Wisconsin systems are leaders in offering their own health plans

Wisconsin is known for its dairy farms and rolling hills. But some healthcare experts call it a trailblazer.

In the past few years, health systems have been launching or expanding their own health plans, seeing it as an opportunity to cut out the middleman and take on more financial risk while caring for patients.

In Wisconsin, providers have practiced that strategy for decades. And, according to Medicare and the National Committee for Quality Assurance, their plans are among the highest-rated in the country.

The Badger State could serve as a prototype for health systems that are trying to shift their focus from filling hospital beds to more risk-based care coordination.

“Insurers have put risk down to providers,” said Gunjan Khanna, a partner in the healthcare practice at McKinsey & Co. “At what point do providers start to have their own entity to manage the risk and have control?” Wisconsin has done that well, he said.

Nationwide, about 13% of health systems own a health plan. There are nine provider-owned plans in Wisconsin, second only to Texas, according to data from McKinsey.

Dean Health Plan, Security Health Plan, Unity Health Insurance and several others offer commercial, Medicare Advantage and Medicaid plans in the state. Those plans cover almost a third of Wisconsin's insured population, based on a recent analysis from consulting firm Deloitte. The only state with a higher penetration is Utah, where 36% of people are covered by provider plans.

There are a number of reasons provider-owned health plans are a staple in Wisconsin, which has about 5.8 million residents.

Commercial insurers historically have avoided insuring vulnerable, costly patients. That's allowed insurers such as Children's Community Health Plan, owned by Milwaukee-based Children's Hospital of Wisconsin, to cover nearly 137,000 Medicaid adults and children, said Bob Duncan, the hospital's executive vice president for community services.

Outside of the southeast and south central regions, where Milwaukee and Madison are located, Wisconsin's population thins out quickly. Rural areas typically have fewer insurance options, and that spurred hospitals and doctors to offer coverage to their patients.

“A lot of communities didn't have strong national or Blues penetration, and there had to be an answer to someone financing healthcare,” said Bill Copeland, a healthcare analyst at Deloitte. “The dominant market leaders—provider systems—started those plans a long time ago. In Wisconsin, I think that's especially true.”

What makes Wisconsin different from other states is that most providers didn't quit the insurance businesses they established in the 1990s. Many hospital-based plans across the country failed or were sold off more than a decade ago. A lack of rate-setting experience and data hurt their plans as did the growing competition from purebred insurance companies.

“In most of the other markets where these health plans evaporated, it happened because the provider system wasn't able to manage the tension between their own health plan and the third-party stand-alone payers in their market,” Khanna said.

However, hospital-owned plans have not necessarily led to lower healthcare spending. From 1991 to 2009, per-capita spending on hospital and physician care in Wisconsin grew at a faster pace than the U.S. average and ranked the highest of the five Great Lakes states, according to CMS data.

While many Wisconsin health systems have expressed a desire to be more involved on the financing side, not all of them want to deal with the high capital requirements or stringent regulations associated with owning a health plan. Consequently, two broad partnerships have emerged in the past year to work more closely with payers: AboutHealth and Integrated Health Network. AboutHealth includes eight health systems and their 48 hospitals. IHN has eight health systems and 49 hospitals.

Aside from improving care quality, sharing data and pulling out wasteful costs, the two competing alliances look to contract with insurers and employers to build broader networks. That effort has not come without conflict. Some insurers have already partnered with AboutHealth, for instance, but others have not been so thrilled to see the state's major provider systems team up for negotiations.

“It has not at all been a uniform response,” said Dr. Nick Turkal, CEO of Aurora Health Care, a 15-hospital, $4.7 billion system based in Milwaukee. Aurora does not own its own health plan but is part of AboutHealth.

Marshfield Clinic Health System, which owns Security Health Plan, is also an AboutHealth member. Marshfield CEO Dr. Susan Turney said regardless of whether providers own a health plan, more has to be done to ensure patients are incentivized to get the right care. “Patients are telling us ... they delay medical care pretty consistently when they don't have the resources to pay for it,” Turney said.