More health systems launch insurance plans despite caveats
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Biden's early approach to virus: Underpromise, overdeliver
      Two travel nurses wearing personal protective equipment.
      Healthcare providers face high costs, demand for agency staff as COVID-19 rages
      By the Numbers: 20 largest healthcare investment banks in 2020
      50% of Americans make resolutions. Fewer than 27% keep them over time.
      Data Points: Sticking with your resolutions
    • Biden's early approach to virus: Underpromise, overdeliver
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Two travel nurses wearing personal protective equipment.
      Healthcare providers face high costs, demand for agency staff as COVID-19 rages
    • Health suffers as rural hospitals close
      Medicare ACO participants fell in 2021
      Louisiana gets reports vaccine providers are discriminating
      'We know this is real': New clinics aid virus 'long-haulers'
    • Last-minute COVID costs cut into UnitedHealthcare's $396 million operating income
      CMS approves rule forcing insurers to ease prior authorization
      COVID-19 still a big uncertainty for insurers in 2021
      Health insurers' outlook boosted after Dems' Georgia win
    • It's a secret: California keeps key virus data from public
      lacewell_linda_supertinendent_dept_of_financial_services_8.47.jpg
      New York state investigates drug price spikes during pandemic
      Health experts blame rapid expansion for vaccine shortages
      HHS freezes rule targeting community health centers' drug discounts
    • By the Numbers: 20 largest healthcare investment banks in 2020
      Providers await new HHS coronavirus grant reporting deadline
      Operation Warp Speed Dr. Moncef Slaoui, Pfizer Group President Angela Hwang, Moderna CEO Stephane Bancel, CVS Health Executive Vice President Karen Lynch and McKesson CEO Brian Tyler participate in a panel discussion on the COVID-19 vaccine.
      Hospitals, drug companies strive to stand out virtually at JPM
      Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
    • Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years - Transcript
      A man in a room with servers.
      Momentum grows to outsource hospital tech functions in 2021
      5 things to know about Google's $2.1B Fitbit acquisition
    • An older man wearing a mask receiving a vaccine.
      Want more diversity in clinical trials? Start with the researchers
      Avocado
      Avocado a day keeps the doctor away
      50% of Americans make resolutions. Fewer than 27% keep them over time.
      Data Points: Sticking with your resolutions
      U.K. chief scientist says new virus variant may be more deadly
    • Cerner names Erceg as new CFO
      Elizabeth Richter will serve as acting CMS administrator
      Providence names new chief financial officer
      Wisconsin's top health official departing for federal job
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • InDepth Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
      Yale New Haven's COVID-19 nurse-staffing model has long-term benefits
    • Modern Healthcare InDepth: Breaking the bias that impedes better healthcare
      Videos: Healthcare industry executives describe their encounters with racism
      Michellene Davis
      Healthcare leadership lacks the racial diversity needed to reduce health disparities
      Dr. James Hildreth
      How medical education can help fight racism
      Quotes from rebadged employees
      Outsourcing IT, revenue cycle takes toll on internal culture
    • A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      self service station
      COVID-19 pushes patient expectations toward self-service
      Targeting high-risk cancer patients with genetics
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Highmark Health inks six-year cloud, tech deal with Google
      Study: 1 in 5 patients report discrimination when getting healthcare
      HHS proposes changing HIPAA privacy rules
      Android health records app launches at 230 health systems
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      New care model helps primary-care practices treat obesity
      How hospitals are building on COVID-19 telehealth momentum
    • Regional insurers bet big on virtual-first plans
      MedPAC votes to boost hospital payments, freeze or cut other providers
      Most Next Gen ACOs achieved bonuses in 2019
      Congress recalibrates Medicare Physician Fee Schedule after lobbying
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
      Dr. Bruce Siegel
      Why taking a hospital not-for-profit was Dr. Bruce Siegel’s boldest move
    • Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
      Mark C. Clement and David Cook
      We all need to 'do something' to fight inequities and get healthcare right, for every patient, every time
    •  Alan B. Miller
      Looking ahead with optimism as we continue to transform healthcare
      Dr. Bruce Siegel
      By protecting the healthcare safety net, Biden can put us on the path to a stronger country
      Healing healthcare: some ideas for triage by the new Congress, administration
      Dr. Sachin H. Jain
      Medicare for All? The better route to universal coverage would be Medicare Advantage for All
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - Health Care Hall of Fame
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Top 25 Minority Leaders
    • Top 25 Women Leaders
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • Leadership Symposium
    • Healthcare Transformation Summit
    • Women Leaders in Healthcare Conference
    • Workplace of the Future Conference
    • Strategic Marketing Conference
    • Social Determinants of Health Symposium
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala (2022)
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next 4 years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
      Next Up Podcast: COVID-19, social determinants highlight health inequities — what next?
      Ceci Connolly
      Next Up Podcast: How to navigate the murky post-election waters
    • Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
      doctor burnout
      Beyond the Byline: How healthcare supply chain struggles contribute to employee burnout
      Beyond the Byline: Covering race and diversity in the healthcare industry
    • Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Chip Kahn
      The Check Up: Chip Kahn of the Federation of American Hospitals
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      The Check Up: Dr. Kenneth Davis
      The Check Up: Dr. Kenneth Davis of Mount Sinai Health System
      The Check Up: Dr. Thomas McGinn
      The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    • Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Insurance
April 04, 2015 01:00 AM

