New Competition for HealthSource RI Emerges

New Competition for HealthSource RI Emerges

UnitedHealthcare – an Obamacare opponent that once eschewed private exchanges – recently shocked a crowd of business owners with plans to open a private exchange for businesses and their employees in Rhode Island. This met immediate criticism from Christine Ferguson, executive director of HealthSource RI, who said UnitedHealthcare’s exchange would limit options.

“There is an exchange that deals with individuals; those individuals get tax credits because they do not have access to affordable, employer-based coverage. The other is a small business exchange. You can choose Blue Cross, Neighborhood and United – and next year, Tufts,” she said.

“With United, the only option given to employer [and employees] is within United. So, any ability that we now have to use competition by allowing consumers to choose goes out the window.”

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UnitedHealthcare of New England President and CEO Stephen Farrell dropped the news at the Health Insurance Small Employer Taskforce meeting on Jan. 28. The meeting included a panel discussion with Farrell, Mike Hudson, chief operating officer at Blue Cross & Blue Shield of Rhode Island, Brenda Whittle, vice president of Neighborhood Health Plan of Rhode Island, and Thomas Croswell, president and COO of Tufts Health Plan – executives from the health insurers that offer commercial health plans in Rhode Island.

New contract for state employees

The Chafee administration recently signed a new contract for current and retired state employees with UnitedHealthcare. The contract runs from Jan. 1, 2014, through Dec. 31, 2016. The state can renew it for up to two more years. The cost of the new contract is unknown because the state is self-insured. The contract only covers medical treatment. A separate agreement for prescriptions is being negotiated CVS Caremark.

Richard Asinof broke the exchange story on his online weekly newsletter, ConvergenceRI. Asinof, who was at the meeting, is a journalist who most recently was the health care and life sciences contributing writer for Providence Business News.

“UnitedHealthcare’s decision to open its own private exchange is in direct competition to Rhode Island’s exchange. As Christine Ferguson, HealthSourceRI’s executive director, said, it is all about the for-profit health insurer’s efforts to increase market share,” Asinof said.

“At issue is not the state of Rhode Island’s recent contract with state employees and retirees. What is at issue is how the state – and the R.I. General Assembly – will choose to provide future financial support for HealthSourceRI.”

Asinof believes UnitedHealthcare’s decision to open its own private exchange provides the illusion of consumer choice – employers and employees can choose between different UnitedHealthcare products, but not from other insurance plans in the marketplace.

“UnitedHealthcare is the biggest health insurer and has made a business decision not to go into the exchanges because they see more profits in skimming off the best risks,” said Robert McGarrah, AFL-CIO Office of Investment Counsel and healthcare benefit expert in Washington, DC.

“They, together with their for-profit competitors, were the biggest opponents of Obamacare, secretly sending over $100 million to the US Chamber of Commerce and Tea Party opponents. Why? Because they didn't like the ‘public option’ that was soon eliminated in a deal with Obama.”

Surprising announcement

In that regard, Farrell’s announcement was a big surprise. Just before the consumer marketplace for insurance went live last year, the Wall Street Journal (WSJ) wrote that big insurers such as UnitedHealthcare would avoid exchanges.

“The insurance companies that are likely to draw attention on the exchanges— which are expected to enroll an estimated 7 million Americans in the first year—are lesser- known, and in many cases will be offering comparatively lower rates. The biggest health insurers are eschewing many of the exchanges out of concern that many of the individuals who will purchase coverage need it because they have chronic illnesses or other medical conditions that are expensive to treat,” write the WSJ.

Under the Affordable Care Act – often referred to as “Obamacare” – companies with 50 or more workers are required to offer affordable health coverage or pay a penalty. Some companies are choosing to offer their employees health benefits via private exchanges — online insurance marketplaces that are separate from the federal system.

“We have always maintained that this one-size-fits-all approach – a heavily-mandated approach – cannot possibly deliver the diversity and range of products that individuals and businesses are looking for,” said Mike Stenhouse, CEO of the Rhode Island Center for Freedom.

“You have to allow open competition. You have to allow businesses to determine which product best meets their needs.”

Asinof said the competition in the Rhode Island health insurance market is for small business customers.

“HealthSourceRI has launched ‘full employee choice,’ targeted at small businesses, as a way to introduce competition and consumer choice in the market to lower costs,” Asinof said.

Still, Stenhouse was perplexed by complaints from Ferguson and the push back from the business community.

“I don’t think they’re seeing the big picture. Business owners have been drinking the Kool Aid to think that only government knows how to put together low cost products.

Let’s have the competition. Let’s see what happens.”

Messages to UnitedHealthcare seeking comment were not immediately returned.