Atlanta Hospital systems to form their own insurance company

Is this a sign of things to come?  Probably, as it is hard to envision all of the competitive changes that will occur in the marketplace over the next two years…- Reeve

By Carrie Teegardin | The Atlanta Journal-Constitution 12/17/12

Piedmont and WellStar, two of Atlanta’s largest hospital systems, said Monday they
are forming an insurance company — a bold move in a rapidly changing
health care marketplace.

By elbowing their way into the domain of
Blue Cross Blue Shield, Aetna and United Healthcare, the hospital
systems could dramatically increase the competition in the state’s
insurance marketplace. The move could also change the way patients get
care, because the hospital systems will have a financial stake in
keeping patients healthy and controlling costs.

The impact could
be especially significant if the Piedmont-WellStar health plan is
included on the health law’s insurance exchange, where many Georgians
will shop for plans and qualify for federal subsidies to help pay for
their coverage in 2014.

“The reason this is such a big deal is
that it creates a considerable amount of competition within the health
insurance market in Georgia that many feared would not happen with the
exchange — that it would be two or three big insurers, and that’s it,”
said Bill Custer, a health care expert at Georgia State University.

Stepping
into the complicated world of insurance might seem risky at a time when
hospitals are facing financial challenges and waves of change. But the
systems are not the first to try it, and they view the undertaking as an
exciting opportunity to shift the course of health care for the better.

“I actually think we have more risk by not moving in this direction than
we do moving in this direction,” said Dr. Ronnie Brownsworth of
Piedmont, who is the CEO of the new health plan. “The trend in this
country is for providers to step up and become more accountable for the
cost and quality of the care.”

By having access to every detailed
piece of information about a patient’s care — from the insurance records
to the medical files — the health systems say they have a better chance
of achieving the holy grail of health care innovation: dramatically
lowering the cost of care by making it better. They say they can do more
to prevent hospitalizations and other costly health events if they can
study their patients carefully and employ care without the intrusion of
insurance company regulations and payment policies.

“We do think it’s a significant advance for the health care market in how care is
going to be delivered,” said Greg Hurst, interim chief operating officer
at Piedmont.

For privately insured people, health care is a
triangle, with patients, hospitals and insurance companies each a
fundamental part of the equation. Under the Piedmont-WellStar plan,
hospitals would draw a straight line between themselves and patients,
cutting insurers out of the game.

And insurance companies are skeptical.

Graham Thompson, a spokesman for large insurers in Georgia, said running an
insurance company is especially challenging today with the wave of
reforms coming through the federal health law, not to mention managing
the day to day operations.

“Can a medical provider successfully  assume the role of an insurer?” Thompson said. “There aren’t a lot of
great examples out there.”

With health care costs ballooning every
year, the government health plans, Medicare and Medicaid, as well as
private employers that provide their workers with insurance, are
demanding that doctors and hospitals get control of expenses, said
Reynold Jennings, WellStar’s CEO. “You can’t succeed unless you have got
total information to do that,” he said.

Custer, of Georgia State, said if the Piedmont-WellStar health plan succeeds at better managing
the most complex and costly cases, it will put pressure on other
insurers to find a way to work with providers to achieve similar
results.

The health systems plan to launch an array of products
for 2014, the same time that the major components of the Patient
Protection and Affordable Care Act kick in. The systems said that they
want to offer a Medicare Advantage plan, as well as plans for employers,
but the details aren’t yet clear. The systems said the plan would be
available for Piedmont and WellStar’s employees and family members.

Whether it will offer a plan on the insurance exchange required by the health
law will depend on the detailed requirements of selling on the exchange,
executives said.

The state Department of Insurance confirmed
Monday that Piedmont has already filed an application — for a health
maintenance organization. Piedmont and WellStar said they intend to move
forward as a joint venture operating a for-profit insurance company.
Piedmont said it started working toward developing an insurance plan
this year when it partnered with Evolent Health, a Washington, D.C.
which helped the University of Pittsburgh Medical Center launch a plan
that the systems hope to emulate.

The plans are expected to operate as an HMO where patients are treated mostly within Piedmont and
WellStar’s vast network of hospitals and doctors. But the systems said
they may expand that network to include other providers.