A Long Island executive with experience managing a network of doctors launched a new insurance company, with plans to enter the Medicare Advantage market in 2018.
Dr. Simon Prince, the former chief executive of Beacon Health ACO, has begun assembling a team and courting investors for Square Care. The Medicare Advantage plan will file a notice of intent with the the federal Centers for Medicare and Medicaid Services in November and submit its application in February 2017. It will also be subject to regulatory approval from New York state's Department of Financial Services and Department of Health.
Medicare Advantage plans offer private insurance as an alternative to traditional Medicare. The federal government pays the plans a set monthly premium that includes comprehensive coverage. Medicare Advantage plans are a profitable product for insurers, and increasingly popular with Americans age 65 and over. Enrollment in Medicare Advantage plans is about 18 million, up from 11 million in 2010.
Square Care will be owned, in part, by physicians and will be available from "Manhattan to Montauk," Prince said. Square Care is still exploring whether it will operate as an HMO, PPO or POS plan. He believes a focus on developing strong relationships with physicians will be a differentiating factor for the health plan.
In a section for providers on Square Care's website, the company writes, "Do you share our frustration with traditional health insurance companies? We can do better." It lists the "prior authorization process, lack of communication, non-transparency, unjustified claim rejections and no voice in clinical policies" as ways it can outperform competitors.
New entrants to the city's insurance market have had varied success. Oscar, founded in 2012, has already raised more than $700 million in private financing toward its goal of building a more consumer-friendly insurance company. Health Republic another company created to sell plans on New York's health insurance marketplace was shut down by regulators last year because it failed to maintain adequate capital reserves. Square Care is staying out of the business of selling individual policies to adults younger than 65, which Prince calls "too risky." Much larger companies, such as UnitedHealthcare, have reported losses in that arena.
Medicare Advantage plans have enjoyed some unexpected success following the passage of the Affordable Care Act, which many thought would have a negative impact on insurers. Successful private Medicare plans report profit margins of 4% to 5%, The New York Times reported earlier this year.
Nationally, Medicare Advantage enrollment rates average 31%, but those rates are lower in some local areas. In Nassau County, 24% of those who are eligible for Medicare enrolled in Medicare Advantage plans, while in Suffolk County, the market penetration of the plans is 21%. New York City has above-average enrollment rates in all boroughs.
Other startups have failed where Square Care hopes to succeed. Touchstone Health HMO, a Westchester plan that had about 10,000 members, shut down at the end of last year. Management pointed to a competitive market and trouble limiting medical expenses as two reasons why it decided to wind down operations.
Sherry Glied, dean of NYU Wagner's Graduate School of Public Service, couldn't contain a chuckle when told of Prince's ambitions to start a new insurer. "Hope springs eternal," she joked.
Glied was reminded of Oxford Health Plans' initial push to work closely with doctors when it was founded in 1984. She said it will be a challenge to align physicians' interests with the insurer.
"The consumers want to spend less money, and the providers want to earn more money," Glied said. "There is some area of mutual benefit: Patients want good care and doctors want to provide good care. But when the providers say, 'I need more money to provide good care,' what is the insurance company going to do?"
Prince acknowledged that developing a cozy relationship with doctors by paying higher rates than his competition isn't a viable business model. Yet he believes Square Care will attract physicians to its network through shared savings, bundled payments and bonuses for performance and quality.
"If we come out with very high fee schedules just to appease providers, we're not going to make money and we're going to go under. If we figure out a way to create win-wins, where they get a piece of the pie and we're in it together, it will work out better," he said.
Dr. Jeff Ellis agrees. He runs Belaray Dermatology in Hicksville, L.I., and says he plans to support Square Care when the company begins taking money from investors. He has been frustrated with insurers' prior authorization rules and has confidence in Prince, who he knows through Beacon's accountable care organization.
"If the doctors have more of a say in the leadership and decisions that are made, I would hope that a lot of the frustrations we experience can be improved upon," Ellis said.
Beacon sold its remaining 50% stake to Catholic Health Services of Long Island for $7.5 million last year. It had sold the first half to CHSLI and St. John's Episcopal Hospital in Queens in 2014.
Prince has brought with him Beacon's former chief medical officer, Dr. Jacqueline Delmont, to be CMO at Square Care. Delmont practices in Far Rockaway, Queens, and Freeport, L.I. David Manko, a partner at Long Island law firm Rivkin Radler who worked with Beacon, serves as counsel to Square Care.
He is currently in talks with investors including "a national player that has operational experience," and is working on bringing in executives with more health insurance expertise.
Prince sees Square Care as a natural next step for him after leading an ACO. He believes he'll have better access to data that can tell him where patients are going for care, and how well certain facilities are performing. The company will also get premium revenue upfront, rather than waiting for potential bonuses earned by saving Medicare money. Many ACOs, including Beacon, missed out on earning a shared-savings bonus.
"I see it as an evolution," Prince said. "The ACO is the caveman, and the provider-sponsored health plan is the fully functioning man-about-town."
"A new insurance company that promises to 'do better'" originally appeared in Crain's New York Business.