Allina Health System and insurance giant Aetna plan to boost competition in the local health insurance market via a joint venture that would start providing commercial coverage in the Twin Cities next year.

Called Allina Health and Aetna Insurance Company, the jointly owned health plan will link one of the state's largest hospital and clinic systems with a national insurer that hasn't had a big presence in the state.

Previously, Allina owned the Medica health plan, but they split in 2001 under questions from ex-Minnesota Attorney General Mike Hatch about alleged mismanagement.

Dr. Penny Wheeler, the Allina chief executive, said she wonders if her health system might operate better today had the Medica relationship been preserved.

That's because so-called "payer-provider" partnerships can more easily develop innovations, Wheeler said, since they have incentives to coordinate care and promote preventive services like flu shots.

"It makes me crazy ... when we benefit [financially] because the community is sick with flu," she said. "Right now, we don't necessarily have the incentives well-aligned for the outcomes we want for our patients and communities."

Across the country, there's a growing trend toward partnerships between insurers and health care providers, under the theory that they can jointly work to provide care that lowers cost without sacrificing quality. The federal Affordable Care Act has supported the trend by calling for "accountable care organizations" in the federal Medicare program.

In a report last year, analysts with Moody's Investors Service predicted that a growing number of health care systems would enter the commercial health insurance business in order to "improve care management and gain market share."

"Health insurance provides health care systems a way to control costs, diversify revenues and efficiently track and measure patient outcomes, known as population health management," the report states.

The emergence of Aetna in the Twin Cities insurance market might surprise some, since nonprofits have had such a large share of the business. But for-profit carriers, including Aetna, have been around for years, said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers.

"This is another effort in our state that moves us away from old fee-for-service systems," Schowalter said in a statement. "Working together, doctors and insurers can deliver better personal care and hold down medical expenses."

The new Allina-Aetna insurer will incorporate as a for-profit company. There are no plans, Wheeler said, for the company to enter the state's HMO market, where state law allows only nonprofits.

Republicans in the state Legislature want to open up the HMO market to for-profit carriers, but Wheeler said that proposal played no part in Allina's decision. Allina issued a request for information from potential insurance company partners back in 2015, she said.

It's not yet clear, Wheeler said, whether the new company will sell policies in the state's individual market, where regulators and state lawmakers have been worried about a lack of competition due to financial losses.

The Aetna partnership will help Allina become more like the Bloomington-based HealthPartners system, which includes one of the state's largest health insurers, and Fairview Health Services in Minneapolis, which owns PreferredOne, an insurance company based in Golden Valley.

"Provider-payer relationships already exist in the market," Wheeler said. "We thought this is a way to make our care better."

Aetna and PreferredOne announced a deal in February 2016 where the insurers would partner to better compete for business from large employers that provide insurance benefits to works. That relationship is ongoing, and won't be impacted by the Allina announcement, according to a PreferredOne spokesman.

Allina, meanwhile, works with Eagan-based Blue Cross and Blue Shield of Minnesota on a health insurance product available to individuals in the Twin Cities. Wheeler said the Blue Cross relationship will continue, as well.

Allina and Aetna did not disclose financial terms. The new company will offer fully insured and self-insured commercial products by early 2018, followed by products in other markets such as Medicare. More details are expected in the coming months.

Wheeler said the deal represents a partnership, and not a merger. The new company will have its own leadership team, she said.

Allina Health System is one of Minnesota's largest operators of hospitals and clinics, including Abbott Northwestern Hospital in Minneapolis and United Hospital in St. Paul. In 2015, the health system posted revenue of $3.9 billion.

Connecticut-based Aetna is one of the nation's largest health insurers, with revenue of $15.8 billion during the third quarter of 2016. The Allina joint venture is the fourth such arrangement in local markets, following similar deals in northern Virginia, Texas and Arizona.

"We are excited to bring a larger Aetna presence into this marketplace alongside our partner in this joint venture, Allina," said Brigitte Nettesheim, the company's president of transformative markets. Allina helps Aetna introduce itself to the Twin Cities market because the health system has "an extremely strong brand in the marketplace," Nettesheim said.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck