Here’s where it gets interesting. Peak is now sending those contracted rates to health insurers to see who can craft the best plans. The hope is that Peak will get lower premiums by removing the cost of negotiating rates and guaranteeing a sizable pool of covered lives. They want the plans, which will be open to individuals who live in the county or businesses based there, to start Jan. 1, 2020.
“They’re doing it backwards,” said Cheryl Larson, CEO of the Midwest Business Group on Health, a coalition of 125 companies, “which is awesome because they can get rid of the waste, the administrative fees. However, the challenge they have is that they now have to get the health plans to agree to those rates.”
Tamara Drangstveit, a member of Peak’s executive committee, said there’s a fair amount of interest from insurers so far. None of the insurers Peak is communicating with agreed to comment for this article, although Aetna said it plans to submit a bid through its local subsidiary, Meritain Health.
“They’ve struggled with the negotiation piece, too,” said Drangstveit, whose day job is serving as executive director of the Family & Intercultural Resource Center, which serves Summit County. “So the fact that we’ve been able crack that nut for them is very appealing.”
The insurer or insurers selected would take on all the typical insurer duties, such as claims adjudication, prior authorization and chronic disease management for members.
The effort has the support of a powerful figure—Colorado Insurance Commissioner Michael Conway. He thinks the model, which he’s not aware of being used anywhere else, will work because it combines the individual, small- and large-group markets to gain more leverage over insurers.
Conway is so confident that he’s working to get a similar operation up and running at the state level. He’s in conversation with the state employee plan, school districts and counties about building a so-called community purchasing model that can lower costs statewide. He said community leaders in Eagle County, which neighbors Summit County and is similarly expensive, and in Grand Junction, Colo., are discussing the model as well.
Katy Spangler, principal at the health consultancy Spangler Strategies and senior adviser to the American Benefits Council, said it’s a new idea that’s very intriguing. Whether it works depends on the prices Peak negotiates—which they declined to make public—and whether those yield lower insurance premiums, she said. One thing is for sure: It’s a sign of the times.
“I think the healthcare system seems to be hitting a little bit of a tipping point,” Spangler said.
The effort was strengthened by a wealth of claims data Peak’s leaders gathered from five self-funded employers in the county and from the state’s all-payer claims database. Using the data, Leif Associates found that the county’s providers collected more than 500% of Medicare rates for outpatient hospital services in 2015 and 2016. For inpatient hospital services, Centura collected between 200% and nearly 250% of Medicare rates. For professional services, Summit County providers collected 200% of Medicare rates.
It turns out those prices are driving people out of the county for care. Roughly 60% of residents’ medical costs were paid to providers outside of Summit County in those years, Leif’s analysis found, although some may have left for other reasons.