A new health plan from Allina Health System and insurance giant Aetna could add a healthy dose of competition for insurance shoppers in the Twin Cities.
Allina and Aetna announced the joint venture last week, saying the goal is to start providing coverage in 2018.
It’s part of a national trend in which large health care providers like Allina have been dabbling in the health plans business, responding to a push from insurers and the government to control health care costs.
Locally, the new insurance company has the potential to boost competition in a market that has seen the major players settle in, said Jon Christianson, a professor of health policy and management at the University of Minnesota.
“Any time you have a new actor with the backing of a large group like Aetna — that’s new, and that could shake things up,” Christianson said. “But we know so little at this stage about exactly how this relationship is supposed to operate, it’s a little hard to jump too far on that point.”
Minneapolis-based Allina is one of the largest operators of hospitals and clinics in Minnesota, including Abbott Northwestern Hospital in Minneapolis and United Hospital in St. Paul. In 2015, Allina posted revenue of $3.9 billion.
Connecticut-based Aetna is one of the nation’s largest health insurers, with 2015 revenue of $57.5 billion.
On Wednesday, the two groups announced plans to create a new insurance company based in Minnesota that would start providing commercial coverage next year. Officials promised more details in the coming months and did not release financial terms.
In northern Virginia, Aetna launched a similar venture with a hospital system in 2013, and the new company has since competed aggressively to court business from employer groups, said Allan Baumgarten, an independent health care analyst in St. Louis Park.
Allina and Aetna officials said their new company might sell Medicare health plans as well.
The timing of the move would make sense, Baumgarten said. Next year, some of the established Medicare players in Minnesota are moving to new payment relationships with the federal government, he said, and that creates an opening for newcomers.
Minnesota’s market has long been dominated by nonprofits including Blue Cross and Blue Shield of Minnesota, HealthPartners and Medica.
The state’s laws governing health plans are unique in requiring HMOs to be nonprofits, Baumgarten said. For-profit carriers like Aetna have always been able to do business in the state, he said, but only if licensed as insurance companies.
“The introduction of new competitors, in general, I would say is a good thing,” Baumgarten said.
The new Allina Health and Aetna Insurance Co. would be a for-profit entity, officials said, and likely would have a small staff of perhaps six to 12 people. The insurer would draw on the resources, staffing and expertise of the parent organizations.
For several years now, contracts from insurance companies and government programs have pushed hospitals and doctors to take some financial risk for patient care costs, said the U’s Christianson. Some give providers a chance at receiving bonuses when care costs are well managed, while others cut payment rates when costs are surprisingly high.
The federal Affordable Care Act further promoted the trend through “accountable care organizations” in the Medicare program.
For large health systems like Allina, Christianson said, the question has been: When and how will they take bigger steps into the insurance world? Allina’s move provides an answer with what’s called a “payer-provider” partnership.
The arrangements aren’t without precedent.
For decades, Bloomington-based HealthPartners and its predecessor organizations have operated both a health insurance company and a network of clinics. For many years, Minneapolis-based Fairview Health Services has owned part of Golden Valley-based PreferredOne and took full ownership of the health plan in 2016.
Two decades ago, Allina owned the Medica health insurance company, but the nonprofits split in 2001 after then Attorney General Mike Hatch alleged mismanagement.
A concern at that time, Hatch said in an interview, was that patient care could suffer when insurers and health care providers are under one roof. The worry is that medical judgment might be wrongly influenced by the financial interests of the organization, Hatch said, with incentives to make sure doctors refer patients only to specialists within their system.
“Who you pick as an insurer is going to define who you get as a specialist,” Hatch said. “Fifteen years ago, it was much more controversial. … I don’t think the pendulum can swing back again because … the cost of health care is so prohibitive.”
In a statement, Allina officials said there are important differences between the relationships with Aetna today and Medica in the past.
“By keeping the current not-for-profit care system separate from the insurance plan, we believe we will be able to create the balance between the two that will benefit patients,” Allina said.
The Allina-Aetna insurance products likely will give patients access to a network of doctors and hospitals that’s concentrated on the Allina staff and facilities. These “narrow network” health plans have become commonplace in the state’s market where individuals buy health insurance on their own. Some consumers have bristled at the limitations.
“It is evident that payer-provider systems are the future,” said Bob Stein, president of the Minnesota Association of Health Underwriters, a trade group for insurance agents, via e-mail. “My concern is that all of these systems start to have closed networks, and the [health plan members] will have to use the network that is connected to the payer-provider exclusively.”
Health plans with narrow networks can be sold at a lower premium price since there’s a chance for doctors to save money by coordinating care, said Brigitte Nettesheim, the president of transformative markets at Aetna. The idea is that better coordination can deliver not just lower costs, but also better care, said Dr. Penny Wheeler, the Allina chief executive.
As an example, she pointed to Allina’s use of cancer care coordinators who counsel patients on how to best manage their conditions so they can avoid hospitalizations. In a study of the program for six months, the care coordinators prevented 95 admissions to hospitals, Wheeler said. Patients liked it and insurers save money, but what did it mean for Allina?
“We lost, as an organization, $600,000,” Wheeler said. “That’s wrong.”
The Aetna agreement has the potential to change things, she said, by freeing up money for services that don’t always get paid for with traditional “fee-for-service” contracts.
“We want to be able to do those things that really matter to people — and get market rewards for doing the right work,” Wheeler said, “rather than market rewards for when the community is ill or isn’t supported.”