More health systems launch insurance plans despite caveats

Bob Herman
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Premier Health headquarters, Dayton, Ohio.

    Premier Health, part-owned by Catholic Health Initiatives, took its first step into the insurance business last year. After acquiring a state insurance license in 2013, the system in Dayton, Ohio, offered its own health plan for its 17,000-plus employees and their family members.

    Premier's employee benefit plan was a laboratory for expanding its capacity to manage the health of enrolled populations, said Mike Maiberger, CEO of Premier Health Plan and chief value officer of the five-hospital, $1.9 billion system.

    This year, Premier Health Plan is moving beyond its employees. It now covers 7,100 Medicare Advantage members and 2,000 individuals and families, most of whom signed up through the federal insurance exchange in Ohio. “For us, the insurance business is just a vehicle to cover as many lives as we can in our service area with our population health initiatives,” Maiberger said. “We're not out to be one of the large national players in the insurance market.”

    Provider-owned health plans like Premier's continue to spring up or get larger as more hospitals and physician groups are moving to take on financial risk for their patients under value-based and capitated payment contracts. Providers see the financial and quality advantages of controlling premium dollars from beginning to end and steering patients toward their services. It frees them from having to share with insurance companies any savings they generate from improved quality and efficiency.

    MH Takeaways

    The safest option may be converting a Medicare ACO into a Medicare Advantage plan.

    “If you can demonstrate that you offer more quality at an effective price point, you can take (market) share,” said Joseph Marinucci, a health insurance analyst at ratings agency Standard & Poor's.

    But for every potential advantage of starting a health plan, there is an “equally robust list of cons,” said Chris Myers, a director at consulting firm Navigant Healthcare.

    Once hospitals “get into product design and pricing and all of the nuanced areas, you can get into trouble reasonably quickly,” said Greg Maddrey, a director at the Chartis Group, a consulting firm.

    Leaders of established provider-owned plans say it's a long slog to positive margins. Plans need to watch out for attracting too many sicker members who may be drawn to the system's providers. And many hospital executives are leery of antagonizing insurers whose provider networks they want to participate in by competing with them for insurance customers. As an alternative, some health systems such as UCSF Medical Center in San Francisco are seeking partnerships with insurers.

    Consequently, many health systems are taking a cautious approach to entering the insurance business, at least partly because they don't want to repeat hospitals' financial losses in the 1990s, when many jumped into the risk business. Recently, Partners HealthCare in Boston and Fairview Health Services in Minneapolis have suffered sizable losses with their health plans.

    Cleveland Clinic has considered applying for an insurance license but has not yet done so. Any talk of launching a health plan is “very premature,” a Cleveland Clinic spokeswoman said.

