Leader Q and A: NH has some new kids on the insurance block
But all of that is going to change this fall, when two other companies are expected to start offering plans on the exchange for coverage starting on Jan. 1, 2015.
Minuteman was first licensed in 2013 as a cooperative in Massachusetts, thanks to a provision in the Affordable Care Act that funds cooperative health insurance organizations with low-interest or no-interest loans. The company has been selling health insurance on the Bay State exchange, MAHealthConnector.org.
The business plan that the board developed and accepted had a fork in the road depending on the path toward financing. The intention of the organization was to establish a new insurance company one way or the other. We raised a million in private capital from hospitals and physician groups, and then hit the fork in the road, when we said, "OK, which way are we going to go for the rest of the financing?"
The capital is divided into two categories. For startup, the total was about $20 million and that is at zero percent for five years. You can't argue with that. The balance of the funds is a 15-year balloon arrangement, so it's all due at the end, at 0.34 percent.
How many co-ops have been funded through that loan program?
We are one of 23 nationwide. Funding for new co-ops was ended last December, when there were still well over 40 applications pending.
Why the expansion into New Hampshire after only a year in business?
First of all, we recognize that New Hampshire is a very different market than Massachusetts, and so the model we are planning on deploying in New Hampshire is very different.
In addition to those naturally attractive elements is the fact that there is currently only one player on the New Hampshire exchange. That made it even more attractive to us.
What are the differences in the two markets beyond size?
The Massachusetts market has, on the provider side, very well-documented and extreme pricing differentials. Some hospitals charge vastly more for the same services than another hospital across the street. The market need in Massachusetts was one of price, much more than access.
So are you promising to include every hospital in your network?
That's certainly not a promise. No company could ever do that. We would like to. We've started discussions with all the hospitals in New Hampshire and would like to have our network be as broad as possible. But we're running a business here. Any providers who can meet our price targets will be welcomed and will end up being in our network. If there's one hospital that demands outrageous pricing, then we would not be able to do that because it would harm the ability to serve the members.
What is the difference between a co-op and other insurance companies?
The real difference is in the way we are structured. We are member-governed, so the analogy is with a mutual life insurance company, although legally slightly different, but policyholders are the owners.
Anthem has claimed narrow networks are necessary to keep costs down. How can you create the broadest possible network and offer lower cost?
The first thing is to make sure that your unit cost, how much you pay doctors and hospitals, is competitive. Then, it's having very low cost of administration. We are in an old leather factory sitting on crummy used furniture. We are your classic startup; we are not a mahogany insurance company.
Our new ad campaign in Massachusetts says we can save consumers 25 to 40 percent versus Blue Cross of Massachusetts, Harvard Pilgrim or Tufts, and the reason we are able to make that claim is become the Connector has published the prices for all four of us, and that's what they show.
Will New Hampshire see the same price differentials?
I would anticipate that the differential would not be on the high end, because the hospital pricing doesn't vary as much. I would be conservative and say if we get hospital and physician arrangements on a par with Anthem's, we could be 10 percent or more cheaper than they are.
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