R.I. insurers agree change is coming

UNITED FRONT: Stephen J. Farrell, president of UnitedHealthcare of New England, speaks at recent meeting of the Health Insurance Small Employer Taskforce. He told the board evolution in the insurance market is being spurred by innovation. / PBN PHOTO/RUPERT WHITELEY
UNITED FRONT: Stephen J. Farrell, president of UnitedHealthcare of New England, speaks at recent meeting of the Health Insurance Small Employer Taskforce. He told the board evolution in the insurance market is being spurred by innovation. / PBN PHOTO/RUPERT WHITELEY

Regardless of how the U.S. Supreme Court rules in June on federal health care reform, economic, demographic and technological forces will continue to push and reshape the health care delivery system, moving away from fee-for-service and toward global payments and evidence-based outcomes that reward value, not volume.
As a result, the health-insurance market is embracing a new dynamic: Risk is being transferred from health insurers to the hospitals, providers and physician networks, based upon how well they perform under the new quality measures.
That was the message delivered by Chas Rhoades, chief research officer at one of the nation’s pre-eminent research think tanks, The Advisory Board Company, at his talk at Brown University on March 1.
Rhoades is not alone in his prognosis. Aetna CEO, Chairman and President Mark T. Bertolini, speaking at an insurance industry trade show on Feb. 21 in Las Vegas, predicted that the end of the traditional health-insurance business is at hand. “The system doesn’t work, it’s broken,” Bertolini said. “The end of insurance companies, the way we’ve run businesses in the past, is here.”
In Rhode Island, symptoms of the health-insurance market’s altered landscape abound. Total commercial health-insurance enrollment declined by 10 percent between 2005 and 2010, from 620,000 covered lives to 555,000 covered lives, and that decline continues at the rate of about 2 percent a year, according to the R.I. Office of the Health Insurance Commissioner.
All three commercial health insurers in the Rhode Island market are busily reshaping their strategies to adapt to what they all agree is an evolving marketplace.
To capture details of those changes, Providence Business News interviewed each of the three presidents and CEOs – James Roosevelt Jr., of Tufts Health Plan of Rhode Island, Stephen J. Farrell of UnitedHealthcare of New England, and Peter Andruszkiewicz of Blue Cross & Blue Shield of Rhode Island. All three participated in a March 6 meeting of the ad hoc Health Insurance Small Employer Taskforce under the direction of Health Insurance Commissioner Christopher F. Koller.
Andruszkiewicz arrived in Rhode Island eight months ago, replacing James E. Purcell as the health insurer’s president and CEO. “I believe we’re on the cusp of a lot of change,” he said, adding health care reform is really about payment reform. “Health care reform through the Affordable Care Act made a lot of changes in insurance reform; those changes were necessary and they were good things. But health care reform doesn’t come until there are changes in the incentives in the system for how hospitals, physicians and other caregivers get paid.” For decades, he continued, there have been “perverse” incentives. On the hospital side, for example, “it made them behave more like a hotel business than a care-giving business, worried about how many beds are full,” Andruszkiewicz said.
The important thing now, according to Andruszkiewicz, is to change the incentives. “When you change the incentives, all of a sudden, you change the behavior,” he said. “The problem is, you can’t walk them off the cliff. It’s taken decades to get a system as dysfunctional as we have now, and it’s going to take some time to evolve.”
Blue Cross is experimenting with different kinds of incentives in its provider contracts to move away from fee for service and toward fee for value, according to Andruszkiewicz, who cited a new contract reached recently with emergency-room providers and a pending contract with a large physicians’ group. “Between 10 and 15 percent on our spending for hospital contracts are now fee for value. We expect that it will be 20 percent by the end of 2012,” he said.
Blue Cross is also pushing for a more integrated model of health care, promoting the model of patient-centered medical homes through which every patient has a primary-care provider. Andruszkiewicz said the health insurer is trying to move away from its former reputation as a big, lumbering institution to become an instigator of change. He admitted that Blue Cross’ administrative costs are too high, but said the insurer was looking for ways to be more efficient. Instead of putting energy into “looking over the shoulders of physicians,” he said that Blue Cross is “redeploying those resources to wrap them around the patient’s care.” Toward that end, Blue Cross is paying for nurses and pharmacists in primary-care offices to create a one-stop-shopping model for health care.
