Boeing, Going, Gone: The End of Group Health Insurance

Come the fall, when benefit enrollment is in full swing, Boeing employees in St. Louis and South Carolina will have a new option – one of their local health systems, in addition to current coverage alternatives from Blue Cross and Blue Shield (BCBS) plans. Boeing announced last week that it has directly contracted with Mercy Health Alliance, an accountable care organization (ACO) in the St. Louis bi-state region, and the Roper St. Francis Health Alliance ACO in South Carolina’s coastal low country. Behind the scenes, the Health Care Service Corporation of BCBS Illinois will help with administration and paper work. Greater Savings, Improved Health, Better Experience By working directly with the ACOs, Boeing hopes to save money for itself and employees, improving employee health and enhancing service for a more positive employee experience. Boeing South Carolina executive Beverly Wyse told WSCC-TV the company is applying the same logic to healthcare as it does in building Dreamliners, with a commitment to more quality, reliability and lower costs. Boeing estimates employees will save $350 to $1,000 per person per year on monthly payments, deductibles and copays. Mercy executive Donn Sorenson told the St. Louis Business Journal Mercy could cut per family health care costs by more than half to $6,000 from the large-employer average of $15,849.  He plans to do it with greater attention to preventative and maintenance care. In negotiating Preferred Partner ACO contracts, Boeing puts a high priority on access and convenience. Primary care appointments are available for acute conditions same day and within 72 hours for any condition. The wait for a specialist appointment can be no longer than 10 days. In addition, each Preferred Partner provides extended hours, a dedicated phone line with care navigators, a member website and phone apps. Competition in SeattleAdditional Preferred Partner arrangements are in the works, understandably because Boeing’s formula appears to be working. A year ago, Boeing contracted with two ACOs in the Seattle area – Providence Swedish Health Alliance and the UW Medicine Accountable Care Network. Of the 27,000 eligible employees and 3,000 retirees,about 18,000 signed up for one of the ACOs in roughly equal numbers. In Seattle Boeing has pitted two prominent health systems against each other, creating a retail, consumer market within its large employee population, much like a private exchange. Through their ACOs, both systems have assumed upside and downside risk, absorbing an insurer’s traditional role. Instead, BCBS Illinois collects and provides data, in addition to performing administrative services as in St. Louis and South Carolina. Boeing’s relationship with BCBS Illinois could be a plus, if the manufacturer decides to implement a private exchange. BCBS Illinois has its own, Blue Dimensions, private exchange platform, which offers “many of the same features of online shopping.” Boeing’s Health Care Endgame In fact, the Seattle competition may foreshadow Boeing’s endgame, according to Tory Wolff of Recon Strategy.  Boeing “is setting up its market to transition to a provider-consumer type market. We do not expect it to be too long before Boeing starts transitioning its employees to defined contribution.” The impact would be substantial. The 

 on health care for 480,000 employees, dependents and retirees in 48 states. Assuming Wolff is right, look for Virginia Mason to become a third option for Boeing’s Seattle employees. In St. Louis, SSM and its newly acquired Saint Louis University Hospital could become a second option. In time, BJC Healthcare/Washington University Physicians will conclude their shared brand – without an insurer intermediary - can attract more Boeing patients. In South Carolina and other major Boeing locations, expect the same. Private Exchanges – Small but Growing Rapidly While Boeing approaches a private exchange, where employees get a broad range of coverage options and a defined company contribution, other large employers have already made the plunge. These include Walgreen Co., CVS Health Corp. and IBM, at least for retiree benefits. Admittedly, private exchange utilization is still extremely small. There are six million participants this year, up from three million in 2014. However, by 2018, 40 million people likely will choose coverage on a private exchange, according to an Accenture study. Aon Hewitt attributes the projected surge to a number of factors, including lower cost. The average annual cost increase to employers completing a second year renewal 2.6%. Large employers with similar benefit structures saw increases of 6.5% to 8% this year. However, the most significant driver is a 40% excise tax on “Cadillac” health benefit plans scheduled for 2018 implementation under the Accountable Care Act. Imposed on family and individual plans respectively costing $27,500 and $10,200, the tax could impact as many as 48% of employers in its first year, according to the benefits consulting firm Towers. According to Accenture, private exchanges are a “compelling alternative” for employers who want to accomplish two goals simultaneously – control cost and administrative burdens, while still providing health coverage. They are very aware that 76% of consumers see health insurance as the primary or an important factor for continuing to work at their current employer. In fact, employer involvement in facilitating health benefits matters as much if not more than the employer’s financial contribution. Sam’s Club Now, Amazon Soon? Typical operators of private exchanges include health insurance companies and benefit consulting firms. However, small employers may rely on an unlikely source to provide their employees with coverage options, Sam’s Club, which has collaborated with Aetna to offer the Aetna Marketplace for Sam’s Club. Employers can offer a defined contribution plan or make a flat, pre-tax contribution an employee can apply to his or her plan choice. (Recently proposed IRS rules could negatively affect the latter option.) Can Amazon be far behind? Perhaps not. Both Wal-Mart and Amazon are engaged in a fierce battle for consumer loyalty. There is no public evidence suggesting an Amazon move toward offering a private exchange. However, Amazon Web Services has been touting its deep association with Oscar Health, a technology-driven, health insurance start-up, which could be serving as a learning platform for Amazon. What is surely not far behind is the end of group health insurance, supplanted by a rapidly growing retail market for health coverage. As blogger Joe Markland has observed, “a single 10,000 person employer will become a firm with 10,000 retail buyers.” In addition to the 40 million in private exchanges by 2018, Accenture predicts there will be 31 million participants in public exchanges, up from 15 this year, for an overall 71 million consumers. Retail Market Driving Insurance Mergers This burgeoning retail market is the primary driving force behind the mergers of Anthem and Cigna, and Aetna and Humana, respectively.  Yes, greater size will provide negotiating advantage, but within a model that is quickly becoming obsolete.  In fact, insurance industry critic Wendell Potter observed last year, “If the Boeing strategy flies, health insurers as middlemen will be history.” Agreeing, Leavitt Partners notes that employers want benefit options that will drive a world-class, healthy, productive workforce.”  However, it concludes, “the current composition of intermediaries cannot meet these demands on yesterday’s technology and workflows.” Instead, health insurers are racing to avoid commoditization. They have to reposition to add value differently in the new retail paradigm. Instead of pounding out reimbursement deals with providers, they will need to collaborate, creating differentiated coverage alternatives for retail marketplaces. More important than added scale, success for these insurer mergers will depend on the integration and expansion of initiatives such as:

• Cigna’s Collaborative Care, which currently has 124 care arrangements in 29 states and comprises nearly 50,000 physicians, including BJC Healthcare/Washington University Physicians

• Anthem’s Vivity, an HMO-style joint venture with seven Los Angeles hospitals, including the prestigious Cedars-Sinai Medical Center

• Aetna’s Innovation Health partnership with Inova Health System Foundation, created to serve Virginia with a “collaborative model”

• Humana’s Transcend and Transcend Insights, recently established as vehicles for working closely with physicians, medical groups and integrated delivery networks on population health strategies.

Ultimately, successful health insurers will be collaborators instead of intermediaries, creating value with, not at the expense of, providers in a retail marketplace. Stephen Littlejohn is President of Climb the Curve Communications. He can be reached at 

selj@climbthecurve.com

and on Twitter 

@ClimbtheCurve

. This article was originally posted on his

website

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