CT’s newest insurer emphasizes its differences. Will that win customers?

Wallingford – In the quest to build an insurance company from scratch, Kenneth Lalime sees opportunity in mistaken phone calls.

The new insurer Lalime runs is called HealthyCT, and it’s not uncommon for people to call trying to reach the state’s health insurance exchange, which is called Access Health CT.

So the people who answer the phones at HealthyCT can transfer callers to Access Health, or they can answer questions themselves. Lalime hopes callers will remember that HealthyCT was helpful.

Mistaken identity is just one of the quirks of being “the new guy on the block” at a time of major change for the health care and insurance industries.

HealthyCT is trying to carve out a niche for itself as a different sort of insurance company, a nonprofit with consumers on the board that's set to compete with for-profit carriers in a state where dissatisfaction with the industry led to a sustained -- albeit unsuccessful -- campaign for a public insurance option.

Its roots and start-up funding come from a provision of the federal health reform law that’s drawn boosters with hopes of transforming insurance markets and critics who question the wisdom of the concept and the viability of the companies it’s funding.

HealthyCT is still in the process of building a network of doctors and other health care providers to treat members once its health plans take effect Jan. 1. So far, the company says it has 70 percent of the state’s hospitals and about 5,000 doctors and other providers on board.

And it has to attract customers. Lalime hopes to have more than 25,000 in the first year. Of the companies offering coverage on the state’s health insurance exchange, HealthyCT has some of the highest prices for individual market plans.

The company received its first application for coverage early in the morning on Oct. 1, before its website even officially launched. Two days later, the site had surpassed 100,000 visitors.

But how much will helpful phone interactions, or interested web visitors, or the company’s nonprofit status matter when customers decide what to buy? Will having a new and different sort of insurance company be enough to make customers consider foregoing cheaper premiums from other carriers?

Lalime thinks price and provider network will drive customers’ choices, but he thinks there’s room for identity to matter too. “I think being new in the marketplace gives us a little bit of an edge,” he said.

If people hear that HealthyCT is not for profit, a new insurer created as part of the federal health law, Lalime thinks, “Some people will go, ‘Gee, maybe it is [worth] $20 here or there.’”

How viable is the model?

For the record, HealthyCT’s name was in place before Access Health’s. The company was created by the Connecticut State Medical Society and the medical society’s association of independent physician practices, and was awarded nearly $76 million in federal loans made available through the health law commonly known as Obamacare.

It’s one of 23 “consumer oriented and operated plans,” or CO-OPs, funded with nearly $2 billion in federal money. 

The existence of CO-OPs in the health law stems from a political compromise, a way to mollify liberals who wanted a public insurance option to compete with private carriers. The law included $6 billion to establish nonprofit insurance companies that would participate in states’ individual and small-group markets, although the funding has since been reduced to $2 billion.

The CO-OPs will start offering coverage next year, offering a chance to show how the theory works in practice.

John Morrison, president of the National Association of State Health CO-OPs, is unsurprisingly bullish about their future.

“It’s important to realize that a health CO-OP, in order to be successful, doesn’t have to get all the consumers,” he said. “It doesn’t have to get a majority of consumers. It can simply get its fair share, and then some, of consumers.”

And he believes some shoppers will be drawn to CO-OPs because of their business model.

In their first year, CO-OPs might not look much different from other companies, Morrison said. But he believes they will ultimately be able to offer lower premiums than their competitors because their business model will make them better positioned to make changes in how care is paid for and delivered, helping to rein in costs.

“Everybody else right now in the marketplace wants to make money,” Morrison said. “The health insurance CO-OP doesn’t want to make money. The health insurance CO-OP wants to provide good health to their members as affordably as possible.”

Robert Laszewski, president of the Washington D.C. consulting firm Health Policy and Strategy Associates, is skeptical about the viability of CO-OPs. To attract enrollment and succeed, he said, they’ll have to offer customers value -- that is, competitive prices or superior networks of health care providers. 

But he said they’re starting out with enormous disadvantages: With no membership, they have limited clout in getting health care providers to join their networks at rates that can help keep premiums down. They don’t have claims experience, so they lack the data needed to set prices. They don’t have the data systems or economies of scale that existing insurers have. And they’re competing in what are traditionally the hardest parts of the insurance marketplace, selling coverage to individuals and small groups.

“They flat out don’t have a good chance of survival,” Laszewski said. “This is a big boys' game. This is not a game for altruists. This is a cutthroat market.”

What matters to customers?

As an insurance agent, John Calkins, president of Bozzuto Associates in Watertown, likes the idea of new carriers in the market, regardless of their business model.

“It gives me more options to show my clients,” he said. “Everybody will have their own little wrinkles that will be attractive to some people and maybe not to others. That just gives us more tools in our toolbox.”

What matters to clients in deciding which carrier to select? Calkins says it’s price and which doctors are covered.

“One of the toughest things in my business is to tell an employee that their wife has to change their ob-gyn because they don’t participate,” he said. “I can tell you, that’s usually a nonstarter.”

HealthyCT is still building its provider network. It’s selling insurance both on and off the exchange, but plans to maintain only one network, so all providers who sign on will accept patients with plans bought through the exchange or outside it. The payment rates for providers won’t differ whether patients are covered by exchange or non-exchange plans.

That’s in contrast to the how many insurers nationally are handling their exchange plans, signing up fewer doctors and hospitals and offering lower payment rates as a way to keep premiums down. Other carriers in Connecticut are also expected to have separate on-exchange and off-exchange networks, although the extent of the differences is limited by Access Health’s requirement that carriers’ exchange networks be substantially equal to their commercial networks.

Insurer identities

One of the ways HealthyCT hopes to differentiate itself is through its focus on patient-centered medical homes, a model that involves primary care providers taking a more active role in coordinating patient care. (Other carriers also have initiatives involving medical homes and care coordination.)

HealthyCT provided funds to help 75 medical practices go through the process of becoming recognized as patient-centered medical homes.

The assistance didn’t come with any requirement for joining HealthyCT’s network, but Lalime hopes the practices “would recognize the contribution that we had made to help them get there.” Either way, it’s a wise investment in the marketplace because care coordination can change outcomes and the medical home approach can help stabilize costs, he said.

Another selling point Lalime likes to point to is the inherently local nature of HealthyCT. Although it’s applying for federal approval to serve as a CO-OP in Rhode Island, the company isn't intended to grow nationally.

ConnectiCare, another insurer offering coverage through Access Health, also touts its local focus.

“When choosing a health plan consumers should consider several factors like health plan quality rating, provider network, benefit coverage, price, market reputation and personal local service,” President Michael Wise said in a statement. “ConnectiCare products are nationally recognized for quality and service and offer comprehensive coverage with a broad provider network and local caring service.”

By contrast, one of their key competitors on and off the exchange, Anthem Blue Cross and Blue Shield, the state’s largest insurer, has a national brand. Its parent company, Wellpoint, offers plans in 14 states.

Anthem spokeswoman Sarah Yeager said the role of insurance companies is changing “alongside the evolving health insurance landscape,” including a marketplace that is more consumer and retail-focused. For Anthem, that means in part developing tools to help consumers shop for coverage and navigate health insurance.

And she emphasized the company’s history and standing in the market.

“With more than 76 years as a the leading carrier in the state, Anthem is a market place leader in the individual and small employer markets and we are uniquely positioned to succeed in the health benefits exchanges,” she said.

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