The American Association of Retired Persons has taken the first step to expand the health-related products it makes available to its membership in 21 million households across the country.
The result will make a select group of HMOs and health insurers very happy.
The AARP, which represents those age 50 and older, has begun the process of choosing HMOs to offer health coverage to Medicare beneficiaries and those under age 65, opening up a vast new market for selected HMOs. Until now the AARP has never offered HMOs to its members. The group's selections would amount to a virtual endorsement of the health plans.
The AARP also has invited 18 health insurance companies to bid on long-term health insurance for its members and has asked 16 health insurers to bid on providing supplemental health insurance, including Medicare supplement and hospital indemnity plans.
The AARP Group Health Insurance Program now offers traditional Medicare supplement-or Medigap insurance-hospital indemnity and long-term-care plans to about 6 million members through Prudential Insurance Co. Last November, the AARP notified Prudential of its intent to terminate the current agreement, which runs through December 1997. The AARP invited Prudential to submit bids for its new program along with the other bidders.
When the AARP last month asked insurers to bid on long-term health insurance and supplemental coverage, Wayne Haefer, director of its membership division, said: "We are asking for innovative product ideas that will support the needs of our members." He said the association was hoping to award agreements that provide wide access as well as competitive pricing.
The AARP has decided it's time "to increase the amount of choice our members have available," said Susanne C. Bowman, the group's director of insurance services. The AARP also is responding to members' requests to have managed-care plans available to them.
HMOs "will become more important as people who are HMO-familiar age into the Medicare population," she said.
Prudential now sells Medicare supplemental coverage to more than 5 million AARP members. People buy supplemental policies to cover deductibles and other healthcare expenses Medicare doesn't cover.
Now the AARP is in the process of choosing Medicare-risk HMOs to offer as an option to its membership. But unlike some large employers, it's not the AARP's intent to encourage those members to transfer to Medicare HMOs.
More and more employers are encouraging retirees to join Medicare HMOs by paying part or all of the premium. That allows the employer to drop expensive Medicare supplemental coverage while offering enhanced benefits (April 3, 1995, p. 76; Aug. 21, 1995, p. 156). Some Medicare HMOs don't even require a premium. But they do require the enrollees to use only HMO providers.
"We're not trying to do what an employer does. We don't have cost issues. We're not trying to substitute managed care" for Medicare supplement products, Bowman said. "We want them to exist side-by-side."
One of its goals in offering Medicare HMOs "would be to provide something that doesn't exist in the marketplace today-programs with a higher level of educational materials, wellness seminars, making sure people have access to the coverage," she said.
Medicare HMOs for AARP members also would be expected to support "meaningful" dispute resolution and offer coverage for prescription drugs, she added.
"We're looking to do something different. We want to be leaders in making it a comprehensive product," Bowman said. "Portability is another big issue."
Salt Lake City-based Health Benefits America is assisting the AARP in developing a request-for-proposal to send to HMOs. HBA "helps large employers do what we are trying to do," Bowman said. The company is collecting data from which the AARP will make preliminary selections before applying AARP-specific requirements to the candidate HMOs, she said.
The organization will be sending out RFPs to health plans in phases and anticipates the first ones will go out in June or July. The AARP hopes to have commitments from six or seven plans covering 12 to 15 markets by year-end, she said.
Like large employers, "our approach is to look for the best local provider of care," Bowman said. "Most of the large carriers want to sell us on their ability to handle most of the country. That's important, but bigger is not necessarily better."
The result of the AARP's selection process will be "a very distinctive change for the association. We've never been in a multiple-provider situation before for a particular product. Our service providers are all national," Bowman said. For example, in addition to Prudential as the group's only healthcare insurer, it also chose ITT Hartford for auto and homeowner insurance; and New York Life for life insurance, she said.
While overseeing a number of HMOs nationwide will make for "a much more complicated environment," Bowman said the group will be "much more comfortable looking at local plans" for healthcare.
The AARP is looking at an HMO's "whole package," not just its medical outcomes, but other considerations such as member service and solid financial standing, she said.
Like the other products the organization offers, "we would want prices to be competitive. But we're looking at a total value kind of approach as opposed to the cheapest product," Bowman said.
Understandably, officials at the nation's largest Medicare-risk plan, PacifiCare's Secure Horizons, welcome the AARP's new tack. "We look forward to talking with them," said Craig Schub, senior vice president for government programs at the Cypress, Calif.-based plan, which now enrolls more than a half-million Medicare beneficiaries.
"We think this is an appropriate recognition that healthcare for people on Medicare has changed and that managed-care plans offer value in terms of added benefits and quality heretofore not available in fee-for-service plans or straight Medigap policies," he said.
"There is really no one-stop shop for a national membership," Schub added. "There are quality HMOs emerging in every market across the country, and quality does vary. You really have to look at who are the strong providers on a geographic basis."
Secure Horizons covers Medicare beneficiaries in California, Oklahoma, Oregon, Texas and Washington state. It also serves beneficiaries in Massachusetts through an affiliation with Tufts Associated Health Plans.