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.