Blue Cross is also redesigning its “value-based” product to introduce more cost-sharing, with higher-deductibles, because Rhode Island, compared to other markets, has a level of “benefit richness” that is significantly higher. “I won’t win a bunch of new friends by saying this, but people in Rhode Island have been spoiled to some degree.” Appropriate copays can reduce overutilization; otherwise people are insulated from the real costs, he said. At the same time, he continued, “we’re going to take away the financial barriers to the things we know we want people to do, like wellness programs, like prevention.”
For UnitedHealthcare’s Farrell, who has been with the health insurer for a quarter century, new market opportunities are defined by the ability to introduce innovative products into the marketplace.
“Evolution in the health-insurance market in Rhode Island and elsewhere is supported by innovation. Innovation is one of our pillars of strengths in terms of bringing value to the marketplace here,” Farrell said, touting the company’s efforts to introduce products and services such as Web-enabled eligibility and three-tiered drug-benefit plans. “We’re proud to be a linchpin in that evolution.”
Most recently UnitedHealthcare, a national for-profit company with more than 26 million health-plan participants, introduced its own mobile app, Health4Me, offering 24/7 access to a registered nurse, ability to locate a nearby, in-network physician as well as access to personal health-benefits information.
“Our strategy is to use information in a way to make everybody in the health care system better,” Farrell said. “It promotes better health, better information and better decision-making. We use it to help providers and employers to better understand population risk management, and we use it to help members to understand their own benefit-plan designs, and give them tools to improve their health.” He added: “Better health leads to lower costs, and that’s what we’re all after.”
Farrell called the development of Accountable Care Organizations, to which bundled payments from Medicare will be made, part of the evolution in health care delivery. The final design of what the ACO will look like is unclear, he continued. “There are lots of ideas and pilots, different types of reimbursement strategies,” Farrell said. “As a large company, we have the ability to partner and support this evolution. We are taking a leadership position in Rhode Island as well as across the county.”
In Massachusetts, a number of tiered health plans have been introduced, including limited networks of providers.
Does UnitedHealthcare anticipate introducing similar products in Rhode Island? “Nothing is off the table. We will consider everything that the marketplace tells us is important. We will do our best to innovate and drive solutions in the marketplace,” Farrell said. He added that UnitedHealthcare is building new products and designing its health plans to address prevention and to improve maintenance of chronic diseases, such as diabetes.
For Tufts Health Plan’s Roosevelt, in this era of change, the opportunity is to redesign health plans that put a greater emphasis on wellness and coordination of care. To do that, Tufts is promoting plans that enable customers to be served by providers who deliver care that is both cost-effective and coordinated, targeting small businesses in order to expand its market share in Rhode Island.
In partnership with Steward Health Care, which owns 10 hospitals in Massachusetts and is in the process of buying Landmark Medical Center in Woonsocket, Tufts has developed a limited network, tiered health-insurance plan.
“We are emphasizing coordination through a limited network,” Roosevelt explained. When you sign up for it, you will receive primary care and hospital care, and specialists through Steward. Massachusetts General Hospital and Brigham and Women’s Hospital have signed on to provide tertiary care [at a lower cost].”
The plan was launched on Jan. 1, with its first big enrollment date on April 1. Roosevelt said, “I definitely could see a similar product being introduced in Rhode Island.” To do so, he said, it would require a willingness of providers to lower costs and employ such a limited-network arrangement.
In terms of shifting risk from insurance companies to hospitals and providers under payment reform, Roosevelt drew distinctions between capitation models developed 20 years ago and the current pay reforms, which he labeled payment-reform 2.0.
“The difference is the ability to have real-time information about utilization, care and wellness,” he explained. By making the clinical information on quality and cost of care transparent, it changes the health care equation.
“If it were just about costs,” Roosevelt explained, “and you had all the money in the world, you could buy a Hyundai for $20,000 or a Cadillac for $50,000. If I know that the Hyundai gets better mileage and has a higher safety rating,” he said, it changes the equation. “Our goal is to make both cost and quality available to our members.” •

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