Scuttlebiz: Area health insurance market is more competitive than most

The turning leaves and chilly night air serve as a reminder of the season upon us.

 

That’s right: “open enrollment” season – that annual rite of passage when most American workers find out how much more their employer-sponsored health insurance will cost in the new year.

Fortunately, the gigantic health care price hikes of decades past are long gone. But costs for medical services are still outpacing the country’s wages and overall inflation rate, so it’s a safe bet your premiums and out-of-pocket costs in 2018 will be higher.

The largest share of area residents – about 49 percent for Georgia and 46 percent for South Carolina – get their employer-sponsored health insurance through health maintenance organizations, preferred provider organizations, point-of-service plans and other products on the commercial market.

Except for the roughly 10 percent who go uninsured, nearly everyone else is covered by the government’s Medicare or Medicaid programs or in an Affordable Care Act exchange plan.

If there’s an upside to this seemingly insatiable industry that consumes nearly one in every five U.S. dollars, it’s that the metro Augusta is a regional health care hub. That’s good for the local economy – especially those on the receiving end of the health care dollar.

Those on the paying side might be interested to know metro Augusta’s private health insurance market is slightly more competitive than most.

The American Medical Association’s 2017 Competition in Health Insurance: A Comprehensive Study of U.S. Markets shows Augusta-Aiken’s commercial health insurance market isn’t as highly concentrated as most U.S. metro areas based on 2016 data.

The AMA contends highly concentrated insurance markets drive down payments to doctors and hospitals and drives up consumer premiums and cost-shifting.

Of course, there is another side to the story, but we’ll get into that later.

First, let’s look at market share figures for area commercial HMO, PPO, POS and exchange plans that the AMA calculated using the Herfindahl-Hirschman Index. Basically, the the higher the index number, the less competitive the market.

Metro Augusta’s index number for all commercial insurance plans is 2,345. That makes it slightly more competitive than Georgia as a whole (2,451) and much more competitive than South Carolina (4,900), which was ranked No. 4 on the AMA’s “least competitive” health insurance list. Augusta-Aiken also was below the 3,353 mean for all 389 metro areas.

Anthem, a Blue Cross Blue Shield Association company and the nation’s largest for-profit managed care firm, has the biggest total market local share in metro Augusta with 38 percent, followed by Blue Cross Blue Shield of South Carolina’s 19 percent. (Georgia and South Carolina may be politically “red” states; but they’re covered in “Blue” when it comes to health care.)

Anthem also is metro Augusta’s No. 1 in the HMO category with a 58 percent share, more than twice the share of No. 2 Aetna’s 27 percent. Anthem also leads the PPO category with a 32 percent share compared to Blue Cross Blue Shield of South Carolina’s 27 percent.

For POS plans – a sort of hybrid between HMOs and PPOs – UnitedHealth Group and Anthem virtually have the metro market cornered, with 50 percent and 47 percent shares, respectively. As for the public exchanges, Anthem is again No. 1 with 35 percent to Humana’s 25 percent.

All in all, the Peach State ranked No. 34 on the “least competitive” list and No. 14 on the list of states with the largest decrease in competition levels between 2014 to 2016. South Carolina’s distinction of being the fourth least-competitive market likely has something to do with Blue Cross owning 67 percent of the Palmetto State’s commercial health insurance market.

Whatever side you take in the the payer-vs.-provider tug-of-war that epitomizes the American health care system, it’s clear from the AMA’s analysis that Augusta-Aiken’s health insurance market share is less concentrated than most cities.

Want more detail? Go to www.ama-assn.org/about/competition-health-insurance-research.

AND NOW FOR THE DEBATE: Are highly concentrated insurance markets really “bad” for consumers?

The AMA, of course, says yes – it exists primarily to protect the interest of physicians, a group that historically has opposed any reforms that threaten their autonomy or compromise their financial interests.

Considering the clout doctors wield in shaping health care policy, I’d say the AMA is the hands-down most influential union in America – more powerful than Teamsters and teachers combined.

But there is evidence concentrated markets actually help constrain health care costs. A recently published University of California Berkeley study, for example, showed costs in highly concentrated markets were as much as 19 percent lower compared to fragmented markets where payers have less price-negotiation power.

Then there is the case study of Anthem and the 1.3 million-member California Public Employees’ Retirement System, which in 2009 decided to limit knee- and hip-replacement surgery payments to $30,000 once it realized there was almost no difference in quality between a $15,000 surgery and a $100,000 surgery.

Guess what happened? The number of California hospitals charging $30,000 or less for joint replacement surgery increased nearly 60 percent over the next four years.

Maybe, just maybe, more market-driven intervention is needed. Health care is complicated – I get it. But it’s also, at its core, a service industry. Comparison-shopping shouldn’t be virtually impossible and measurements on quality and value shouldn’t be so difficult to find and harder to understand.

