As you may have heard Steward Health Care and Tufts Health Plan are working together to offer an insurance product for small businesses in Massachusetts that will be priced up to 30 percent lower than competitors. The opportunity is clear: most businesses are required to provide coverage under Massachusetts health reform laws and benefit plans are required to be generous. Meanwhile Bay State residents are accustomed to using expensive academic medical centers for everything including primary care; that among other factors keeps costs high. While it’s normal in most of the country to see health plans with limited networks, that has not been the case in Massachusetts where employers have lacked the courage to try it for fear of losing a competitive edge in the talent wars.
Of all the health plans in Massachusetts, Tufts has been battered the most by the market power of the big provider organizations, especially Partners HealthCare. It is therefore keen to try teaming up with private equity backed Steward, which is trying hard to offer value for money.
There’s a reasonable chance that the strategy will work. The target customers have done about all they can to control costs and shift financial responsibility to their members, but premiums are still rising 15% per year or so. Smaller companies don’t have the option to self insure, and they can’t easily drop coverage. The new plan advertises that Partners hospitals (Massachusetts General Hospital and Brigham and Women’s Hospital) will be available for “services that cannot be delivered by the Steward network” so that should make it easier for employers to swallow.
The advertised price advantage is enticing, but that still doesn’t make the premiums low. Even if the savings really are as high as 30 percent, it just turns the pricing clock back two years for the typical customer.
September 19, 2011