Cost Containment RFP Seeks To Reshape Health Plans

OCTOBER 11, 2012: Phase 2 of Health Care Reform is now well underway in Massachusetts, with the state’s Group Insurance Commission (GIC) delivering the opening salvo in the battle over healthcare cost containment.

Since all of the GIC’s health insurance plans must be rebid for FY 2014, the Commission is using the RFP process to restructure its plans to meet the requirements of the state’s new Cost Containment Law (Chapter 224, Acts of 2012). The new law is seen by healthcare experts as the next step in reforming the healthcare system. Phase 1, of course, was the landmark 2006 law, also known as Romneycare, which ushered in near universal insurance coverage for all Massachusetts citizens.

While Chapter 224 applies to all public and private health insurance plans and care providers in Massachusetts, the state’s own insurance plans run by the GIC, MassHealth and the various state agencies, that provide health services, will be the first to implement the cost containment measures on a wide scale.

Click Here For Further Information on Chapter 224

Released on October 9, the GIC’s Request For Proposals seeks bids from insurance carriers that will include cost containment measures to be phased in over the five-year length of the contract. GIC officials estimate the changes will save $1.29 billion over five years, “with improved quality of care and no reduction in benefits.”

Advocates argue that this is achieved through a transformation of how healthcare services are delivered to the patient, as well as how the internal billing processes work. At its root, the GIC is moving away from the traditional “fee for service” model of healthcare payments and into a new system of bundled or global payments that focus on overall treatment.

“We’re told that one of the reasons why healthcare is so expensive is due to the billing process under the fee for service system. When every item is billed as a separate charge it often leads to waste, abuse and inefficiency,” says Shawn Duhamel, our Association’s designee on the Special Commission on Retiree Healthcare. “The big difference going forward is that there will be a coordinated effort and risk sharing between the insurance companies and healthcare providers that is aimed at improving the quality of care, without restricting access.

“The hope is this will lead to healthier patients, with fewer complications and medical relapses, which will result in lower healthcare costs. And, billing will move away from fee for service and into the new models.”

As the new law is phased in, doctors and hospitals will eventually share in the financial success or failure of the overall system. For instance, a medical practice that is able to improve the health of its patients and thus reduce costs will be rewarded with financial bonuses.

However, those providers, that either do not meet cost benchmarks or don’t improve the overall health of their patients, will be penalized with what amounts to fines. Safety measures and other guidelines are also being built into the contracts by the GIC, as well as under state law, that monitor patient health to insure care is not being withheld.

“Our biggest concern with this reform is that somehow it will lead to substandard care or medical services being withheld. However, we’ve been assured by state officials, including the Attorney General and the GIC that such behavior will not be tolerated,” explains Association General Counsel Bill Rehrey. “Denying care is not only illegal, but it also leads to people developing greater medical problems that place a far greater financial burden on the system. That’s the opposite of what they hope to accomplish here, which is lower costs through higher quality and coordinated care.”

Retiree Impact

For retirees enrolled in the GIC the logical question is “how do these changes directly impact me and my family?” While there are still more questions than answers, this much is currently known.
•    No retiree or survivor, insured under the GIC, will lose their health insurance coverage.
•    Some insurance carriers and the benefit structures will change as of July 1, 2013.
•    We do not anticipate an major changes in copayments or deductibles for FY14.
•    Open enrollment for FY 14 begins on April 10, 2013 through May 8, 2013.
•    Retirees and survivors living, outside of Massachusetts, will continue to receive full health insurance benefits.
•    Depending on the insurance plan in which you are enrolled, some retirees may be required to have a primary care physician.
•    GIC and healthcare providers will increase wellness and disease management programs.
•    Greater coordination between primary care and specialists.
•    Improved sharing of medical records between providers, which will reduce duplicate tests, procedure and medical errors.

Under the RFP, the GIC has kept specific requirements to a minimum in order to entice insurance carriers to be innovative with their approach to cost containment. Therefore, specifics will not be known until February 2013, when the GIC sets its FY14 benefits and selects its insurance providers.

“This new reform law is something that we’re going to spend a lot of time following over the coming years. It’s not only a very complicated issue, but also Massachusetts stands out as the first state to ever try something like this. So there really is no model to look to. We will become the model that the rest of the country looks to,” said Duhamel. “But, the important thing to remember is that no one is going to lose their health insurance, plus it’s extremely unlikely you’ll have to even change doctors.

“If this reform works and we can move away from the cost shifting that has been the norm for the past fifteen years, then we’ll all be better off. The trick is maintain the highest quality and affordable care for our members.”