Tufts Medical Center, its physician group, and the publicly traded parent company of MetroWest and St. Vincent hospitals have been awarded an $88.5-million loan by the federal government to create what would be the state’s only member-owned health insurance plan.
The nonprofit Minuteman Health Initiative expects to offer coverage in Eastern and Central Massachusetts starting in January 2014, and its backers said its ownership structure would help the initiative lower costs.
Its products will be sold to individuals and small businesses through insurance brokers and the state’s virtual health insurance market, the Massachusetts Health Connector.
With the Massachusetts program, and another announced Friday in Tennessee, the Centers for Medicare & Medicaid Services has approved 20 “consumer operated and oriented” plans. The program, created under the Affordable Care Act, is open only to new insurers not licensed before July 2009 and requires the start-up money to be paid back within 15 years.
“We don’t have anything on the market like this” in Massachusetts, said John McDonough, a Harvard health policy professor who had a hand in drafting the federal law. Depending on how it is implemented and received by consumers in the state, McDonough said, the program could become “a belly flop” or “a disruptive innovation worth watching.”
The organizers of the Massachusetts plan, which include Tennessee-based hospital group Vanguard Health Systems, have assembled a panel of industry specialists to get it started. Ultimately, though, members would elect directors and hold a majority of seats on the board.
“Consumers who are members of this plan will ultimately participate and be in control of the governance long-term,” said Ellen Zane, former chief executive of Tufts Medical Center and chairwoman of the plan’s starting board.
Surpluses beyond what the plan needs to comply with state and federal laws would be returned to members or used to lower premiums, said Eric Beyer, who succeeded Zane as Tufts chief executive. Members would have a say in the design of coverage options, too, he said.
It’s not clear which hospitals and doctors would be included in the plan’s network. Seventeen have signed letters of support for the plan, but Beyer and others declined to say which.
The plan, which still must get approvals from the state Division of Insurance, is aiming for a “broad base of providers who are willing to work at those rates that are sort of closer to the median” in prices, and it will not accept large disparities in payments to providers, Beyer said. Closing big gaps in how much hospitals and doctors are paid for providing similar care is seen as one way to control rising health costs.
The loan program is one of the lesser talked-about pieces of the Affordable Care Act. It was created as a compromise when lawmakers were at odds over whether state health insurance exchanges should include a federally run health plan, often referred to as the “public option.” Supporters said the federal plan would ensure competition and hold down costs but critics said it would have an unfair advantage over private insurers and could be a possible first step toward nationalized health care.
Eric Linzer, spokesman for the Massachusetts Association of Health Plans, said the new plan should be subject to the same level of scrutiny as others in the state.
“Massachusetts is already home to some of the nation’s top health plans in terms of quality and member satisfaction,” he said. “We think our health plans provide tremendous value to individuals and small business. We look forward to learning more about this new option.”
The Minuteman plan would streamline billing processes to save on administrative costs and allow providers to work more closely with employers, organizers said. Information about smoking cessation or workers’ weight collected through employer wellness programs is not typically shared with doctors.
“Imagine working closely with an employer who can help us gather data and, with employees’ permission, to be able to share that data with their primary care providers,” said Dr. Jeff Lasker, chief executive of the Tufts physician group, New England Quality Care Alliance.
Physicians also can work alongside members in designing coverage options that meet the needs of people with chronic conditions, Lasker said.
State and national laws have put increasing pressure on hospitals and doctors to take on more of the financial risk — and with it, get the potential rewards — of managing patients’ overall health care, which typically has fallen on insurers. While the Minuteman program would be guided by its members, it fits a trend of closer relationships between insurers and providers.
Partners HealthCare last year announced plans to acquire Neighborhood Health Plan, which mostly serves low-income people. Steward Health Care has worked with Fallon Community Health Plan to develop plans offered at reduced prices through a small business cooperative created by the Retailers Association of Massachusetts.
Jon Hurst, president of the retailers group, said he is skeptical that the Minuteman program will have much impact on the state. Because it is a broad plan, with “no teeth” to limit its membership or control pricing, “how can it do any better than the rest of the marketplace?” he said.
Nancy Turnbull, senior lecturer and associate dean at Harvard School of Public Health, was optimistic. Consumer engagement is on the rise, she said, and people may be attracted to a plan where they think they can have a stronger voice.
“I think it could very much shake up the health insurance market for individuals and small employers,” she said.
The challenge, she said, will be in developing a network of hospitals and doctors broad enough to attract customers without adopting the price disparities that are pervasive in other parts of the market.