Two large Midwest health systems are building an insurance plan together centered on Medicare Advantage. The joint venture marks yet another example of providers' burning ambitions to get into the insurance game. Many of them are honing their play in the Medicare league.
The growth of provider-owned health plans likely will not subside, because systems want to raise revenue where they can. They also see value in controlling premium dollars, which may help them better manage care for high-risk patients like Medicare beneficiaries, who typically represent half of a hospital's patient base.
Another benefit of starting out with Medicare plans: Private insurers often don't have footprints so large that it's daunting to enter the market.
“Medicare Advantage is most definitely an area that has piqued most folks' interest,” said Kevin Weinstein, chief growth officer at Valence Health, a Chicago-based company that builds and operates insurance plans for health systems. “These are the patients that require the most care coordination. There's the most to gain clinically, and if you're at risk for them, the most to gain financially.”
This week, UnityPoint Health, a 17-hospital system based in West Des Moines, Iowa, and HealthPartners, an integrated delivery system based in Bloomington, Minn., said they are creating a new health insurance company in which each organization will have a 50% stake. The company, to be called HealthPartners UnityPoint Health, initially will only sell Medicare Advantage plans but could branch into other lines of business.
The partners intend to start selling plans in 2017, after they get approval from the CMS and receive insurance licenses in Illinois and Iowa. UnityPoint and HealthPartners could reap huge rewards in both states, where only a tiny slice of the population has a private Medicare managed-care plan.
Nationally, about a third of the country's 54 million Medicare beneficiaries are in Medicare Advantage, a program that has increased in popularity because of its low-premium plans and extra benefits. There are approximately 575,600 eligible Medicare beneficiaries in Iowa, but only 15% of them are enrolled in Medicare Advantage, according to a Modern Healthcare analysis of federal data. In Illinois, only 21% of the 2.1 million residents eligible for Medicare have an Advantage plan.
The gates are wide open to capture that market share because competition from large, private insurers varies widely. For instance, Iowa's largest insurer, Wellmark Blue Cross and Blue Shield, does not sell any Medicare Advantage products.
“That's a big part of what motivated us—the relative under-penetration plus the growing demand,” said Troy Caraway, a senior vice president at UnityPoint who handles health insurance operations. UnityPoint first entered the insurance market when it acquired Meriter Health Services in 2013, and it also operates one of the remaining Medicare Pioneer accountable care organizations.
HealthPartners wants to capitalize on its nearby, untapped Medicare market just as much as UnityPoint does. The system—which grew membership in its five-star-rated plan to nearly 14,000 from 6,000 over the past year—operates in a much more saturated market.
Of the 26 U.S. counties that have at least 60% of their eligible Medicare beneficiaries enrolled in Advantage plans instead of traditional fee-for-service, 12 are located in Minnesota—more than any other state. Minnesota's Red Lake County is the most saturated Medicare Advantage county in the nation, with almost two-thirds of its 850 Medicare-eligible residents in an Advantage plan. Partnering with a neighboring system allows HealthPartners to comfortably expand.
“We view this as a great opportunity to extend our health plan products into new markets,” said Andrea Walsh, HealthPartners' chief marketing officer. “We're interested in growth and expansion, and felt that UnityPoint Health had a really consistent strategic alignment.”
Although large national carriers like Aetna, Humana and UnitedHealth Group dominate the Medicare Advantage market, health systems continue to lure large numbers of Advantage enrollees to their membership rolls.
UPMC Health Plan in Pittsburgh, owned by the UPMC health system, has added more than 21,000 Advantage members in the past 12 months, according to Medicare data. SelectHealth of Intermountain Healthcare in Salt Lake City has added nearly 12,000 seniors over the same timespan. Plans operated by Catholic Health Initiatives in Englewood, Colo., Geisinger Health System in Danville, Pa., Henry Ford Health System in Detroit and MedStar Health in Columbia, Md., have each added more than 6,000 Advantage enrollees in the last year.
UnityPoint and HealthPartners aren't alone in their greenfield Medicare pursuits. Cone Health in Greensboro, N.C., for example, is selling a Medicare Advantage product for the first time this year. North Carolina providers have contemplated doing the same.
While Medicare Advantage is a “relatively easy market” for health systems to enter, experts believe providers also have to look at their individual and employer markets to sustain their operations and improve care coordination. Profitable provider plans usually have at least 100,000 members, according to a new report from consulting firm Deloitte. Weinstein of Valence said Medicaid managed care and exchange plans have been big focal points for some of his company's hospital clients.
“The successful provider-sponsored plans have a critical mass,” said Bill Copeland, a healthcare analyst at Deloitte. “I don't think Medicare alone is an end point. I think it's a market-entry point.”
UnityPoint and HealthPartners still have to work out many details, such as what type of Medicare Advantage benefits they will offer. They do not have membership projections yet. Provider networks will be based on UnityPoint's ACO, which includes UnityPoint hospitals and doctors as well as “key independent provider groups,” Caraway said.
“We see this happening across the country, this convergence of delivery and care and coverage,” Caraway said. “And we think this is very consistent with what you see being advocated out of CMS and the feds.”