Children’s Hospital could offer private insurance plan

State agency reviewing request

Children's Hospital of Wisconsin

Children’s Hospital of Wisconsin is seeking state approval to sell insurance on public and private health care exchanges in 2017.

Children's Hospital

The Office of the Commissioner of Insurance is reviewing a request submitted by the hospital to offer its Children’s Community Health Plan on the Affordable Care Act exchange and in private insurance markets. A decision will be made this spring.

“Our hope and desire is that we’ll be able to file rates in May (and) move into the exchange in 2017,” said Bob Duncan, executive vice president of community services. “I’ll be excited if we have 1,000 or 2,000 new members in the first year.”

Children’s Community Health Plan is an HMO for patients who qualify for BadgerCare Plus, the state’s Medicaid program for low-income residents. Children’s insurance plan is the largest BadgerCare plan in the state and covers around 130,000 people in 13 counties.

It’s unusual for a children’s hospital to offer a private health insurance plan, but Duncan said the move would help families who are on the bubble for Medicaid coverage.

“We’d like to minimize the impact on some of these families, of them going back and forth between the (private) exchange and Medicaid,” Duncan said. “We just feel like if we have an exchange product, and they make that transition, they’ll stay with us. And if they lose that eligibility, then they can still stay with us and we can provide continuity of care and case management.”

Offering a private insurance plan would also give Children’s some flexibility if the state ever decides to privatize Medicaid. Duncan used Arkansas as an example. The state began using Medicaid funds to purchase certain private plans for qualifying residents in September 2013, rather than using that money to reimburse health care providers who provide medical services to poor communities.

“You had to be a commercial provider to provide Medicaid coverage in Arkansas,” Duncan said. “We thought this would be a decent way to protect ourselves if our state ever chose to go down that path.”

Wisconsin currently uses Medicaid funds to reimburse qualifying health care providers.

Insurance consultant Andy Serio said the move could protect Children’s operating margins with increased competition from Aurora Health Care and UW Health, which partnered to begin offering pediatric care in Green Bay and Oshkosh on Jan. 1.

“Children’s has always been the anchor of all the insurance companies and all the HMOs in Wisconsin since the 1973 HMO act was passed,” Serio said. “Now they have competition coming in and … Medicaid paying less on the dollar. This is a defensive move to keep their operating margins strong. Children’s needs commercial business to maintain favorable operating margins.”

Jim Mueller, CEO of Mueller QAAS, a health care consulting firm, said selling a private insurance plan could work well for Children’s in the short-term, but would ultimately put the hospital at a competitive disadvantage if insurance giants like Aetna, Humana or UnitedHealth push back against the increased competition by removing Children’s from their coverage networks.

“There could be consequences of taking some of their market share,” Mueller said. “I think it’s a very short-term decision, it’s uncommon and it’s the first time they’ve ever tried this strategy.”

Duncan thinks that scenario is unlikely, and sees Children’s Community Health Plan as a potential partner of large insurance companies.

“I don’t think we’ll ever be able to compete with the big boys in this market,” Duncan said. “We don’t see ourselves as real competition with those in the private market. We look at ourselves as more of a niche player. We could sub-contract to manage pediatric cases …whether it’s Humana, Aetna, United or Anthem, we can say to them: ‘We have this expertise, we have these skill sets, let us partner with you.'”

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Ben Stanley
Ben Stanley, former BizTimes Milwaukee reporter.