A struggling for-profit HMO in Vermont co-owned by several not-for-profit hospitals is pushing the hospitals' employees out of the plan to make room for former Kaiser Permanente members.
Like many hospital-owned HMOs, the Vermont Health Plan began with thousands of hospital employees as its first enrollees. But now the 3-year-old plan is jettisoning those employees partly because they are costlier to cover than the former Kaiser patients would be.
Kaiser Permanente decided earlier this year to pull out of markets in Connecticut, Massachusetts, New York and Vermont (June 21, p. 4).
Vermont was the only state where Kaiser could not sell its business to another insurer. That will leave about 80,000 enrollees in the state searching for a new plan when Kaiser officially closes shop March 1.
"Nationwide, healthcare workers utilize health services at a greater rate than other workers do," said Jill Jesso White, spokeswoman for Rutland (Vt.) Regional Medical Center, one of the HMO's owners, in a written statement. "This higher rate of utilization and the costs associated with it may have indirectly caused premiums for all plan purchasers to be higher than they needed to be."
When Vermont Health Plan started in 1997, 132-bed Rutland Regional and another plan co-owner, 481-bed Fletcher Allen Health Care in Burlington, automatically enrolled their employees in it. The employees made up about one-third of the HMO's 27,000 members.
Starting next month, Fletcher Allen will transfer its employees to a plan owned by Hartford, Conn.-based Cigna HealthCare.
Rutland Regional also said it may move its employees to another plan.
A third provider owner of the plan is the Hitchcock Alliance, a 6-year-old network of 10 loosely affiliated hospitals. It did not enroll its employees in the plan because its lead hospital, Mary Hitchcock Memorial Hospital, is located in Lebanon, N.H., about 50 miles east of Rutland.
The providers own half the plan, and Blue Cross and Blue Shield of Vermont owns the remaining half.
Providers starting HMOs often select their own employees as inaugural members.
"If you're a provider, you'd want your workers to use you instead of your competitors," said Paul Fronstin, senior research associate at the Employee Benefit Research Institute in Washington.
But in the long run hospital employees may be the costliest members, he said. "(Being in a provider-owned HMO) encourages higher use, because it's so much easier to get a doctor's appointment if you know the people who make the appointments," Fronstin said.
In 1998, Vermont Health Plan lost $897,440 on premium revenues of $21.9 million (See chart). It has lost a total of $2.3 million since its birth.
Leigh Tofferi, a spokesman for the Vermont Blues, said it's unclear how many new enrollees Vermont Health Plan will take, but the plan's owners were "concerned" about the potential influx.
"One way health plans get into trouble is they grow too fast," Tofferi said. "We had 27,000 members prior to making this decision, making it the second-largest HMO in the state within a two-year period. A business decision was made to have the hospital members seek coverage elsewhere to free up the ability to absorb Kaiser members without rate increases and the need for more capital reserves."
The hospitals and the Blues started the plan with $7 million, and the partners are required to ante up another $2.7 million by year-end.