    “We are going to do our insurance products through established health plans” such as Anthem, said UCSF CEO Mark Laret.

    Dignity Health in San Francisco is exploring a limited state license to accept full-risk payments from health insurers, but it does not intend to create its own health plan. “I think that's ill-conceived,” Dignity Health CEO Lloyd Dean said last year. “I think it's ultimately not going to be successful.”

    The safest option for provider systems for now, some experts say, may be offering insurance products that serve a narrow population, such as a Medicare Advantage or Medicaid plan, or creating loose partnerships with insurance companies. Some hospitals have co-branded, limited networks with national insurers.

    “The average organization does not necessarily want to start out (with) their own health plan,” said Frank Williams, CEO of consulting firm Evolent Health. His organization advises provider systems on how to operate plans. It's partly funded by 2.5 million-member UPMC Health Plan in Pittsburgh, which is owned by the not-for-profit UPMC health system. “But to move to a population health model, they have to have enough scale.”

    There were 698 hospitals that had an equity stake in an HMO in 2013, up 11% from 2012, according to the American Hospital Association. But because that figure includes many hospitals within the same health system, the total number of provider-sponsored plans is more likely to be about 90, Navigant's Myers said.

    Financially, provider-owned plans are doing as well as other health insurers or better. They had a 3.2% average profit margin in 2013, and that margin has hovered above 3% since 2010, according to a February report from ratings agency A.M. Best Co. The entire health insurance industry had a similar 3.2% profit margin in 2013, but that was down considerably from 2010, when the average margin was near 4.5%.

    Premiums collected by provider-owned plans rose faster in 2013 (5.5%) than at publicly traded insurers (2.4%), Blue Cross and Blue Shield plans (2.5%), and others in the industry (3.2%).

    The A.M. Best analysis looked at about 150 provider-owned plans, which included several subsidiaries within the same insurer. Many of these statistics, however, may be skewed toward the well-established provider-owned plans such as Kaiser Foundation Health Plan and UPMC Health Plan.

    Provider-owned plans cover less than 10% of the entire privately insured market, but their membership is growing. Total enrollment jumped to 19.1 million people in 2013, a 4% increase from 2012 and a higher growth rate than for other types of plans. This is especially the case in the Medicare and Medicaid markets, where in 2013 Medicare beneficiary membership in provider-owned plans rose 8.2% and Medicaid beneficiary membership grew 15.3% compared with 2012, according to A.M. Best.

    For instance, Presbyterian Health Plan, owned by Presbyterian Healthcare Services in Albuquerque, increased its Medicaid membership by 18% to 193,000 in 2014. It was one of four health plans selected to manage care for New Mexico's Medicaid population, which grew because that state expanded eligibility under the Affordable Care Act.

    Paul Levy, former CEO of Boston-based Beth Israel Deaconess Medical Center, said hospitals are starting health plans because handling both sides of the premium dollar helps them better understand the enrollment risk pool and medical cost trends. They're also doing it to gain dominance in their market. “I just don't think most of them are thinking about getting into insurance for the sake of better patient care,” he said.

    “For us, the insurance business is just a vehicle to cover as many lives as we can in our service area with our population health initiatives. We're not out to be one of the large national players in the insurance market.”

    Mike Maiberger

    CEO, Premier Health Plan

    A few health systems have struggled in the past year with their insurance divisions. Neighborhood Health Plan, owned by not-for-profit Partners HealthCare, lost $110 million in fiscal 2014 and had to book another $92 million in reserves for 2015. Executives said the losses resulted from higher-than-expected medical claims, high costs related to hepatitis C drugs and low Medicaid payment rates.

    PreferredOne, jointly owned by Fairview, North Memorial Health Care, Robbinsdale, Minn., and a physician group, lost $21 million last year. Red ink from the individual market alone hit $139 million. Preferred-One had become the dominant insurer on Minnesota's insurance exchange in 2014 by offering the cheapest premiums. But that large market share came back to haunt the plan, which attracted a high proportion of sicker people and made medical costs “not sustainable,” according to the plan. PreferredOne exited the state exchange for 2015.

