For the first time in decades, Western New Yorkers can choose from more than Blue, Red or Green – the not-for-profit health insurers BlueCross BlueShield of Western New York, Independent Health and Univera Healthcare that dominate the local market.
Out-of-town health plans, including the country’s largest for-profit insurers, have failed to gain a foothold in this region.
But that is changing now, with the opening of the insurance exchanges created as part of the Obama administration’s health care reforms.
Seven insurers are selling individual coverage through New York’s exchange here, and some of the plans offer rates well below those of the Big Three.
This provides greater choice to area consumers and has the potential to upend the status quo on the regional market.
Three main insurers have at least 80 percent of the commercial insurance business here. They have spent years building strong ties to area doctors and hospitals, while spending millions of dollars marketing themselves to companies, employees and the public.
Now, four other health plans with limited or no experience in the Buffalo Niagara market are competing for customers on the state exchange, where individuals can shop for insurance.
Officials with the three dominant plans say they are confident their products – even at higher rates – remain appealing to exchange shoppers.
The state has not released exchange enrollment data broken down by insurer, and many of the new players in this marketplace aren’t sharing their figures. So nothing is certain about the new system, and some insurers take the long view.
“This exchange market is not a sprint, it’s a marathon,” said Michael Conroy, vice president for commercial accounts in the region for HealthNow New York, the Blues’ parent here.
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Depending on whose numbers you use, and which accounts are included in the measurement, BlueCross BlueShield has 40 to 45 percent of the market, Independent Health has 25 to 32 percent and Univera has between 10 and 18 percent, according to the various insurers.
Out-of-town insurers have between 8 and 18 percent of the market, depending on whether you count people who work in the Buffalo area for a company headquartered elsewhere.
“There are three very strong players that are locally based, that have historically provided a good product,” said Dr. Irene Snow, medical director of Buffalo Medical Group, the physicians’ practice.
High barrier to entry
Other companies have tried to enter the local insurance marketplace, but with limited – or niche – success.
For example, Fidelis Care, the New York State Catholic health plan, has 85,546 members in this region in Medicaid, Child Health Plus and its other government-sponsored plans, but doesn’t sell group coverage.
Fidelis entered the market in 1997 and now employs 678 people in its Getzville office. “I think we’re very entrenched in Western New York in the government programs,” said David Thomas, executive vice president and chief operating officer.
The out-of-town plans have for the most part failed to gain traction here because there’s a high barrier to entry and no one – not the physicians, the hospitals or the brokers – feels a burning need for them in the marketplace, local insurance officials contend.
“We’ve been able to create community value with these providers that the nationals haven’t been able to duplicate,” said David W. Anderson, HealthNow’s president and CEO, who previously worked for UnitedHealthcare in California.
Providers do have some tough negotiations over reimbursement rates and other contractual issues with the health plans, Snow said. “Some payers are, I would say, more physician-friendly than others,” she said, without naming names.
The Kaleida Health hospital system has contractual relationships with all three of the main local insurers.
“Competition is certainly important, but the Western New York market is a bit unique for it, whether it’s insurance or hospitals. There is an affinity to local brands. The national insurers have come in and out of the market with mixed results,” Michael Hughes, a Kaleida Health spokesman, said in a statement.
Vying for business
The insurers say the fact that they spend more of their premium dollars on medical care than required by state and federal guidelines – a formula known as medical-loss ratio – is a sign the region is well-served by its dominant health plans.
The insurers say there is real competition in the area.
“We go toe-to-toe with BlueCross BlueShield on just about every account. Same thing with Univera,” said John R. Rodgers, Independent Health’s chief operating officer. “This is not a monopoly, or oligopoly, market.”
Industry consolidation has limited competition in other markets. An American Medical Association study released last fall found that one provider had 50 percent or more of the HMO market share in two-thirds of 385 metro areas.
Federal and state officials sought to spur greater competition among health plans, with the expectation this would lower premiums for people who buy health insurance on their own.
Sixteen health plans are approved to sell insurance through New York’s exchange, which opened Oct. 1, and shoppers buying one of the new plans could pay less than half what anyone directly buying individual coverage now pays.
