Blue Cross parent commits $1.5 billion to lower medical costs
Following a financial turnaround in its operations in 2017, Chicago-based Health Care Service Corp. is anxious to promote fresh ideas in containing patient care costs.
The company, which owns Blue Cross and Blue Shield plans in five states, including Illinois, announced today that it is launching a new program called Affordability Cures. Budgeted to cost $1.5 billion over the next three years, the program will focus resources on collaborations with hospitals and doctors, partnerships with employers, the use of more digitally-driven data to assist in decision-making and initiatives in expanding care beyond traditional hospital settings.
Cost containment initiatives are not new to HCSC, but the company has redoubled its efforts on a variety of healthcare fronts. "Some of the tactical things that are part of Affordability Cures we've always done," said Joel Farran, the company's chief brand officer and a senior vice-president, in an interview. "But we are putting our shoulders behind some of these initiatives with more focus now. These will not be short-term investments. We want to contain costs in a sustained way."
It appears the company is headed in the right direction. HCSC announced that it earned $1.3 billion in 2017 while expanding its membership by 5% to more than 15 million people. In 2014 and 2015, as it was trying to come to terms with the Affordable Care Act, the company lost "significant" sums on its insurance plans, executives say.
This year, HCSC added another 500,000 members in January alone and has announced that it will be filing rates by mid-year for small-group plans aligned with the Affordable Care Act that will actually be down or only slightly above year-ago rates, according to Farran. Final pricing for both small groups and individual policies, also expected to be stable in price at mid-year, will be announced sometime in the spring.
"We think it's a good sign that the medical-cost trend is moderating," Farran said. "We've been investing to lower costs. And we are continuing to look, in particular, at the cost of drugs. We are offering more generic alternatives in our drug formularies."
How will the new Affordability Cures program lower costs specifically? Farran offered up the example of a corporation with an unusual prevalence of diabetes among its workforce. The program will expect to crunch computer data, he explained, to identify pre-diabetics and then enact educational assistance and early treatment to head off cases of full-blown diabetes before they develop. "This is all about cost management. We want to accelerate the pace of that," Farran said.
The company is also intent on reducing the variability in care and costs from one hospital or doctor to another. "Our data tell us that an MRI (magnetic resonance imaging) may cost $300 in one place and $1,300 someplace else," Farran said. "Where patients go matters. We want to educate them on that."
The timing of Affordability Cures—announced in the wake of strong profits within a $70 billion annual budget—is no accident. "A couple of years ago we were simply focused on stabilizing our operations," Farran said. "Now that our income has turned the corner we're ready to reinvest."
Tax reform legislation late last year, expected to provide HCSC a $971 million annual tax benefit, will help finance the new Affordability Cures program, said Caroline Pearson, a senior vice-president at healthcare consultancy Avalere Health in Washington, D.C. "Health Care Service Corporation and other insurance companies are enjoying an infusion of resources from the tax bill," she said. "But this is something that insurance plans would want to be doing anyway. You can't just be in the business of just paying claims any more. Health insurers have to be thinking more holistically about how to reduce health care costs."
She added that the projection of neutral rates at mid-year "caught me by surprise. It tells me that insurance plans seem to be priced right this year." Competing insurers, she said, have not announced rate plans yet for later this year.
In addition to Illinois, HCSC oversees Blue Cross plans in Montana, Oklahoma, Texas and New Mexico.
"Blue Cross parent commits $1.5 billion to lower medical costs" originally appeared in Crain's Chicago Business.
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