    Maiberger said that because health insurance is heavily regulated and based on complex actuarial predictions, providers should not expect to quickly turn a positive margin. “You're on a five- to seven-year journey until you're really going to see profitability,” he said. He declined to provide financial projections for Premier Health Plan, and documents have not yet been filed with bondholders.

    SelectHealth, Intermountain Healthcare's 30-year-old health plan based in Salt Lake City, illustrates the long wait for profitability. “It took us six years to break even back in the '80s,” said Greg Poulsen, Intermountain's chief strategy officer. “And if we hadn't believed there was a really important reason to do this, I don't think we would have continued to take the losses.”

    Hospitals starting or acquiring their own health plans also run into what S&P's Marinucci calls “channel conflict” with legacy insurance companies. Starting their own health plan directly competes for insurers' premium dollars and can create tension when providers negotiate to be included in an insurer's network.

    For example, after Catholic Health Initiatives in Englewood, Colo., entered the insurance business in seven states, including Nebraska, Blue Cross and Blue Shield of Nebraska ended its contract with CHI last fall. “We don't know for sure it's because we entered the market and got a license approved, but the fact is we're in a pretty rough, intense negotiation with them in terms of the network,” CHI CEO Kevin Lofton said.

    Similarly, Dan Wolterman, CEO of Memorial Hermann Health System in Houston, said that health insurers are “not happy” about his organization starting an insurance arm, but it has maintained contracts with the insurers because they need his system.

    “We try to be open to everybody, as long as it is a fair two-way discussion,” Wolterman said.

    America's Health Insurance Plans argues that if providers want to get into the insurance business, they have to be willing to deal with many complex government requirements including maintaining hefty reserves and paying the ACA's health insurance tax.

    “It is not likely that doctors' offices and hospitals will want to take on all of these responsibilities,” AHIP spokeswoman Clare Krusing said.

    The potential for conflict with insurers is at least partly why many health systems are more interested in small-scale startups, experts say. Providers are particularly eyeing the Medicare Advantage business because they feel they know how to manage seniors' care.

    Medicare's Pioneer and Shared Savings ACOs are giving providers the experience to manage risk, making fully capitated Advantage a logical progression, said Eric Hammelman, a vice president at consulting firm Avalere Health. With Medicare's Next Generation ACO program, announced in March, providers will be able to shift into full-risk contracts.

    Providers already operate many of the highest-quality Advantage plans in the marketplace, based on the CMS' star ratings system. Most of the 16 plans with five-star ratings for 2015 are run by providers or integrated delivery systems, including plans owned by Kaiser Permanente, Providence Health & Services in Oregon, Gundersen Health System in Wisconsin and Group Health Cooperative in Washington state.

    Medicare Advantage is a “relatively easy market” for provider-sponsored plans to enter because Advantage plans are marketed directly to individual beneficiaries, said Brigitte Nettesheim, a principal with the Chartis Group. An added attraction for providers is the ability to convert Medicare ACO members into Medicare Advantage enrollees. She said some of her clients are having discussions with the CMS on doing this.

    But experts caution that it's essential first to invest in the insurance expertise, infrastructure and information technology needed to succeed in the health plan business. “It's years of trial and error,” said Lisa Goldstein, a senior vice president at Moody's Investors Service. “Even the ones that are established, they are still learning."

    —With Melanie Evans and Beth Kutscher

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Last-minute COVID costs cut into UnitedHealthcare's $396 million operating income
    Last-minute COVID costs cut into UnitedHealthcare's $396 million operating income
    CMS approves rule forcing insurers to ease prior authorization
    CMS approves rule forcing insurers to ease prior authorization
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • InDepth Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Top 25 Minority Leaders
        • Top 25 Women Leaders
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Leadership Symposium
        • Healthcare Transformation Summit
        • Women Leaders in Healthcare Conference
        • Workplace of the Future Conference
        • Strategic Marketing Conference
        • Social Determinants of Health Symposium
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala (2022)
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing