Reduced care costs and higher patient volume are only two of the reasons North Shore LIJ Health System is launching its own commercial health plan. Other benefits: It will make "getting paid and paying our docs…much, much, much simpler," says one executive.
Last week, North Shore LIJ Health System—a 15-hospital integrated delivery network serving Long Island, Queens, Staten Island, and Manhattan—received approval from New York to launch the first provider-owned commercial health plan in the state.
CareConnect, the system's plan, will be sold through the state's health insurance exchange. Enrollment begins Oct. 1, and the plan goes into effect on Jan. 1, 2014.
Although the timing of the insurance license is perfect for selling the product through the exchange, the plan was not originally designed to coincide with the new online marketplace, says Howard Gold, North Shore LIJ's executive vice president of managed care and business development. Instead, the health plan was initially created to cover the system's own employees and their families.
"We've tried this with our employees, having a limited network, using our 15 hospitals and 5,000 doctors and our continuum of care," Gold says. "We have about 41,000 employees and family members. We have offered it to our employees for the last few years at a much cheaper basis."
The health plan reduced premium rates and overall care costs and drove patient volume to the health system, Gold says, adding, "Most people stayed in network … we have nearly 90% in-system utilization."
"It was proof that the idea of a self-contained network could work from a quality, coordination, and financial point of view," he says.
In late 2012, North Shore LIJ decided to apply for a license to sell CareConnect as a commercial insurance product after being encouraged by the level of interest area businesses and unions showed in the health plan.
"When the Affordable Care Act passed and Obamacare became law, we decided to launch our own insurance product around these ideas that have been proven by our employees," Gold says. "We realized the days of fee-for-service reimbursement are numbered. An alternative reimbursement model around shared risk was one way to promote quality. When the ACA became law, we realized we could jump out ahead of this and get there first and prove it can be done."
"The stars aligned," he notes of the fortuitous timing.
North Shore LIJ expects to enroll between 5,000 and 15,000 members in the first year. Alan Murray, vice president of managed care, says the system is deliberately keeping the plan small to start.
"We are trying to be very careful and ease our way into this," he says. "Ultimately, the experience of each member is what comes first. We want to change the way healthcare is delivered from the insurance and provider sides, to make it connected."
"We don't expect to be the biggest in the marketplace," Gold agrees.
What Gold does expect is that the line of CareConnect products will undercut the competition when it comes to price. An individual CareConnect plan through the exchange will cost about $420, roughly 10% less than the next lowest priced plan on the market, according to Gold.
"Our price point is highly competitive," he says. "We are not necessarily going to pay ourselves more. If anything, we expect our premiums will be lower than others on the market, and we will pay ourselves a reasonable rate."
During its first year, CareConnect will have about 4,500 to 5,000 in-network physicians, including primary care doctors and specialists that are both employed and independent. One financial advantage of operating its own health plan is the ease with which the hospitals and physicians will be paid for their services, Gold says.
"I would say one of the secondary or tertiary byproducts of having our own plan is it will make getting paid and paying our docs and the docs who work with us much, much, much simpler. It will also make it much, much, much easier for consumers. There will be less hassle for everyone involved. … We think by owning our insurance company, we can do that. It's not the reason for doing this, but it's a byproduct."
Gold believes the CareConnect plan will also help North Shore LIJ keep pace as the healthcare industry moves towards population health management.
"All of this is in response to us wanting to run an organization that is concerned about health as opposed to sickness and how you do that from the point of view of reimbursements and clinical staff. We are looking at wellness and the continuum of care over a lifetime," he says.
Provider organizations and commercial carriers should embrace the idea of forming new relationships designed to lower costs and improve quality, Murray says, and offers a warning to those that don't.
"Those providers who are not involved in these kinds of activities or those insurers who are not involved with providers who are willing to be in these kinds of activities will fall by the wayside," he says. "Plans that do this, whether it is a provider that owns the plan or a plan that wants to work with providers like us are the ones that are going to succeed and be very successful under the Affordable Care Act."