WellStar Health System and Piedmont Healthcare are dropping key parts of their joint health insurance plan after just two years of operation.
Citing costs, the two metro Atlanta systems have told medical providers that they’re discontinuing their Medicare Advantage plan for next year. The current 12,000 Medicare beneficiaries will have options to switch to another Advantage plan or to receive care in the traditional program.
The health plan will also end its offering for employees of Piedmont and WellStar at the end of the year. About 35,000 employees and dependents were estimated to be eligible for coverage from the Piedmont WellStar HealthPlans at the launch of the program. They will be served by other health insurers in 2016.
The moves drastically reduce what was seen as a bold, high-visibility venture by the two nonprofit hospital systems to get into the health insurance business. WellStar and Piedmont leaders, at its outset, said the health plan was a new avenue to improve the quality of medical care and lower costs.
The health plan told providers that the Medicare offering is ending “largely because of an inability to generate a large enough membership and the required premium revenue needed for long-term operations and sustainability. Further, the regulations around [Medicare Advantage] are complex and much more costly to comply with as a small scale health plan than . . . anticipated.”
In a joint statement to Georgia Health News, WellStar and Piedmont said the health plan was successful in “improving the patient experience and quality of care.” The organizations added that the insurance plan kept health care cost trends per member flat for the past 18 months.
“Both Piedmont and WellStar remain committed to the idea that we can achieve better health for the communities we serve,’’ the statement continued, adding that the plan would help Medicare members find a replacement when Medicare open enrollment begins next month.
Health plan members are being notified of the changes.
Though the WellStar/Piedmont venture has fizzled, more hospital systems nationally have looked to offer insurance products, with several doing it through acquisition. Provider-owned plans cover less than 10 percent of the entire privately insured market, but their membership is growing, Modern Healthcare reported earlier this year.
But many health systems are taking a cautious approach to entering the insurance business, at least partly because they don’t want to repeat hospitals’ financial losses in the 1990s, when many jumped into the risk business, Modern Healthcare reported.
Another metro Atlanta health plan, one run by Promina, also failed in the 1990s, losing millions of dollars before closing.
The insurance business “is a tough business in all facets,’’ said Graham Thompson of the Georgia Association of Health Plans, an industry trade group. “It’s complicated.”
Piedmont and WellStar “were certainly invested and there was a lot of energy around” the health plan, he said.
Thompson said he expected similar ventures from hospitals in the future.
The only part of the Piedmont/WellStar health plan that will still function will be the segment that offers coverage to employers.
Both Piedmont and WellStar remain strong financially, the systems told medical providers.
Dave Smith, a consultant with Kearny Street Consulting, said he wasn’t surprised by the health plan move. “In that business, you either have to go big or go home,’’ Smith said. “They had issues over who was managing the company.”
The Piedmont/WellStar move doesn’t mean the end of such provider-owned health plans in metro Atlanta, Smith added. “All around the country, [insurers] are flexing their muscles,’’ and are consolidating into a few large players.
“Hospitals want to control the dollars,’’ he said.