|No competition? Higher rates?|
Sweetheart deals? What's not to
love for an insurance monopoly
Aetna Medicaid President and CEO Pamela Sedmak said the company is “reluctantly” taking the action after several months of extended negotiations with the state failed to result in a rate agreement that would cover the costs of operating the plan.
“We regret having to make this very difficult decision,” said Sedmak. “Delaware Physicians Care is an integral part of the fabric of the community.… Unfortunately, recent changes to the Medicaid landscape in Delaware are requiring the plan to absorb significantly higher levels of costs. Without payment rates that support our ability to continue to provide high-quality service to members, we cannot keep this great health plan open.”This is a very interesting development in the State's health insurance and health care landscape for a variety of reasons.
First, there's the absence of coverage of this story (at least so far) in Delaware media. You have to ask yourself why Aetna choosing to shut down the largest (137,000 customers), most popular, and easily most effective Medicaid group plan in our State would not be news. But apparently it isn't. Maybe tomorrow somebody in the News Journal's "Newsroom of the Future" will read the Philadelphia Business Journal and discover what's happening in our own back yard.
Second, there's the fact that the reason cited for the closure--failure to achieve "a rate agreement that would cover the costs of operating the plan"--is really suspicious. Here you need to know that Delaware is one of only a handful of states wherein the physicians reimbursement rates are virtually the same for both Medicare and Medicaid--in 42 of 50 states Medicaid reimbursements have always been significantly lower than those of Medicaid. One of the reasons that most physicians in Delaware will accept Medicaid patients is that they don't get short-changed on the reimbursements. On the other hand, in a state that did not make adequate financial provisions for the recent Medicaid expansion (potentially 30,000 new patients), you can see how the government might be trying to reduce those costs.
Moreover, Aetna is NOT notorious (at least in Delaware) for gratuitously charging higher rates. Two months ago, when Highmark was proposing rate increases for some plans in the 5-15% range, Aetna was reducing rates on some plans and only filing for about a 2.5% increase on others:
Aetna ... filed requests for several plans, some of which would reduce rates by an average of 2.5 percent for those holding similar 2014 plans under its Coventry brand.
The cost of some small-group plans would rise by an average of 1.9 to 3.1 percent, Aetna's filing said. Aetna acquired Coventry last year, but will offer all 2015 plans under its own brand.So the idea that Aetna is somehow price-gouging and therefore could not come to an agreement with state negotiators does not initially pass the smell test.
Third, you have to consider the torturous (one might say, "fratricidal") relationship between Highmark and Aetna. In Delaware we like to ignore the fact that our state is too small to be the driver in major economic issues--we are more usually the piece of paper whirling around in the larger hurricane. In this case the larger hurricane is what's going on in Pennsylvania, which is home territory to Highmark of Delaware's parent company, and the Mecca to which Highmark Senior VP Paul Kaplan is often summoned to kneel for his marching orders.
Most of the coverage of what's happening in the Keystone State has centered on Highmark's well-publicized feud with the University of Pittsburgh Medical Centers, but there has been plenty of friction between Highmark and Aetna as well. Here's just one item to give you the flavor of it:
When Westinghouse Electric Co., the Cranberry-based nuclear engineering giant, announced this autumn that it was jilting Highmark Inc. and handing its health insurance business to Aetna in 2014, Highmark responded with radio and TV ads implying that Aetna is an out-of-state carpetbagger, stealing business and jobs from Pennsylvanians.Highmark attempted to appear philosophic about the whole affair:
"Westinghouse is considered a national account," Highmark spokesman Aaron Billger said. "The national account space is extremely competitive. We win some accounts and lose some accounts." Westinghouse is a "name-recognizable loss, but we have a tremendous book of business with national accounts."The reality is, however, that Highmark is facing a real challenge to its dominance in western PA, a challenge it cannot afford on its corporate doorstep:
Now the Pittsburgh health care landscape looks very different. "It went from one of the least competitive environments that you can imagine — a dominant insurer and a dominant health system joined at the hips with a long term contract," says Romoff, "To one without a long-term contract with, now, five choices."
In addition to the two new competitors, UPMC invited three large insurance companies into the Pittsburgh market: Cigna, Aetna and United Healthcare. "Competition is good," says Romoff, "It keeps us all on top of our game. It gives us incentive to not be fat and sloppy."Hopefully you caught that "competition is good" meme--don't believe it for a second, because monopolies are never interested in competition. They are interested in profits, and profits are generally higher when there is no competition to keep prices down.
So where is the connection to Delaware? Here I've only got patterns and logic so far, but as Sherlock Holmes famously suggested, it is important to note that the dog did not bark.
We know (patterns) that Highmark's feuds with other insurance companies and health providers has repeatedly spilled over Pennsylvania's borders--that's how we ended up abruptly having multiple MedExpress locations dropped in Delaware about two years ago. Highmark's preferred strategy is to move out of the purely insurance arena and into the provider area (hence the acquisition of hospitals in PA and the cobbling together of the nation's second-largest retail optometry chain).
We also know (or at least infer) that Aetna's footprint in Delaware is currently slender enough (and our market is small enough) that it wouldn't take much to cause that other insurance giant to pull out of the state completely. Aetna's Delaware Physicians' Care contract is a lot more significant than its small (well under 10%) share of the private insurance market. So is it merely an interesting coincidence (remember what Ian Fleming and James Bond said about "coincidence") that talks with State officials break down right after Aetna embarrasses Highmark with far lower rate increase requests?
Why (or how) would State officials be responsive to the Highmark-Aetna conflict of interest? First, you have to know that this Insurance Commissioner has been completely onboard with whatever Highmark wanted since she actively recruited the Pennsylvania insurance giant to buy out Delaware Blue Cross Blue Shield with a $175 million sweetener. Then you have to realize just how quickly and thoroughly Highmark has penetrated even physician circles in Delaware over the past two years, a tangled web involving the Medical Society of Delaware and its subsidiary Mednets and four Provider Organizations. That's a story that can only be pieced together from fragments, but as you get the puzzle pieces one at a time it amounts to the de facto elevation of Highmark from an insurance company to a provisional element of the State government.
Ask yourself, especially if you have taken the time to check the links I have provided, why you've heard no hint of any of this in the mainstream media? If you google for critical work on Highmark in Delaware, guess what? Almost all you will find is my own work.
I wish I could let you read my mail. Not a week goes by that a physician or medical service provider does not contact me to say (paraphrasing): "Why isn't anybody else covering this? Highmark is taking over everything. Here are the documents, but you can't print them because I'll lose everything if you do."
There is one other voice in our state discussing this issue, Delaware Business Daily:
Delaware has made the American Medical Association’s annual list of 10 states with the least competitive commercial health insurance markets.
The lack of competition means consumers and employers in Delaware have fewer choices among commercial health insurers than consumers and employers in almost all other states, the association stated.By the way, according to this survey we are the 4th least competitive insurance market in the USA.
In the end, one of the reasons I decided to run for 22nd State Rep is that SOMEBODY has to tell the story of what Highmark is doing to Delaware health insurance and health care. Maybe we're past the tipping point (and this Aetna story suggests that to me), but people have the RIGHT to know what's happening here, and apparently no platform short of the General Assembly will allow me to tell that story.