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Leader Q and A: NH has some new kids on the insurance block

New Hampshire Union Leader

March 28. 2014 11:52PM

New Hampshire has had a tough first year under Obamacare, with only one insurer, Anthem, offering plans with a narrow provider network on healthcare.gov.

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 Health, a nonprofit, customer-owned cooperative, and Harvard Pilgrim, a not-for-profit health plan, are both expected to begin competing with the for-profit Anthem.

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.

CEO Tom Policelli is a lifelong insurance and health care executive who has worked at CIGNA, Deloitte Consulting and United Health Group. In an interview with the New Hampshire Union Leader, he predicted that Minuteman would be a disruptive force in the New Hampshire insurance market, to the benefit of consumers.

Did you and other Minuteman founders set out to create a cooperative?

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?"

We identified two paths to finance the business - one was using private capital and one was using the provision in the ACA for the federal loan dollars. The feds came through with extremely low-cost capital, and as any business does, you take advantage of low-cost capital when it's available.

How low?

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.

For New Hampshire, we got an additional $67 million. The total to date has been about $156 million. The motivation was largely to inject new competition into the market. They (federal officials) felt the market had gotten static and controlled by a few dominant players. They wanted competition."

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.

But it's also a very adjacent market, and there are a whole lot of trans-border companies, people traveling across the border for care, so it's a natural enough market for us to want to explore.

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.

So we started talking to the hospitals, physicians, chambers of commerce to see if there is room in the market for a new entrant that believes it can hit the market with a broad product and an attractive price point, and they told us, "Yes, there is a need for that."

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.

There's certainly pricing variation in New Hampshire, but its not as extreme as what we see in Massachusetts. In New Hampshire, what we're finding is that access is the big problem right now in a lot of the state. As long as we can keep the price in the right range for New Hampshire, we believe we can offer much broader access.

In New Hampshire, there are areas where there's one provider. So if you're serving that population, you have to deal with that provider. In Massachusetts, we have more hospitals than you can shake a stick at.

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.

We recently attended a kick-off event held at the New Hampshire Hospital Association, and cosponsored by the New Hampshire Medical Society. We've been very welcomed by the provider community.

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.

They get to vote on the board members and direction of the company. If Minuteman were to make any profit, it would be sent to membership as dividend or however they vote to use it.

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.

Those two things added together give you a very competitive premium.

How competitive?

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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