If past is prologue, HMOs will make a comeback in Indiana

WellPoint Inc. struck a big deal this month to form an HMO with Los Angeles’ biggest hospitals that could shake up the kind of health benefits employers offer their workers.

The joint venture, called Vivity, will offer a health plan to employers that is 10-percent cheaper than competitors’ plans, will limit patients to a narrow network of providers but will also free them of all deductibles and coinsurance, and will share all profits and losses equally among Anthem and the participating hospitals.

That’s a huge deal because it means the hospitals are, upfront, promising to take less in reimbursement while hinging their financial fortunes to the success of—gasp!—a once-hated health insurer.

It’s also a big deal for WellPoint, because it’s happening in California, which generates the biggest chunk of the company’s revenue.

But my question, after reading the details of the deal, was this: Could something similar happen here?

The short answer is yes, but with changes for local conditions, said WellPoint CEO Joe Swedish in an interview with Modern Healthcare magazine.

“This might be replicatable in other markets," Swedish said, although he added that what WellPoint tries outside of Los Angeles will likely not look exactly like Vivity. "Would some variation on the theme work elsewhere? Probably."

Merrill Goozner, a longtime health care journalist who is now editor of Modern Healthcare, wrote a lengthy column about WellPoint’s Vivity HMO headlined “Back to the future in La La Land," which noted how WellPoint's latest move is essentially an HMO from the 1990s that faces an uphill climb as a nationwide model.

A message for a spokesman at Anthem Blue Cross and Blue Shield, WellPoint’s Indiana subsidiary, went unreturned. But some local health observers think WellPoint will certainly give it a try here.

“Why not?” Deloitte hospital consultant Elizabeth Walker told me last week. She sees the potential for lots more consolidation among health systems, although she sees it happening more in a partnership way—as WellPoint has done in Los Angeles—rather than through outright mergers and acquisitions.

One big reason for WellPoint not to try pushing HMOs in Indiana is that Hoosier employers and their workers have so roundly rejected the restriction of provider choices they entail. HMOs have never been as popular here as in California, where WellPoint is competing against the Kaiser Permanente plan that includes hospitals, doctors and insurance all under one roof.

Advantage Health Solutions Inc. is a well-run HMO based in Indianapolis and backed by the St. Vincent and Franciscan hospital systems, but its market penetration always has been modest around the state.

When the former M-Plan started in the late 1980s, it had to broaden its selection of providers almost immediately—after a chorus of feedback from employers. And now IU Health Plans, which is a sort of successor to M-Plan, has struggled in recent years to sign up employers beyond its own backers, Indiana University and the IU Health hospital system. IU Health plans to re-launch its insurance products for employers later this year.

But benefits brokers tell me their employer clients are more willing than ever to restrict their employees’ choice of health care providers—if it brings them relief on the cost of health benefits. If Anthem offered an HMO like Vivity here—with no deductibles or coinsurance and cheaper premiums—perhaps employees would take that in exchange for the rising prevalence of high-deductible plans that leave them on the hook for huge bills.

Anthem officials seem to have noticed this shift in sentiment because, as early as two years ago, they had done research on narrow-network plans for employers. Their analysis found employers need about a 10-percent price reduction to get sufficient interest.

That led Anthem to create a narrow network for its Obamacare exchange plans. In Indianapolis, that network includes Community Health Network and the central Indiana county-owned hospitals, but not the state’s largest systems—IU Health, St. Vincent and Franciscan. Even so, Anthem claimed the lion’s share of the Obamacare exchange market this year, even though it offered a fairly limited network of providers.

In Los Angeles, the Vivity HMO will include the most prominent—and typically the most expensive—hospitals, such as the Cedars-Sinai Health System and UCLA Health.

An HMO like Vivity might also help Anthem cut off the rising number of provider-run health plans against which it must compete.

So who knows? Perhaps we’ll go back to the future, put on the '80s music and party like its 1989.