanente in several states. WellPoint has large MA populations in Ohio, New York, California and Indiana, but its Heartland and Mountain state Blue plans haven’t made much headway in the MA segment.

CareMore’s modest enrollment numbers don’t speak to the magnitude of the purchase. Although the Medicare plan enrolls only about 52,000 members, mostly in California, it has a growing presence in Las Vegas, Tucson and Phoenix, which it entered in 2011. The plan performed well in its first open enrollment in Phoenix, drawing almost 3,000 beneficiaries.

Once the sale is completed, WellPoint will own CareMore’s 26 clinics in its three states, employing physicians, nurse practitioners, case managers and other providers. The clinics serve as medical homes, coordinating care for members and managing symptoms and comorbidities for the chronically ill. CareMore places heavy emphasis on preventive care, drug adherence and treatment plan compliance to keep beneficiaries out of acute-care settings.

This purchase allows WellPoint to keep up with other national plans and get ahead of the accountable care wave with its own vertically integrated system.

With the sale expected to close before year’s end, WellPoint might not leverage CareMore’s capabilities fully until 2013. It’s still too early to tell whether CareMore’s model will spread across WellPoint’s geography. The more immediate impact should be in markets where both operate in California and Nevada. Owning brick-and-mortar facilities allows WellPoint to compete with regional provider-owned MA plans and national carriers with strong provider ties.

As Baby Boomers comfortable with managed care retire, WellPoint could turn this purchase into major Medicare enrollment gains. WellPoint competes for top membership share in its 14 Blue Cross states, and many new retirees will have been covered by WellPoint in its commercial plans. Buying, then expanding, the CareMore concept seems a natural move as the elderly population grows and more savings are sought through care coordination.

The CareMore name might end with the sale, but it will have a significant influence on WellPoint’s Medicare Advantage future.

Contributor: Sheri Sellmeyer
Topic: Kaiser Permanente and the self-insured market

In the race to offer up the right products under healthcare reform, Kaiser Permanente has many things going for it and one distinct disadvantage.

On the plus side, Kaiser has a long history of coordinated care, disease management and electronic health records – all key tenets of the Accountable Care Act. Kaiser employs its own physicians and operates its own medical centers, enabling the insurer to examine claims data and medical records to constantly come up with best practices – in other words, it’s already configured to do what accountable care organizations are supposed to do. The new requirement that health plans spend at least 85 percent of premiums for medical care for large groups and 80 percent for small won’t be a problem for Kaiser, either – among the national health plans, it has the highest medical loss ratio, trending in the 90s, compared to national plans Aetna, CIGNA, UnitedHealth Group and WellPoint in the low 80s.

But Kaiser’s Achilles’ heel is its self-insured business, still a very small percent of its book in a time when companies are moving to self-insured plans. For employers with relatively healthy workforces, the cost of a self-insured plan can be as much as 20 percent lower than a fully insured one, and the plans aren’t subject to state insurance regulations or the new federal tax in the health reform law. Although the traditional market for self-insured plans has been large groups, which can spread their risk across thousands of lives, Kaiser’s competitors have been busy devising offerings with stop-loss coverage for small and medium-size companies. (Stop-loss reinsurance limits the risk for self-insured employers.)

Kaiser barely has a toehold in the self-insured market: it had just 104,000 commercial self-insured lives out of close to 9 million members at the beginning of this year; compare that to Aetna, with more than 60 percent of its almost 18 million lives self-insured, or UnitedHealthcare, with about half of its 25.6 million lives in self-insured plans.

But there are signs that Kaiser will more aggressively pursue self-insured business. In the Washington, D.C. area, where it competes with national insurers firmly entrenched in the ASO market, Kaiser has added brand-new health facilities in Tysons Corner, a densely populated office/retail area of Northern Virginia, and has opened a huge new facility in the middle of D.C. And its self-insured business, though tiny, has grown by 30 percent year nationally year over year. (Kaiser only entered the self-insured market a few years ago.) The fact that Kaiser has been able to offer lower-cost coverage in the fully-insured market for years suggests it will be able to offer low cost to self-insured plans as well, backed up with its own exhaustive data.

Kaiser certainly has all the pieces in place to appeal to employers looking for self-insured plans that include real care coordination, cost control, and wellness programs. With savvy pricing and the right marketing message and sales infrastructure, it could move into a competitive position in the growing self-insured market.