When national healthcare reform died this year, state reform plans hinging on federal waivers for employer mandates were left high and dry.
The Republican landslide in November threw even more uncertainty into state healthcare reform agendas.
Despite these setbacks for government initiatives, the speeding train of market change to managed care seems unstoppable. Take, for example, Washington state, which could be considered a microcosm of high-speed, market-based reform in the face of stymied legislative reform.
The Washington Health Services Act of 1993-hailed by Hillary Rodham Clinton as a model for national reform-was designed to provide each of the 4.9 million residents with healthcare by 1999. The goal was to add coverage for the estimated 600,000 uninsured.
Some parts of the law, such as expansion of the Medicaid program into managed care and expansion of the state's basic health plan, have been implemented, swelling HMO enrollments.
But key parts of the legislation are stuck.
Beginning in July 1995, the hoped-for waiver from the federal Employment Retirement Income Security Act would have allowed the state to require employers to pay at least 50% of a uniform benefit package that had to be offered by certified health plans focused on managed care. The cost of the package has yet to be determined.
For more than a year, a Health Services Commission, created by the legislation, worked to define the uniform benefit package and come up with rules for certified health plans, an effort that stalled when national reform died and Republicans took over the state Legislature in November.
The new majority indicated it would dismantle key provisions of the act, forcing the commission to switch gears and spend time "seeing how the vision of health reform can work in a voluntary environment," said Claudia Sanders, director of policy analysis at the Washington State Hospital Association.
On Dec. 1, the commission voted to recommend to the Legislature that certification of health plans be delayed from July 1, 1995, to Oct. 1, 1995, and that coverage under the reformed system be phased in between Feb. 1, 1996, and Jan. 31, 1997.
Earlier, the commission adopted a uniform benefit package that includes preventive care, visits with doctors and other providers, and hospital, emergency and other healthcare services.
Crazy market."We don't know which
pieces of the act will remain," said Elaine Von Rosenstiel, vice president of planning for the Group Health Cooperative of Puget Sound, Seattle, the state's largest HMO with more than 485,000 enrollees. Ms. Von Rosenstiel quoted from a recent newspaper article to illustrate the current state of affairs: "If you're almost totally confused about healthcare reform in Washington state, you probably have a good grasp of the situation."
"So you might think we were back to the old market," she said. "But it's a very different and new market. Regardless of what has been happening in the reform area, our marketplace has been changing rapidly. The 1993 act would have helped structure it," but the changes are happening anyway.
Despite the confusion, HMOs have not been standing still. "What we're gearing up for is responding to the crazy market we're in," Ms. Von Rosenstiel said. That dynamic market includes "several new employer purchasing groups...recent mergers and alliances among our old competitors, (and) the moving in of new competitors," such as PacifiCare of Washington, which this year significantly expanded operations.
The activity includes Swedish Health Services, Seattle, which has a definitive agreement to merge with MultiCare Health System in Tacoma, Wash., forming a network with a number of suburban hospitals and purchasing a Cigna HMO in the state. "Clearly (the two entities are) positioning themselves to be a managed-care plan," Ms. Von Rosenstiel said.
Also, Seattle-based Sisters of Providence purchased various physician practices, and "a number of hospitals are trying to form physician-hospital organizations with community physicians," in order to qualify to be certified health plans, Ms. Sanders said.
Room for growth.Comparing the HMO penetration in Washington with the larger HMO presence in the San Francisco Bay Area, Ms. Rosenstiel said, "There's room in this state for tremendous growth in the managed-care market."
Group Health Cooperative is doing a number of things to ride that wave of growth, including a recent alliance with Virginia Mason Medical Center in Seattle. In 1995, the organizations will offer a joint product that balances Virginia Mason's specialty care and the cooperative's primary-care capabilities, and includes a point-of-service plan, she said.
Meanwhile, last March Mercer Island-based PacifiCare of Washington, which formerly operated only in Clark County, emerged as a strong new competitor by acquiring Network Health Plan, a prepaid health plan in Mercer Island, and Network Management, a third-party administrator.
"We're using those operations as a base to establish ourselves and grow statewide," said Mary McWilliams, PacifiCare of Washington's president and chief executive officer. The HMO is now accessible to about 70% of the state's population in 10 counties.
"In some respects we felt we had to have a statewide presence in the light of healthcare reform," Ms. McWilliams said. But even apart from reform, PacifiCare felt it had to expand to meet the needs of its statewide employers, she said.
The HMO has about 50,000 enrollees in prepaid plans, but it's preparing itself for the possibility that more employers will turn to self-insurance if they don't like the requirements of the uniform benefit package.
That's where PacifiCare's new third-party administrator, which now covers 42,000 people, comes in. "We've found increasing interest in self-funding as certain insured employers who are uncertain about healthcare reform are seeking to self-fund," Ms. McWilliams said. "I think we can accommodate ourselves whatever way the wind blows."
With competition heating up among HMOs, employers in the state are seeing a slowing of premium increases and even a reduction in premiums, Ms. Von Rosenstiel said.