Hospitals, Health Systems Quicken Pace to Own Insurers, Full-Risk Health Plans

State regulators recently approved the first provider-owned health plan in New York just in time for Oct. 1 enrollment into health insurance exchanges. Industry watchers tell HPW that an increasing number of providers, especially major health systems that have done well under “old” models of care, are being spurred by market reforms toward forming insurance companies and creating their own full-risk plans — even as they continue to partner with insurers on other products.

“The Geisingers and Mayos tend to have [their own] HMOs,” an industry source says, but in an era of bundled payments and accountable care organizations, hospitals of varying sizes and smaller systems also are putting more at stake in various types of partnerships.

Nationwide, about 100 provider-sponsored health plans are owned by hospitals or health systems, says Joe Damore, vice president of population health management for the Premier healthcare alliance. Moreover, he tells HPW that approximately 20 more health systems are in the process of getting licensed to offer their own plans. These likely will be implemented within the next 18 months or so for at least a 20% increase over that time period, says Damore.

Although providers have assumed greater risk, few provider-owned health plans will participate in exchanges next year, Ellen Pryga, the American Hospital Association’s Washington, D.C.-based policy director, tells HPW. Nationwide, about 15% of hospitals had PPOs, 13% HMOs and 5% fee-for-service products in 2011, with percentages relatively flat over a decade, according to AHA’s latest data.

“In general terms, if you’re not already in the mix, you’ve missed all the deadlines,” Pryga says. “It’s not the sort of thing you can do overnight, and for anyone to be on the exchange, they have to be a fully licensed health plan. What I hear is greater risk assumption, but I don’t know how far that will progress and in how many places.” Hospitals’ strategy may begin with partial risk for an ACO, she says, “and then turn and go in a different direction. There are a lot of moving parts. It’s like turning a kaleidoscope.”

Pryga cites a small health system in Minnesota, which she did not identify by name, with a hospital of 150 to 200 beds along with home health and skilled nursing services, “that organized a delivery system in their area and is offering it on the exchange.” But she concedes there are limitations for smaller provider organizations in taking full risk and becoming an insurance plan, “because you need large numbers in terms of how capitated rates are set.”

While many systems are stopping short of seeking state insurance licensure, North Shore-Long Island Jewish (LIJ) Health System opted to take that route. The New York State Dept. of Financial Services on July 30 approved North Shore-LIJ Insurance Co., Inc.’s application for a license. The company is marketing an array of commercial products under North Shore-LIJ CareConnect. It will sell individual and small-group options on the exchange in Queens and Staten Island in New York City, and Nassau and Suffolk counties on Long Island, and individual and group products off the exchange in those counties plus the borough of Manhattan. The delivery vehicle is an exclusive provider organization (EPO) offering only in-network benefits at various metal levels.

North Shore-LIJ’s exchange plans fall on the low end of 2014 pricing ranges for various metal levels approved by New York state regulators in July, state data show. Its approved monthly premium rates for individual standard plans on and off the exchange for Staten Island and Queens in the New York City metro area and Long Island range from $568.13 (platinum) down to $330.13 (bronze) and $180.53 (catastrophic-only coverage). For small groups, its monthly premiums range from $682.93 (platinum) down to $421.61 (bronze) in the two rating regions.

President and CEO Alan Murray of North Shore-LIJ’s new insurance company and CareConnect tells HPW the decision to offer products on and off the exchange “really comes down to the health system’s mission: to improve the health and wellness of the communities we serve….So we have to be in a position to offer our services across the board.” The integrated health system, which has an annual operating budget of more than $6.7 billion, will provide CareConnect members with inpatient care at 15 hospitals, and outpatient and specialty care at nearly 400 physician and ambulatory practices. It employs about 2,500 physicians, and has another 7,000 staff or affiliated physicians along a continuum of services.

North Shore-LIJ Started With Own Workforce

North Shore-LIJ began a health plan for its 50,000-some employees and their families about four years ago, Murray says. He explains North Shore is the primary network and UnitedHealth Group’s UnitedHealthcare unit, the plan’s administrator, provides the “wrap” network. More than 85% of inpatient services occur at North Shore-LIJ facilities, he says, “so through benefit design we’ve encouraged our employee base to use our health system” and thus lower costs. That plan experience, coupled with market changes under the reform law and interest from employers and unions, “is why we thought we could move into fully insured products and become an insurance company,” he says. “So we decided to enter this highly competitive market.”

In another example of the market evolution, Catholic Health Initiatives (CHI), which has annual operating revenues in excess of $12 billion and approximately 85,500 employees, purchased a majority interest in Soundpath Health, Inc., a Medicare Advantage (MA) plan in Washington state, for $24 million in 2012 (HPW 10/29/12, p. 8). Colorado-based CHI, a nonprofit system, operates in 18 states and includes 86 hospitals; 40 long-term care, assisted- and residential-living facilities; two academic medical centers; and home health agencies. CHI is the parent of Franciscan Health System in Tacoma, Wash.

Over the past year, CHI has been developing its strategic plan for how it “should participate in risk-based relationships with the payer community and where it would make sense for us to sponsor or participate in sponsoring plans,” Juan Serrano, CHI’s senior vice president for payer strategy and operations, tells HPW. “We’re evaluating and entering into relationships with insurers that have more financial complexity and more at stake for the health system,” he says, “and looking at where it makes sense to partner with or acquire plans — and even put our own product offerings into certain markets, like Soundpath.”

CHI May Seek State Licensure

Serrano says he thinks CHI likely will seek state licensure, either sponsoring directly or co-sponsoring health insurance products. He anticipates that CHI is “going to see some more emerging opportunities like Soundpath in maybe three or four other markets” in 2014 and this could involve either MA or exchange products or both.

Similar to North Shore-LIJ and numerous other health systems, CHI sponsors health benefits for as many as 70,000 workers, Serrano notes, “so we’re at risk for our employees.” CHI also is involved in bundled pricing, the Medicare Shared Savings Program, a couple of ACOs, and “a managed Medicaid globally capitated program” in Nebraska, he says. Other than Soundpath, the health system doesn’t directly operate any commercial insurance plans, he says, but it is involved in a growing number of “value-based relationships” with insurers — which he describes as offering financial underwriting gains if CHI demonstrates that it meets certain quality, cost and service measures.

In 2014 and 2015, CHI will make a significant investment in electronic health records and informatics for better evaluation of patient data and claims, Serrano says. “We need to take active opportunities to learn about populations we’re serving, and how to better manage their care and costs at the same time,” he explains.

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