Selling health insurance in Utah is about to get more competitive.
Arches Health Plan, the state’s first consumer-driven health insurance company, is open for business. The nonprofit was recently cleared by state regulators to enroll customers starting on Oct. 1 for coverage effective January 1, 2014.
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What is Arches?
Arches Community Health Care is a health co-op, a new nonprofit health insurer run by consumers.
The insurer is one of 24 in 24 states awarded a start-up loan by the Obama administration. It will begin enrolling customers in individual, family and small and large group policies on October 1, 2013. Coverage will begin January 1, 2014.
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The insurer will be going up against industry giants SelectHealth and Regence BlueCross BlueShield.
But it’s well funded, backed by a $85 million federal loan.
"No one should have reservations about doing business with us," said CEO Linn Baker, noting Arches has enough reserves to pay 500 percent of its projected claims, or billings from health care providers. To be licensed by the Utah Department of Insurance, it needed only 200 percent of expected claims.
And as the state’s first and only insurance CO-OP, or "Consumer Operated and Oriented Health Plan" — and one of only 24 nationwide — it brings a unique edge.
"Our insurance model is the way health care in Utah will get better," said CEO Linn Baker.
Insurance co-ops are a new breed of insurer championed by a bipartisan group in Congress as a private-market alternative to the hotly debated public option, or government-run health plan.
They are democratically controlled by their customers rather than outside investors, functioning like rural electric or dairy co-ops, providing an under-produced good or service — in this case, affordable health coverage. Arches’ board of directors will be consumer-elected, and by 2016, consumers must fill two-thirds of the seats.
"That member governance will lead to a kind of accountability that does not currently exist," said John Morrison, head of the National Alliance of State Health Co-ops. "People will be reluctant to overcompensate executives and agree to deals with hospitals that are richer than they need to be."
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Today’s insurers, even the non-profit ones, have no real incentive to keep costs in check, because their income is a net percentage of premiums – say the 15 percent of premiums they don’t spend on health care, explained Morrison. "The more care costs, [the more they raise premiums, and] the more their 15 percent amounts to."
Arches’ selling point comes from changing how doctors are paid and, subsequently, how they deliver care, which it expects to translate to lower rates, said Baker. "We’re quite confident we’ll have competitive pricing."
But what excites Baker — what drew the founder of Utah’s Public Employee Health Plan out of retirement — is the opportunity for true payment reform.
Today insurers pay doctors for services as provided, a system that rewards volume over value and contributes to soaring spending.
Arches will assign patients to medical homes and pay those providers lump sums up front, giving them an incentive to keep patients healthy and out of the hospital.
For specialty care, the insurer has contracts with hospitals in each of Utah’s 29 counties and is now ramping up to handle claims and price its plans.
The non-profit is targeting populations that haven’t been well served by private insurers, including Latinos, who comprise a disproportionate share of Utah’s 400,000 uninsured.
But it will market to anyone, the uninsured and underinsured, individuals and families, and in collaboration with brokers, to small and large employers.
"We are making good progress. By April we have to have our plans and benefits set," Baker said.
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