by Mark Friedman on Monday, Oct. 2, 2006 12:00 am
Brett Kirkman, executive director for Arkansas of Mercy Health Plans, says, "We think we'll be third in the market in three years."
The three hospitals Sisters of Mercy operated in Arkansas started a joint venture with ABCBS in the 1990s, making them in-network providers for the state's dominant insurance carrier.
But their relationship changed last summer. The Patient Protection Act of 1995, best known as the "any willing provider" law, finally survived its legal challenges when the 8th U.S. Circuit Court of Appeals upheld most of the act. Under the law, providers that are willing to accept the same terms as contracted providers cannot be excluded from an insurance company's network.
"As a result of any willing provider, Blue Cross canceled the joint venture," said Brett Kirkman, executive director for Arkansas of Mercy Health Plans, Sisters of Mercy's subsidiary insurance company. "So it was at that point that Sisters of Mercy decided to go ahead and bring their health insurance into the state to make sure there was ample competition."
Even without AWP, Arkansas was on Mercy's radar screen, according to Bill Bennett, senior vice president of field operations.
"Arkansas was a natural expansion because we have a significant presence in southwest Missouri, and that goes naturally into northwest Arkansas," Bennett said.
Mercy Health Plans, which also sells in Illinois and Texas, began selling health insurance in Arkansas in May. So far it has 12 accounts with 1,000 members and claims to be putting some competitive pressure on ABCBS' rates.
Mercy declined to say what its Arkansas revenue is now and no public record will be available from the Arkansas Insurance Department until after the end of the year.
By the beginning of 2007, Mercy hopes to have 5,000 members, Bennett said. Its ultimate goal, though, is to be one of the state's three largest health insurance carriers — meaning it hopes to displace ABCBS, United Health or QualChoice.
"We are on a three-year schedule," Kirkman said. "We think we'll be third in the market in three years."
Right now Mercy is selling only group health insurance but is planning to offer an individual policy soon. It also has its eye on the Medicare business.
A product that Mercy hopes will attract customers is called My Choice. It closely monitors a member's health and offers premium savings of up to 20 percent compared with its PPO (preferred provider organization) product if the member follows Mercy Health's advice. If an employer signs up for My Choice, employees may choose not to take it.
The My Choice product has al-ready received posi-tive reviews after being in operation in other states.
"I'm a huge proponent of the My Choice program," said Sean Donlin, senior vice president of Lockton Cos., a Kansas City independent insurance agency. "I've watched it within my client base drive behavior, reduce costs and have quite a profound impact on the employees that buy into the concept."
Mid-tier and smaller companies seem to enjoy My Choice because it holds down insurance costs, said Jay Savan, a health care consultant for the St. Louis office of Towers Perrin.
"If you keep [employees] well, you prevent claims later," Savan said. "It's no different than the maintenance on your car or maintenance on your house."
Bennett said Mercy Health Plans' philosophy was to address the reasons for higher health care costs.
"If we don't change poor health behavior, we're not going to fundamentally alter the underlying factor behind escalating health care costs," Bennett said.
Entering a new insurance market is hard enough, and it's especially difficult in Arkansas.
"We're a small state; we have a lot of uninsured people," said Kirk-man, whose office is in Little Rock. "It's not an attractive state for the big companies to come and spend a lot of money in and set up an office. It's more profitable to go set up in a more populous state."
Another challenge an insurance company faces in entering an uncharted market is getting its name out there.
Mercy, though, is a "well-regarded organization in St. Louis, and I would be surprised if they don't ultimately capture their fair share of the Arkansas market," Savan said.
Mercy's three hospitals should help them generate business, too, he said.
St. Joseph's Mercy Health Center in Hot Springs is the fourth-largest hospital in the state based on patient revenue. For the fiscal year that ended June 30, 2005, it reported $662.6 million in patient revenue and income of $5.43 million.
Another Mercy hospital in the top 10 is St. Edward Mercy Medical Center in Fort Smith. For its fiscal year that ended June 30, it had patient revenue of $420.5 million and income of $10.4 million.
About 3 percent of the workers in a company are responsible for most of the company's health care premium costs, Kirkman said.
"So let us help you address that," he said.
If that small percentage of employees could become healthier, then rates for the company should drop. But employers can't walk up to employees and tell them to shed some pounds or stop smoking.
That's where My Choice comes in.
If the employer wants the My Choice plan, each employee fills out an on-line health questionnaire. Mercy Health will then come up with a list of things the employee needs to do to improve his health.
Some people might be told to take a smoking cessation class, while others might be sent to the doctor's office for a colonoscopy.
Throughout the year, Mercy Health Plan will chart the progress of the member.
"Then if they do the things that we ask them throughout the year, they get a lower premium ... than the employees in the straight PPO," Kirkman said.
The members in the My Choice plan team up with doctors from Mercy Health hospitals and other hospitals in the network to make sure the members get the checkups and preventive care they need.
"We help ... make sure those employees have every opportunity to do the things that we've asked them to do based on the results of their health questionnaire," Kirkland said.
As a result of the emphasis on prevention, Mercy Health Plan has seen its pharmacy costs rise because it's finding people who should be on high blood pressure medication but aren't.
But the cost of prescriptions tends to drop in a few years because members are taking better care of themselves.
If a member or his family doesn't follow Mercy Health Plan's advice, he will be kicked into Mercy Health Plan's PPO product the following year and pay the higher premium.
Sean Donlin of Lockton Cos. said it is difficult to change the behavior of an employee who is 40 or 50 years old. Still, it is worth a shot, he said.
"The [My Choice] program isn't saying we don't want your sick and your wounded," Donlin said. "It's saying we want them in the program. We want them to have the guidance to make better decisions."
He said it had been successful because employees typically hadn't given much thought to the consumption of health care, nor did they give much thought to the lifestyle decisions they made.
Now they do because of the monitoring of the My Choice plan, Donlin said.
Kirkland said he'd already seen the effect of Mercy Health Plan in Arkansas.
"It's very, very competitive right now," Kirkman said.
He said a small auto dealership in Fort Smith was facing a premium increase of 18 percent if it stayed with Arkansas Blue Cross & Blue Shield.
But Mercy offered to provide insurance to the 25-person group for 10 percent less than the current ABCBS price. When ABCBS learned of the offer, it countered with a premium that was even lower. The auto group chose to stay with ABCBS, Kirkman said.
"It was a win for us because, had we not been there, the group would have gotten an 18 percent increase in one of our hospital communities," Kirkman said.
Max Heuer, a spokeswoman for ABCBS, said several companies do business in Arkansas, and "we've always welcomed competition. It's always a plus because it really does put the focus on the consumer."
Click here for a look at the Sisters of Mercy Health Hospitals in Arkansas.
More on Mercy Health
Click here to download a PowerPoint document on the My Choice program, what it is and how it works. [Mercy Health]
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