New Jersey beats Amazon to the punch on self-insured health plan

Left to right: Kevin Lenahan, chief financial and administrative officer, Atlantic Health System; Kevin Joyce, vice president, Insurance Networks, Atlantic Health System; John Dellocono, senior vice president/CFO of CentraState Healthcare System.

The same day Amazon partnered with Berkshire Hathaway and JPMorgan Chase, a coalition of six New Jersey hospitals revealed that not only do great minds think alike, but that it had beaten the online giant to the punch.

The six competitive providers in New Jersey formed the Healthcare Transformation Consortium to self-insure their combined 50,000 employees through one health plan, in an effort to lower costs and to achieve better outcomes.

[Also: 5 ways Amazon could disrupt healthcare]

"We were ready to go out with the press release when Amazon dropped that day," said Kevin Joyce, vice president of Insurance Networks for Atlantic Health System.

In fact, this is believed to be among the first models of its kind, with a projected go-live date of Jan. 1, 2019.

[Also: JPMorgan CEO shares more on aims, tactics of healthcare venture with Amazon, Berkshire Hathaway]

The timing to Amazon's announcement in late January was pure coincidence, but the concepts are not.

"I think it's similar," Joyce said.

While the Amazon joint venture has yet to announce a similar tactic, analysts and healthcare experts predict the company will take this route to self-insure its one million employees.

In a letter to shareholders this week, JPMorgan Chase CEO Jamie Dimon gave a glimpse of what to expect. One focus will be to create better workplace wellness programs and to empower employees to make better choices, Dimon said. Data will help drive this initiative.

The Healthcare Transformation Consortium will also use the combined data to help with wellness efforts, said Kevin Lenahan, senior vice president and chief finance and administrative officer for Atlantic Health. The hospitals will be sending out digital preventative health reminders for such services as a mammography or a flu vaccine. 

Each hospital has a different EHR, but all will have access to the same quality metrics, Lenahan said.

"This is one of the ways to try to bend the cost curve. I honestly believe with the rise in high deductible plans, trying to make healthcare more affordable should be the mission of both payer and provider. What makes us different from Amazon," Joyce said. "We as competitors came together to do this.  This should have a ripple effect across all of our membership."

Meaning, the aligned benefit in how the hospital systems care their employees will carry-over to all patients.

Joyce, who is a health insurance veteran, brought a payer's mindset to the development of the coalition.

"I kind of understood where the market was going," Joyce said. "Employers are unhappy, they're not seeing a value proposition for what they are spending for healthcare costs. They are not seeing providers coming together to lead that charge."

Joyce said he knew all of the CEOs and CFOs of the other health systems.

Lenahan said, "It's like-minded organizations that came together. We know each other. We all felt that we have a responsibility to improve quality, help transparency."

The incentive from the start has been how to achieve cost savings while increasing better health outcomes.

"The challenge is in the ways to increase the care we're providing, and at the same time trying to maintain cost, to look at the cost curve and best practices," said John Dellocono, CFO and senior vice president for CentraState Healthcare System.

The six health systems include Atlantic Health System, CentraState Healthcare System, Holy Name Medical Center, Hunterdon Healthcare, St. Joseph's Healthcare System and Saint Peter's Healthcare System. 

Each currently has a separate, self-funded employee health plan. 

The consortium did not release figures on rates or the amount of projected savings. 

"Each of our cost structures are different, the savings opportunities will be different at our hospitals," Lenahan said. "We all know we have opportunities for savings."

HTC is in the process of collectively bidding out for third-party administration of their self-insured plan. They will go for one prior plan approval administrator and a single carrier for all six to reduce administrative fees associated with providing healthcare benefits. 

"We're trying to start small," Dellocono said. "The first issue is the overall administration burden. We're trying to standardize one TPA."

The consortium will select a flexible insurance carrier that is open to development of a unique product that can be replicated by health systems in other regions.

HTC's employee market is a beta test. The consortium will look at the key metrics of such factors as ER utilization per 1,000, and how hospitals with better rates can pass on their best practices.

Once that evaluation is done, they'll decide whether to open up the insurance model for the general market.

"The model developed by HTC can be shared locally with other self-insured employers and replicated nationally," Joyce said. "By working closely with like-minded organizations, we can share best practices, learn from one another, and lead the transition from fee-for-service to value-based care, using our own benefit plans as proving grounds."