UnitedHealth Group's experimental health plan subsidiary is pulling out of the Affordable Care Act exchange markets in Chicago and Atlanta after losing nearly $70 million in the first six months of 2016. And its founding CEO, who spearheaded the plan's primary care-focused benefit design, has been replaced by a new leader.
Harken Health started selling individual and group plans on and off the exchange in the two markets last January. It reportedly has about 35,000 members in those markets. Its retreat from the exchange markets comes months after its parent company, UnitedHealth, announced its withdrawal from most of the public exchanges for 2017.
Harken offers unlimited primary care and behavioral visits at no charge when members receive those services at its staff-run clinics. Other services are subject to a relatively high deductible, depending on the ACA metal tier. But members pay no coinsurance after the deductible is met, other than copays for prescription drugs. And beyond primary care, members have access to UnitedHealth's broad national network of hospitals and specialists.
In Chicago, Harken's premiums were comparable to competing plans that did not offer no-charge primary care and that featured standard 20% coinsurance.
A Harken spokeswoman confirmed the company will not offer plans on the exchanges in the Chicago and Atlanta markets in 2017 though it will continue to sell plans to individuals and employers outside the exchanges. She did not offer any explanation. “Harken Health remains committed to our innovative model of insurance paired with access to relationship-based care,” the company said in a prepared statement.
In August, Harken reversed course and announced it would not sell exchange plans in Miami and Fort Lauderdale in 2017. It had announced plans last spring to open 12 primary care clinics in those South Florida markets.
Earlier this month, Harken announced that founding CEO Thomas Vanderheyden, a long-time UnitedHealth executive who helped establish the primary care-focused vision of the company, would be replaced by Stevan Garcia. “Harken's vision will continue under the leadership of Stevan Garcia, who… is committed to Harken's vision of helping people access care in their communities,” the company said.
A Harken regulatory filing last month showed an operating loss of $69.9 million for the first half of 2016 and a “cash infusion” of $60 million from UnitedHealth in June.
Harken is widely seen as a test of what Vanderheyden called relationship-based primary care. This responds to what many experts say is a need for value-based benefit designs that encourage people to receive recommended primary and preventive care.
“We think giving people unfettered access to relationship-based primary care will provide better counsel and advice and get members to use the broader healthcare system more judiciously,” Vanderheyden said in an interview last November. “We have reasonable confidence in our model … I wouldn't call it an experiment.”
But Susan Morris, an independent broker in Atlanta, said Harken “did a poor job of marketing the plan to agents and brokers.” In addition, she said her individual customers didn't like the idea of giving up their regular primary care doctors and instead using Harken's staff providers. And Harken didn't have enough clinic locations to serve the large Atlanta market. On top of that, she noted, Harken competes in Atlanta against Kaiser Permanente, a long-established staff-model HMO that offers all services including specialty care under one roof.
Stephen Parente, a health insurance expert at the University of Minnesota, said the model of offering no-cost primary care can work if the insurer sets the premium at the right level. “The design has some merit but the key to survivability is having a claims history and making it work actuarially,” he said.
Some observers had questioned from the start whether Harken, with its competitive premiums and lack of coinsurance, could make money while offering unlimited primary care and behavioral visits at no charge. “We'll see how it works claims-wise in 2016,” Vanderheyden said last November. “It's reasonably proven that if you overinvest in primary care, you have lower downstream cost in the system. We'll have to tweak this or that, but we have high confidence.”
He argued that removing coinsurance and copays except for drugs would provide better and more appropriate care and save money. “These are huge points of friction in the system that cause people to make decisions that aren't necessarily best for them,” he said at the time. “They delay or get one type of care when they would be best served by another type of care. By reducing friction, we think people are far better served and healthier.”
But Dr. Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design, said it was predictable that Harken would spend more on prevention without saving money in the short term. A better benefit design, he said, would be to focus richer preventive benefits on members with chronic health conditions while reducing coverage for low-value services such as annual physicals for younger and healthier members.
“Instead of a one-size-fits-all type of improved access, it should be tailored,” Fendrick said.
Oscar Insurance Corp., another innovative insurance startup created with the ACA in mind, announced last month that it was exiting the exchange markets in Dallas and New Jersey while remaining in New York City.