Western Health Advantage decided to enter California's individual insurance exchange last year even though it previously had offered health plans almost exclusively in the small- and large-group markets.
For 2014, the Sacramento-based not-for-profit, started nearly 20 years ago by three health systems, offered plans in two of the state's 19 regions through the Covered California exchange. In the North Bay area, which includes four counties, the provider-sponsored insurer captured 4.9% of the exchange's individual market for 2014, while in the Sacramento region it got 2.1% of the market.
Meanwhile, the three giant legacy insurers—Anthem Blue Cross of California, Blue Shield of California and Kaiser Permanente—captured a combined total of more than 90% of the market in both regions. But Garry Maisel, Western Health Advantage's CEO, said his company was satisfied with its initial exchange foray considering that it generally priced its plans higher than the large insurers did.
“We were very cautious” in pricing, Maisel said. “No actuary was clear on what the health status of the incoming population on exchanges was going to be.”
Western's experience on the new exchange market established by the Patient Protection and Affordable Care Act is representative of many provider-sponsored plans across the country. Such plans typically garnered small shares of the exchange market, especially compared with Blue Cross and Blue Shield plans. There were notable exceptions. PreferredOne—owned by Minneapolis-based Fairview Health Services; North Memorial Health Care, Robbinsdale, Minn.; and a physician group—captured roughly 60% of the exchange market in Minnesota.
The launch of the Obamacare exchanges has offered an opportunity for provider-sponsored plans to compete on a level playing field with the traditional insurers that long have dominated the individual and small-group markets. Many hospitals and health systems are launching their own plans as a way to capture the entire premium dollar and hone skills in better coordinating care and controlling costs. But during the first year, they found that the marketing power and economies of scale of experienced insurers proved difficult to beat.