As more Americans shop for health care coverage on private insurance exchanges, hospitals face challenges and opportunities

When a consumer shopping on Medica’s private insurance exchange enrolls in the Vantage accountable care organization, the staff at Fairview Health Services swing into action.

Vantage — actually, Fairview and North Memorial Vantage with Medica — is the product name for the ACO that includes Fairview Health Services and North Memorial Health Care and is sold on the My Plan by Medica exchange in Minnesota’s Twin Cities.

Automatically notified of every new enrollment, staffers check to see if the individual is already in Fairview’s electronic health record system. They look at the robust demographic information collected through the exchange’s online enrollment system.

Then they start an active onboarding process to welcome the consumer, answer questions about how the ACO works and start building a relationship.

“We ask questions about their health and, based on those responses, we make recommendations to get them connected with a primary care provider or some other member of our care team,” says René Coult-Calendine, Fairview Health System’s vice president for market and product development. “In that way, we get in front of some of the potential risk of the population as well.”

Fairview and insurer Medica, both based in the Minneapolis area, are among the nation’s pioneers in private insurance exchanges. After three years of experience, both parties think they are at the forefront of an important trend in health care purchasing and delivery.

The Vantage ACO is one of four ACOs available through My Plan by Medica, the private exchange, which also includes an open-access option. Most individuals who shop on the exchange choose an ACO — and save money by doing so. More than 90 percent of those who choose an ACO one year go on to renew for an ACO in the next year.

Moreover, all the ACOs are exceeding expectations for financial performance, says John Naylor, senior vice president for commercial markets at Medica.

“I believe this gets back to the importance of the relationship and the access to complete information in an individual’s health record,” he says. “And we are providing better care than we were before.”

Why private exchanges matter

Private insurance exchanges are one facet of health care’s move to a retail orientation. Instead of choosing a health plan for their workers, employers give them a cash allocation and point them to an exchange, where they can choose from several options to buy the coverage they prefer.

In 2015, about 6 million consumers enrolled in coverage through a private insurance exchange. Jim Bonnette, M.D., executive vice president at the Advisory Board Co., expects that number to grow rapidly, eventually becoming the standard way that employees enroll in employer-sponsored health benefits. “By 2020, we could see 40 to 60 million people in private exchanges,” he says.

That has major implications for health care providers for two reasons. First of all, many consumers shopping on a private exchange are looking for a low premium, and that means higher out-of-pocket responsibility.

“As individuals are buying down in coverage, provider systems will be on the hook to collect more from individuals,” says Scott Brown, managing director of Accenture’s private exchange offering. “That’s obviously a pain point for many providers today, and exchanges will only accelerate that.”

The other challenge: getting the patient’s business in the first place.

“You’ve got to be in one of the networks [offered on the exchange] so they can choose you when they choose the insurance,” Bonnette says. “You need to be front of mind for them so that they choose you again when they need services, because you’re not likely to be the only one in the network. And you need to stay top of mind because people can change their plan without a penalty every year.”

Positioning for the consumer

That is a new dynamic for most health systems. One of the ACOs vying for patients on the My Plan by Medica exchange touts same-day primary care appointments and online care; another offers a free wellness assessment with a nutrition and fitness specialist; and another promises a free meet-and-greet with a primary care provider, plus free home delivery of prescription drugs.

Naylor, the Medica executive, says the ACOs look for opportunities to get in front of potential customers who will be shopping on the exchanges. “For some of our larger employers, we set up a benefits fair where each of the ACOs has a booth,” he says. “An individual employee can walk around and say, ‘I’ve got a daughter with this condition; what resources and tools do you have to support us?’ They go shopping and see which of those they feel most comfortable with.”

Glimpsing the future?

Like most things in health care, private exchanges are gaining traction in some parts of the country much more quickly than in others.

In an attempt to prepare its members for the future, the Michigan Hospital Association in 2013 commissioned a major study about the implications of insurance exchanges, both private and public. But not much has happened in the private exchange arena so far, says Paul La Casse, D.O., who chaired the Task Force on Future Health Insurance Markets.

“There has been some movement into these private exchanges, but it has not been significant,” says La Casse, executive vice president of the post-acute care division and diversified business operations for Beaumont Health in southeastern Michigan. “I think we’ll see slow growth until there’s a tipping point.”

Leaders at Mayo Clinic Health System agree. That’s why it partnered with Medica to offer a new health plan — called Medica with Mayo Clinic Health System — offered in eastern Wisconsin and southern Minnesota through Medica’s private exchange. “We think that there will be more of these sorts of products and exchanges coming forward, and we’re trying to position ourselves well for that sort of an environment,” says Brian Whited, M.D., vice chair of operations for Mayo Clinic Health System.

The health system consists of Mayo-owned clinics, hospitals and other facilities that serve the people in more than 60 communities in Georgia, Iowa, Minnesota and Wisconsin, outside the Mayo flagship in Rochester, Minn.

The health plan offered on the exchange aligns with Mayo’s efforts to deliver high-value care in two ways, Whited says. First, it is designed so that patients will have all their care within the Mayo system, which means Mayo will have complete information about the patient.

“The second component is that it allows us to understand who signed up for this product, so we can reach out to them proactively to deliver more wellness care,” he says. “We can make sure they’re getting in for their screenings and make sure they are getting their chronic disease follow-up labs in a proactive way, instead of waiting to get sick and coming to us.”

