Employers are just entering the renewal process and deciding benefit levels for 2003. Larger firms have likely made decisions on their Blues plans for next year and will have to scramble to re-work their plans if the Blues and Spectrum don’t resolve the dispute, benefit consultants say.
Benefit managers and consultants working with worried clients are generally telling them to “hope for the best, but plan for the worst.”
“If this is not settled and a resolution is not in hand, it will have significant impact for January renewals,” said James Kenyon, a principal at Pinnacle Insurance Partners, a Grand Rapids firm that represents a variety of health plans to employers. “It’s surprising to me the hospitals are putting their stakeholders in that situation.”
“They owe service to the community. For them to disrupt that is shirking their responsibility,” he said.
Kenyon’s advice to employers caught in the middle of the dispute: “Be patient.”
“I trust it will be resolved eventually,” he said.
Spectrum Health wants the Blues to pay higher reimbursements to help offset the $30 million the health system claims it loses each year to care for Medicaid recipients and uncompensated care for uninsured persons.
No matter how it ends, the dispute may very well result in further economic pain for employers and employees already trying to cope with massive premium increases.
BCBSM has more than 300,000 subscribers in the Kent-Ottawa-Muskegon county area who — if the health system drops participation in the Blues health plans — face paying significant out-of-pocket costs if they go to a Spectrum facility for care.
If Spectrum secures higher payments from the Blues, policyholders will end up footing the bill through higher insurance premiums. The Blues contends Spectrum’s request for a 15 percent reimbursement increase for its Grand Rapids hospitals and 30 percent increase for Hackley Hospital in Muskegon would add three percentage points to already large annual premium increases.
With Spectrum the dominant health care provider in the market, many employers who hold Blue Cross policies for their employees may opt to look for another health plan. In many cases, switching to an alternative health plan that Spectrum accepts may result in higher premiums because of the reimbursement rates it pays to the health insurer, said Ed Murphy, a principal in the health care unit at the Detroit office of Mercer Human Resource Consulting.
“It’s not going to cost you any less. Ultimately, it’s the magnitude of how much more,” Murphy said. “Either way, there’s a higher cost to the employer and the employee.”
Murphy said the dispute is “absolutely a huge battle” with far-reaching implications in the Grand Rapids market. For employers who’ve already made renewal decisions for 2003, they face a significant inconvenience and internal cost if they choose to go back and find alternative health coverage.
“Depending on the outcome here, they may be doing the backstroke in terms of who they’re dealing with, what they’re dealing with and what they’re communicating to the employees for a Jan. 1 effective date,” Murphy said.
The potential for higher costs to employers has one statewide group representing small businesses urging Spectrum to look elsewhere for help in erasing its loss to provide indigent care. Asking the Blues to make up the loss isn’t right, said Barry Cargill, vice president for government relations at the Small Business Association of Michigan, which markets Blues policies to its members.
“Spectrum Health should find other ways to deal with their indigent care problem and not put the costs on the backs of their paying customers,” Cargill said.
But the situation is not that easy, Spectrum Chief Financial Officer Mike Freed said.
The simple reality of today is that neither the federal nor state government are open to raising Medicaid reimbursements, Freed said. Cost-shifting the problem of paying for indigent care to business has occurred for years, he said.
About 18 percent of Spectrum’s patient volume is from Medicaid recipients that account for about 30 percent of the $30 million indigent care loss.
“It always has been the case,” Freed said. “Government should pay appropriately for the care for those we serve. We don’t feel business should cover that, but it has not historically been covered and there has been a shift to business.”
Spectrum, with rates capped for another two years under a 1997 federal consent decree that allowed the hospital merger that created the health system, and with state and federal budgets squeezed, has no other choice but to seek higher payments from private insurers to cover the cost of indigent care, Freed said.
“It’s a reality,” he said. “We can try to get the money from the government but if we can’t, what are we going to do to keep our doors open? We have to rely on the business community.”
Spectrum asserts that Blue Cross Blue Shield essentially does not pay its fair share of covering the cost of indigent care — a claim the insurer rejects, saying it’s inappropriate for subscribers to be taxed for Medicaid through taxes and health premiums.
The Blues claims it does pay its fair share of the indigent care burden and a reasonable rate to Spectrum to earn a fair margin for its subscribers.
“We recognize the right of an institution to make a return on investment, but there is an imperative that it has to be backed against — which is the affordability of premiums,” said Dale Robertson, Blue Cross Blue Shield’s vice president in West Michigan
The Alliance for Health, a regional health care planning agency, last week offered to serve as a mediator in the dispute, perhaps by conducting an independent review of the financial claims that are at issue.
BCBSM, which has already called for a third-party review of Spectrum’s books to determine its financial outcomes on Blues business, welcomes the gesture.
But Freed sees it as unnecessary, saying he believes the matter is best resolved in direct negotiations between the two.
“We don’t think we’re so far apart that we can’t resolve this by Sept. 1,” he said. “We really feel this is a resolvable problem.”
BCBSM, meanwhile, is working to prepare subscribers for when Spectrum goes out-of-network and plans to actively steer people to other hospitals and care providers in the market. The insurer is working with other hospitals to expedite their credentialing process for physicians who practice at Spectrum and now may want privileges elsewhere so they have a option for their patients.
“We certainly have our work cut out for us,” Robertson said. “The idea to make that transition as seamless and as easy as we can.”
The insurer also is willing to pay transportation and lodging costs for patients that opt to go out of town for a major procedure that Spectrum holds a monopoly over in the Grand Rapids market.
But that offer doesn’t do much good in one area of tertiary care in which Spectrum specializes: pediatrics and neo-natal.
The nearest alternative to Spectrum’s DeVos Children’s Hospital is in Ann Arbor.
Ray Brieding, administrator for the Horizon Medical PLC physician group in Grand Haven, says that’s simply too far to expect parents who hold a Blues policy to send a child that requires hospitalization.
“You just don’t go shipping kids off that far when they’re sick,” Brieding said.