Groundbreaking Minnesota health insurance plan to expand

Twin City employers plan to expand a payment system that enhances doctors' authority and sell the product in other states.

By Leigh Page, amednews staff. Nov. 27, 2000.

Minneapolis-St. Paul employers plan to expand significantly a payment program that gives physicians more authority over medical decision-making and pricing.

Starting next year, the Buyers Health Care Action Group plans to convert its 3-year-old Choice Plus system from a self-contained system available only to about 50 large self-insured employers in the Twin Cities into an insurance product available to all employers in Minnesota and some other states.

The program is popular among many Minneapolis-St. Paul doctors because it gives them wide authority over utilization and pricing decisions. But because it is limited to self-insured companies, only about 5% of participating physicians' patient base is signed up with the program.

The insurance product is likely to interest smaller local employers who face double-digit premium increases. Choice Plus has kept yearly premium hikes lower than those of local health plans, according to data filed with the state.

Furthermore, business coalitions in Colorado, Iowa, Oregon and St. Louis are also interested in endorsing the new product and doctors there are reportedly excited about it.

Choice Plus is thought to be the largest system in the country under which doctors contract directly with employers rather than through an HMO or other insurer.

Although the new system, which was announced in October, will be an insurance product, it will function in basically the same way as before. Hundreds of Twin Cities physicians and hospitals are organized into 30 "care systems" that set their own budget, prices and utilization standards. More than 140,000 employees choose a system based on prices and patient satisfaction data.

BHCAG's contracted administrator, Patient Choice Healthcare, will share ownership of the new product with BHCAG. The new company is well on its way to raising millions of dollars of venture capital for reserves and startup costs that are needed to become a licensed insurer, buyers group officials said.

What's in it for doctors?

Bob Burmaster, MD, president of Fairview Physician Associates, one of the largest care systems in Choice Plus, with 850 physicians, welcomed the prospect of an upsurge in numbers of Choice Plus patients.

He said HMOs that dominate the area each have essentially the same network of doctors, dictate utilization review standards and set reimbursement rates at the same levels for all doctors, no matter how efficient they are.

But under Choice Plus, "you get to define who's on your team," Dr. Burmaster said. And because Fairview doctors create their own UR protocols, he said they are more likely to believe in those protocols.

Dr. Burmaster said Fairview has good satisfaction figures and thus can set its prices in the middle range.

Unlike HMOs, buyers group officials say Choice Plus "aligns incentives" for both doctors and employers. Physicians get more autonomy to set acceptable price controls, which appeal to employers at a time of double-digit premium hikes.

According to data from the state insurance commissioner, claims costs have risen 4% to 5% in the past four years, compared with 9% to 10% per year for local HMOs, and administrative costs average $12 per member per month versus $20 for local HMOs.

At the same time, local HMOs like Health Partners, which once administered Choice Plus for the buyers group, are also setting up new programs to give doctors more authority.

Soon doctors from other parts of the country may soon be able to join the Minneapolis-bred system. Last year, employer coalitions in other cities decided against starting up new systems like Choice Plus because of administrative burdens and its limited membership. But now groups like the Oregon Coalition of Health Care Purchasers and the Colorado Health Care Purchasing Alliance are expected to sign up.

D'Anne Turner Gilmore, executive director of the Oregon coalition, said doctors are excited about Choice Plus because it gives employers "a real chance to reward for performance."

Under HMOs, "the high performers are put together with the low performers and [that system] doesn't do them very much good," she said.