What it takes to succeed

Marketing to consumers requires mastering the Triple Aim — improving the patient experience, improving the health of the population, and reducing per capita cost — because consumers are looking for value. Health systems that want to succeed on private insurance exchanges especially need to focus on the patient experience aim.

“Care systems really need to be thinking about how they can create a differential experience that is not core to the clinical experience. I call it a wrapper of services around that clinical care,” Coult-Calendine says. “If we’re really trying to engage patients differently in this model, we need to think about that differently.”

Fairview made additions to its call center to support the onboarding outreach. And it added a new position, a clinical nurse who serves as a product navigator.

“Her role is to look across care within the system and make sure that there aren’t any members in these products who are falling through the cracks,” Coult-Calendine says. “It’s almost like an oversight umbrella over our care coordination.” 

Lola Butcher is a contributing writer for Trustee.

4 reasons private exchanges will grow

1. Savings Employers who jumped early to private exchanges appear to be saving money. Mercer Marketplace says medical plan savings in the first year can be as much as 15 percent; in the second year, Mercer’s employer clients saw an average increase of 1.5 percent, compared with the 4.6 percent increase reported companies responding to Mercer’s national survey of employer-sponsored health plans.
2. Defined contribution Weary of ever-increasing health insurance costs, some employers are moving away from the defined-benefit approach to health coverage for their workers. Using an exchange facilitates that because it gives employees freedom to use their benefit dollars in the way they see fit.
3. But nothing about the exchange itself requires employers to make that change. “Some have yet to move to a defined-contribution environment because they feel such a change overnight might be too much for employees to adjust to,” says Dard Hunter, a senior partner at Mercer. “So they will come aboard the exchange with their traditional defined-benefit structure and, in the next few years, move to a defined contribution.”
4. Cadillac tax The controversial 40 percent tax on high-cost plans, which could affect a third of large employers, goes into effect in 2018, though it is being heavily debated by members of Congress. Employers who move to a defined contribution and then point their workers to a private exchange to spend the money is an easy way to avoid the tax. “And since I can’t find anybody who says they’re going to pay the Cadillac tax willingly, I suspect [the exchanges are] going to grow,” says Jim Bonnette, M.D., executive vice president at the Advisory Board Co.
5. Choice Employers benefit if their workers become savvy shoppers and engaged consumers of health care services, and giving them more choices for coverage is a good starting point.

What’s in it for health systems?

A private exchange offered by an insurance company is simply a way for individuals to shop for and purchase coverage. The significance for health systems is the opportunity to work with insurers in new ways to thrive as health insurance becomes a retail industry. So says John Naylor, senior vice president for commercial markets at Medica, a Minneapolis-based insurer and private exchange pioneer.

Medica, the first insurer to offer a private exchange, has partnered with four provider networks from which individuals can choose when they enroll using its My Plan by Medica exchange. Each network includes hospitals and physicians who contract with Medica as an accountable care organization. Medica’s definition of an ACO is a jointly owned profit-and-loss arrangement between payer and provider. Providers are paid using the fee-for-service system, and they share any profit or loss associated with the care of the ACO enrollees over the course of a year.

The details of each contract — premium rates, risk-sharing details, payment modifers related to quality measures — are negotiated between Medica and the ACO. And the two parties determine which will provide enrollee outreach, care management and other services needed to effectively manage the patient population.

For example, integrated call centers that allow a plan member to phone a single number to ask about benefit design, schedule an appointment, discuss a claim or talk to a nurse are a standard feature for exchange enrollees. “In some cases, the [health] system takes the calls, and in some, we do,” Naylor says. “It depends on each system’s capability and interest level. So we partner with each of these care providers as if we’re all in this together, which we are.”

Naylor lists five benefits to health systems:

1. Increased market share. Two major health systems in the Twin Cities are not participating in the exchange, so private exchange enrollees are funneled into a subset of health care competitors.
2. Increased “keepage,” the percentage of a consumer’s total health care spend that stays in the network. In the highly competitive Minnesota market, less than half of a given individual’s total spend typically stays in a single network, but the ACO concept changes that. “We have consistently shown through our ACOs that they are getting 95 percent of the spend, so they are doubling their revenue from a single patient,” Naylor says.

Equally important, the ACO has almost all of a patient’s care documented in its electronic health record system, which allows for more proactive care management. For example:

3. More targeted marketing. The ACO can use the information it has about enrollees — such as address or chronic conditions — to fine-tune marketing messages.
4. Consumer-level branding. To succeed as an ACO, providers use a high-touch approach to patient engagement to nurture a cradle-to-grave relationship. “Whether the individuals stay with Medica or go to another health plan or to Medicare or Medicaid, that consumer is now branded to a given care system,” Naylor says. That branding opportunity extends to healthy patients who may not seek care. “Every person who proactively chooses an ACO is a potential patient,” Naylor says. “So the health system can market now and brand to an audience who is committed to using them when they need care and not just at the time they seek care.”
5. When some consumers never seek care. Through the jointly owned P&L arrangement, Medica and an ACO receive the insurance premiums for every consumer who enrolls. If an individual does not seek care, they share the profits. — Lola Butcher