New private Medicare option is spreading

Sterling Option 1, the nation's first private fee-for-service Medicare plan, has been available in 17 states since July, and was scheduled to expand to eight more on Sept. 1.

By Susan J. Landers, amednews staff. Sept. 4, 2000.

Washington -- The nation's first private fee-for-service Medicare plan has gained the Health Care Financing Administration's approval to expand to eight additional states.

As a result, more physicians may need to familiarize themselves with the new Medicare plan option, currently offered only by Sterling Life Insurance Co.

Sterling began to enroll members from 17 states July 1 and currently has about 100 members, said Debbie Ahl, chief operating officer with Olympic Health Management Co., a sister company to Sterling that is providing administrative services. Under the expansion, Sterling Option 1, as the plan is known, became available in Arizona, Delaware, Illinois, Iowa, Oklahoma, Pennsylvania, South Carolina and Washington state Sept. 1.

The plan allows beneficiaries to choose their own physicians, and it lacks gatekeepers and prescribed networks, the hallmarks of managed care plans. Enrollees pay a $55-per-month premium plus certain co-payments, including a $10 physician co-pay.

The plan reimburses physicians at rates set by Medicare's physician fee schedule and does not permit balance billing if a physician knowingly accepts a patient enrolled in Sterling Option 1.

The company anticipates that at least some of the nearly 1 million beneficiaries whose Medicare managed care plans are leaving the market will be interested in enrolling in the new private fee-for-service plan.

"We are certainly watching our capacity to take on those individuals," Ahl said.

About 150,000 of the beneficiaries affected by HMOs' pullouts are in areas covered by the new Sterling plan and have no other choice beyond traditional Medicare fee-for-service.

Congress authorized the development of private fee-for-service plans three years ago as part of the law creating the Medicare+Choice program. Other options include Medicare HMOs and medical savings accounts. As yet, no insurance company has developed a Medicare MSA.

The traditional Medicare fee-for-service plan still covers about 85% of the 40 million beneficiaries. Medicare managed care plans cover about 6 million beneficiaries.

Medicare beneficiaries are expressing increased interest in the Sterling plan, Ahl said.

"In the last two or three weeks, we've sent out about 2,500 packets of information in response to phone calls," she said. The program has yet to be released to field agents for marketing, so the phone calls were generated primarily by HCFA news releases, Ahl added.