Provider-run health plans expanding membership

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Providers have long sought to muscle their way past insurers in running healthcare networks that serve employers, but they have lacked the firepower or efficiency to gain enough market share.

Changing technology and patient experiences could finally elevate the presence of provider-sponsored plans (PSPs), which are catching the attention of more brokers and advisers representing the small and midsize market segment.

As a result of the Affordable Care Act and market pressures on healthcare costs, health insurers and health systems are seeking new ways to share costs and rewards. Accountable care organizations and bundled payment arrangements are examples of these attempts.

Some health systems are expanding to include health insurance functions. These new entities, often called PSPs, are rapidly expanding membership. Some health plans are pursuing the same goal by acquiring health systems. These vertically integrated entities are embracing e-commerce for group and individual customers as a way to disrupt the market and set the stage for care management and wellness programs from the health system.

What’s worth noting is that many of these plans don’t have the legacy technology that has bogged down traditional payers, explains Lance Hood, VP of marketing for Array Health, an independent provider of private insurance exchange technology.

“Some of the most intense activity in the e-commerce front is coming from provider-sponsored plans that have this blank-slated technology” to disrupt the market, he says. “So I think they have some inherent advantages on the operational side, particularly for those that have been around for a while.”

There’s also the issue of consumer perception, which may be equally, if not more, powerful. Adds Jonathan Rickert, Array Health’s CEO: “Studies consistently show that people trust their doctor typically more than they trust their health insurance plan.”

The latest JD Power survey shows integrated plans had an overall satisfaction score of 746, which is 63 points higher than non-integrated plans. Hood says the result reflects a realization that these organizations must take on risk “and some of them are deciding the best way to do it is just go directly to the end buyer.”

Indeed, PSPs tend to have better quality metrics and customer-service ratings than large insurers in their markets, reports Cathy K. Eddy, president of the Health Plan Alliance, whose nearly 50 members are provider-sponsored and independent health plans. She’s says there’s also the issue of brand awareness, “especially when the health plan and health system share the same name.”
But the model has been around for years and hasn’t caught fire. In essence, PSPs have largely fallen short of expectations, according to Peter Kongstvedt, M.D., a national authority on health care and senior health policy faculty member in the Department of Health Administration and Policy at George Mason University. For example, he says managed care companies have done a better job managing utilization and negotiating prices.

West Coast brokers have had PSPs in their portfolio for decades, between Kaiser and GroupHealth, according to Hood, who anticipates that integrated health plans will become available to brokers in other parts of the U.S.

Growing numbers
Atlantic Information Services, Inc. (AIS) data shows there are more than 270 PSPs, which is up substantially from 107 just two years ago. And with 94 of them having more than 10,000 members, Hood says the inference is that “they’re at least reasonably experienced in the fundamentals of being a health plan.”

The number of PSPs members edged up about 12% to 36.2 million in 2015 from 32.8 million in 2014, AIS notes. If that growth continues, Hood predicts that about 70 million Americans could be enrolled in PSPs in five years, adding that some PSPs are even growing much faster.

Apart from PSPs, he says another significant development worth tracking is a growing number of payers that are creating integrated systems by buying health systems. Hood cites recent talk about a joint venture between Harvard Pilgrim and some provider systems in New Hampshire “to create a completely new entity that delivers integrated care in a vertical way.”
Since most PSPs are regional, according to Hood, the type of employers that stand to benefit the most will be those whose employee population is confined to a particular region. In some cases, he says players such as Kaiser have expanded into multiple states over time.

Amir Zaman, director of marketing for Wisconsin-based PSP Security Health Plan, sees a synergy between the model’s provider alignment and insurance component that improves the patient-review process and coordination of care. That mentality or influence is reflected in the plans and leads to higher member satisfaction, he says.

“Most brokers are going to be looking for the best value for their client,” he says, describing this integration as a key differentiator. “To them, whether or not a health plan is affiliated with a provider system is almost irrelevant. Where it does start to matter is if the health plan and provider system are able to articulate why they’re a better deal.”

The caveat, however, is that those efficiencies and better patient experiences must be delivered at a competitive price to satisfy all stakeholders, according to Zaman. He says it’s a conversation his PSP is able to have with its provider partners so that they can compete.

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