🔒New nonprofit health insurer seeks better care at less cost

In the lobby of Maine Community Health Options' Lewiston headquarters is a neon red ticker flashing “35 days” — which, on Aug. 27, is the time left before enrollment begins for uninsured Mainers seeking coverage in the state's new online marketplace under the Affordable Care Act.

It's a countdown that CEO Kevin Lewis has been monitoring for two years. In February, the startup received its license to operate as a provider of health plans under the state's marketplace, a regulatory milestone achieved after months of setting up its computer system infrastructure, establishing provider networks and hiring customer-oriented employees. Now it is launching a statewide marketing campaign to meet its goal of signing at least 15,000 customers during the marketplace's first year in 2014. MCHO's only competitor in the marketplace will be Maine's largest commercial health insurer, Anthem Blue Cross and Blue Shield, which is partnering with MaineHealth, parent company of Maine Medical Center, to offer individual and small group policies.

Lewis says there's a long checklist in the countdown to the Oct. 1 enrollment, but the challenge is manageable.

“Three people started yesterday and we're still growing,” he says, noting that 38 employees populate MCHO's newly furnished headquarters in Storehouse No. 2 within Lewiston's sprawling Bates Mill complex. “We expect to be at 50 at the end of the calendar year. We've already cemented in our fixed costs, now we'll be looking at variables. … We have lots of people, including myself, happy to discuss what we have to offer as a consumer-operated and oriented health insurance provider.”

As a startup, MCHO faces numerous and daunting challenges that include embracing a new approach to the delivery of health care and facing a well-financed, well-known competitor. The first hurdle was meeting the ACA's July 31 deadline for submitting coverage plans to Maine's Bureau of Insurance for approval to be offered through the marketplace. Its rate filings for four categories of plans, ranging from catastrophic coverage up to “gold” coverage, required hundreds of pages of supporting information and data.

MCHO and Anthem were approved by Maine's insurance bureau and MCHO received approval from the federal Centers for Medicare & Medicaid Services, which has the final say on exchange plans nationwide.

A catalyst for insurance reform

Lewis says the idea of creating a nonprofit Maine-based health insurer predates the March 23, 2010, enactment of the ACA. Like many in the health care industry, he and his top-level managers had long been frustrated by the contradictions of the American health care system, which is the costliest in the world, accounting for 17% of the gross domestic product, yet lags behind other industrial nations in numerous measurements of health.

Previously the CEO at Maine Primary Care Association, Lewis says his efforts to improve health care access for underserved populations gave him firsthand knowledge of the problems encountered by uninsured Mainers and community health centers under the traditional health care system. All too often, he says, innovations to improve health care ran up against an insurance reimbursement structure that balked because they didn't fit the existing fee-for-service model.

The ACA tackles that problem head-on with an array of reforms, among them the creation of a new type of private nonprofit health insurer, called a Consumer Operated and Oriented Plan, or CO-OP. Initially, Lewis says, $3.8 billion was set aside to provide low-interest loans to the first group of 24 CO-OP insurers in 24 states. The nonprofits would be governed by their members and organized to keep their customers healthy by delivering high-quality care at lower costs.

By statute, the federal CMS says any surplus revenue a CO-OP generates must be returned to its members in the form of lower premiums or cost-sharing, improved quality, expanded benefits or financial stabilization.

MCHO was among the first CO-OP recipients, receiving a $62.1 million loan from CMS to create a new insurance option for Maine and, in particular, its 133,000 uninsured residents. (See “MCHO's financing,” this page.)

“I was lucky enough to be joined by Rob Hillman [then-CEO of Medical Network Inc., Maine's largest independent, physician-owned preferred-provider organization],” Lewis says. “The two of us went at the application and lifted our vision into reality.”

Lewis says he and Hillman spent the summer of 2011 putting together “a binder's worth” of information to make the case that they could deliver on their promises if the startup CO-OP received CMS funding. The application included actuarial data, evidence it would have an adequate network of providers and a description of the needed back-office systems. Maine Primary Care Association provided a startup loan to help get the application off the ground, Lewis says.

Implicit in the application process, he says, was the understanding that CMS wanted CO-OPs to be innovators in the delivery of insurance benefits and health care — in effect, to be leaders in health care reform.

“There couldn't be any involvement by any pre-existing health insurers,” Lewis says. “They wanted us to be starting with a clean slate. They demanded a separation from the industry, per se.”

The federal vetting of MCHO's application started in mid-October 2011. In March 2012 Lewis and Hillman learned their CO-OP application had been approved. Lewis says they both knew the real work had just begun.

Value-based insurance design

Like any startup, MCHO's business plan is based on key guiding principles. Lewis says the framework for those principles is the triple-aim approach devised by the Institute for Healthcare Improvement to:

• Improve the patient experience of care (including quality and satisfaction).

• Improve the health of populations.

• Reduce the per capita cost of health care.