A new name
The seven companies approved to sell individual or small-group coverage on the exchange – and two others approved to sell coverage off the exchange – include insurers looking to expand their offerings here and health plans that are new to the area.
“It gives us the ability to serve an uninsured, or underinsured, population that we haven’t had access to up to this point,” Fidelis’ Thomas said.
The national, for-profit players – such as Aetna and UnitedHealthcare – are not selling on the local exchange, and Art Wingerter, president of Univera, believes they will let the market “shake out” and enter later if they choose.
The most notable new insurer selling on the local exchange is Health Republic Insurance, a separate nonprofit cooperative headquartered in Manhattan and run by the Freelancers Union, which previously sold insurance only to the 200,000 independent workers in the union.
The Freelancers cooperative is offering the lowest rates, by far, in this region for individual coverage on the New York exchange, leaving people familiar with the local insurance market wondering how the co-op set its premium prices and what providers it has lined up.
“We don’t know who they are. I’ve never heard of them. We don’t know what network they’re using,” said Howard Silverstein, president of Choice Employee Benefits Group, an insurance agency.
Debra Friedman, Health Republic’s president and CEO, said the co-op can offer lower rates because of a “superior business model” and because it doesn’t have to answer to shareholders, instead returning profits to members in the former of better care and lower premiums.
“We have members’ interests solely at heart. We believe we’re an innovative solution to the tremendous challenges individuals and businesses have had in finding affordable and accessible health care in the state,” Friedman said in an interview.
Health Republic has a physician network of nearly 3,950 providers in Erie County alone.
The Freelancers Co-Op, Fidelis and MVP Health Care are selling plans on the exchange in this area that are, on average, lower-priced than the plans offered by the Big Three insurers.
“All of the insurers are very nervous about their initial pricing, because they don’t know for sure who is going to show up. And if they mess up now, they’re going to have to live with it, potentially, for years to come,” said Alwyn Cassil, spokeswoman for the Center for Studying Health System Change. “They have to develop products and set pricing that are attractive enough that people will want to buy them, while still maintaining financial viability.”
Low exchange prices
The main local insurers say their rates are based on their lengthy experience in the market, combined with their best estimates of future medical spending as the uninsured buy coverage on the exchange.
There’s a range of premiums – on the silver tier for individual coverage, the Health Republic plan is $190 less per month than the price of Independent Health’s or Univera’s plans. “I would expect more plans to come to the middle over time,” HealthNow’s Anderson said.
The state Health Department, which operates the NY State of Health exchange, said 50,119 New Yorkers had signed up with a health plan for coverage on the exchange as of last week, though it could not break out this enrollment by insurer.
Independent Health said its individual exchange enrollment is more than 1,000, while HealthNow New York, the parent company of the local Blues, said a similar number had signed up for coverage through the exchange in Western New York and in the Capital district.
Univera, Fidelis and Health Republic all declined to report enrollment data, though Friedman professed to be pleased with Health Republic’s results.
Are BlueCross BlueShield, Independent Health and Univera worried about the fierce competition that the state is encouraging on the exchange? Experts say young, healthy people – the most coveted customers – who haven’t bought insurance for themselves may be drawn to the lowest-price options, without a care for the carrier’s provider network or brand.
“Some people are much more price-sensitive,” said Leslie Moran, senior vice president with the New York Health Plan Association, which represents managed care plans.
Insurance officials said consumers need to look at factors beyond price, including quality of customer service, the size of doctor and hospital networks, and the complaint record of insurers over prompt payment and denials of medical claims.
Some of the insurers approved to sell products on or off the exchange – such as GHI and Freelancers – scored among the worst insurers in New York on overall complaints in 2011, according to the latest complaint rankings by the state Department of Financial Services.
But the dominant insurers recognize that competition on the exchange, encouraged by state and federal regulators, does have the potential to shake up the local insurance market. “We all get that, and we all have to live in that environment,” Univera’s Wingerter said.
News Staff Reporter Henry L. Davis contributed to this report.