Those over-arching aims were then broken down to arrive at specific goals to define MCHO's mission and values:

• Increasing appropriate use of preventive care services

• Better disease management

• Promoting community resources

• Improving health outcomes

• Using technology to share information

• Integrating primary care and mental health care

• Improving communication between patients and providers.

“This is a shared vision,” Lewis says. “The professionals around this office bring lots of different skillsets to our company, lots of project management skills. We brought those colleagues on board early in our development phase. We're keenly aware of the incredible importance of this effort and the lack of room for any error.”

In designing plans that met the ACA's guidelines for essential health benefits and varying levels of coverage, MCHO followed an approach called “value-based insurance design.”

V-BID first received national attention in 2004 when the Wall Street Journal reported that Pitney Bowes, an S&P 500 company with 28,000 employees worldwide, saved $1 million in its insurance costs from reduced complications after lowering co-payments for asthma and diabetes medications. Since then, the approach has been used by some states to negotiate contracts with public employees and by a few private employers that are primarily self-insured.

In simple terms, Lewis says, V-BID lowers the cost of medications and services that demonstrably improve patient health and raises costs for low-value care. It emphasizes wellness programs and encourages people with known health risks to sign up for preventive care services to help them avoid more debilitating and costly health problems later on.

“People with chronic conditions can have a large impact on health care costs [if ongoing care isn't managed properly],” Lewis says. “We can turn that around by incentivizing early and proper management of those conditions. We do that by reducing the financial barriers that can discourage people from getting the care or medications they need [to stay well].”

Lewis says MCHO has used V-BID in crafting coverage for four major chronic conditions: asthma, diabetes, hypertension and chronic obstructive pulmonary disease. In each case, he says, members' out-of-pocket costs have been reduced to make the routine management of those conditions — such as office visits, prescriptions, lab tests and self-management classes — less costly. The expectation is that doing so will reduce expensive emergency room visits and avoid hospitalizations necessitated by ignored symptoms that got worse.

Lewis acknowledges the success of the initiatives depends on providers embracing those value-based goals.

“Not every provider is made of the same cloth,” he says, granting the risk MCHO faces if some doctors, clinics and hospitals continue to steer patients toward higher-priced medications or treatments when there are lower-cost and equally beneficial options available.

That's where the ACA's push for greater transparency in relation to treatment costs and quality of care measurements, such as readmission and infection rates, comes into play. It's an effort Lewis says MCHO embraces.

“We want to support and point our members in the direction of affordable, quality care,” he says.

Will it work?

For Trish Riley, a senior fellow and adjunct professor at the University of Southern Maine's Muskie School of Public Policy, MCHO's pending debut as a nonprofit co-op health insurer is a bittersweet reality. That's because it coincides with the dissolution of the Dirigo Health Agency she helped create as part of Maine's 2003 health reform law when she was director of the Governor's Office of Health Policy and Finance under former-Gov. John Baldacci.

Dirigo, she says, provided subsidized insurance products that served more than 40,000 Mainers since its inception and negotiated with private insurers for benefits and rates that would be affordable to individuals and small businesses — essentially what the ACA's reforms are trying to do. Because Maine is choosing to have a federally run marketplace and Dirigo's insurance carrier, Harvard Pilgrim Health Care, chose not to participate in the marketplace in its first year, the DirigoChoice insurance program will expire on Dec. 31.

That puts 8,200 people and 706 small businesses enrolled in DirigoChoice into the marketplace's pool of customers, with MCHO and Anthem as their two options.

Riley knows from her experiences with Dirigo — which prior to Harvard Pilgrim had Anthem as its insurance provider — the immense challenge MCHO faces as it competes against the largest health insurance provider in Maine with an established name and deep pockets.

“It won't be easy,” she says. “It's tough work … They've put up some great ideas. Value-based insurance design is the cutting edge. It's where insurance and health care is heading. Now it's up to their marketing and how well they communicate that to providers and prospective customers. We'll have to wait and see if people go with someone new, or go with someone tried and true.”

Riley says the challenge for any startup health insurer is “getting it right in terms of the balance between affordability and the actuarial risks” that drive its costs.

“It's a big list, there's so much to do,” she says. “They've mastered step one, getting their approval from the Bureau of Insurance. That's a significant accomplishment.”

Joseph Ditre, executive director of the Augusta-based Consumers for Affordable Health Care, agrees.

“We view having a nonprofit as an option in Maine's marketplace as being very important for a couple of reasons,” he says. “First, the nonprofit insurance company's mission isn't to generate a profit for Wall Street investors, and that translates into more premium dollars going toward actual medical care. Second, having as your primary goal the co-op value of serving your members. That's important because it means the insurer is more likely to work closely with members of the community to deliver a higher-quality product.”

Ditre gives high marks to Lewis and his MCHO team for building a statewide network of providers that includes the major hospitals, local doctors and community health clinics.

“In a short period of time they have reached out to more community groups and consumers than any insurer I've ever seen,” Ditre says. “They are actually seeking out people's opinions about how we can lower costs and also have better health care. So that's a very good start.”