I’m a typical consumer. I like doctors and nurses but hate having to deal with the folks who pay them on my behalf. But I’m not naive enough to heap all the blame for this mess on the insurance industry. There obviously is room for health providers to operate more efficiently, transparently and – let’s be honest – much less costly.

Yeah, I know – “easy for me to say.” My job didn’t require me to pay for four years of college, four years of medical school and undergo three to five years of residencies and fellowships.

But perhaps that’s part of the problem, too. Our century-old method of training physicians (Google “Flexner” for some light reading) is still designed to make doctors rare and expensive.

You’ll see that for yourself when you fill out those open enrollment forms in the next few weeks.

WANT LOWER COSTS? BE HEALTHY: Employee health plans often are a company’s No. 2 expense after payroll. One might assume paying medical bills for the 100 mostly blue-collar employees at Augusta’s Macuch Steel Products would be a financial nightmare.

But it isn’t.

“Five years ago they were looking at 20 and 30 percent rate increases – this year they had a minus 7,” said David Hogan of ACHS Insurance in Evans, Macuch’s insurance adviser.

How’d Macuch do it? By focusing on wellness to reduce the lifestyle-related ailments (heart disease, obesity, type 2 diabetes, etc.) that account for somewhere between 60 to 80 percent of all health care costs.

The family-owned steel-fabrication firm’s plan through Humana includes the insurer’s Go365 Wellness and Rewards Program, which reduces employee health insurance costs by giving them financial incentives to live more healthy.

Because regulations prohibit employers for penalizing workers for being over-eating couch potatoes, Go365 enables employees to accrued credits by doing things such as taking health courses, wearing heart rate monitors and pedometers, and using diet and nutrition apps on their mobile phones.

Workers who advance from the “bronze” level to the “silver” level, for example, get a 7 percent reduction in premiums. Those who move up to the next level, “gold,” get a 15 percent reduction, and so on.

“If you’re talking about a paying for a family plan, that could be a lot of savings,” Hogan said.

Productivity at Macuch has increased because employees make fewer hospital visits and are less likely to show up for work sick. Hogan believes such wellness programs will be the key to reducing lifestyle-related claims that have helped push health care costs out of control.

“We’ve created a system where you have almost unlimited demand,” Hogan said. “In that scenario, you’re not going to see a reduction in cost. If we keep going, we’re going to reach a point where nobody can afford it and it will all collapse. If we could cut (lifestyle claims) in half, I could envision a scenario of doctors looking at empty waiting rooms and looking for ways to be more competitive.”

INVESTING IN HARRISBURG: Dr. M. Vinayak Kamath is a well-known cardiothoracic surgeon throughout the region. But in his own heart is a soft spot for the Harrisburg area, where he owns several properties.

He purchased another just last month – the parcel on the southeast corner of Broad Street and Crawford Avenue, a commercially-zoned tract currently occupied by Holmes Car Wash.

The compact but highly visible property is directly across from Augusta’s Kroc Center complex, which, among other things, houses the offices of the United Way of the CSRA – where the physician serves as a board trustee.

“I’ve been in Augusta for 40 years and I just love the downtown area,” said Kamath, who practices at Augusta University Medical Center. “I’m a big supporter of what’s going on around the Kroc center.”

He said he’s not sure what he wants to do yet with the property at 1770 Broad St., which he acquired from local attorney Sam Nicholson for $81,500 according to public real estate records.

“When Sam casually mentioned to me he would sell it, it fit in with my vision for having a walkable, safe neighborhood,” said Dr. Kamath, who also owns tracts near the historic Martha Lester School, which recently has become the focus of a burgeoning revitalization effort.

The 2-acre property along the Augusta Canal, named for the iconic turn-of-the-century educator who taught children and adults in the poor textile mill neighborhood, is the center of a $3.5 million fundraising campaign by the Augusta Therapy Academy, which seeks to purchase the property from Augusta businessman Clay Boardman and turn it into the permanent home of its Martha Lester School for Integrated Learning, a faith-based school for children 6 and younger with disabilities.

Kamath owns about a dozen properties in the area, most of which he says are rented to formerly homeless veterans and “good people” on fixed incomes. He said he wants the new property to be something complementary to the Kroc Center as well as the nearby Martha Lester School and historic Ezekiel Harris House.

“This is not for speculation, not for making a ton of money,” Kamath said of his latest acquisition. “It’s my little way of giving something back to the community.”

SPEAKING OF THE KROC CENTER …: The Salvation Army-managed center’s restaurant, Cafe on the Canal, was among the 14 local eateries participating in The Augusta Chronicle’s inaugural “Sandwich Showdown” this past week.

The Cafe’s sandwich entry “The Early Bird!” could very well be the winner when the results of the online popular-vote contest is announced Nov. 8. If you love your specialty sammiches, hopefully you had a chance to pick your favorite during the Oct. 27-Nov. 5 voting period through augustasandwichshowdown.com and the Chronicle’s Facebook page.

In addition to Cafe on the Canal’s entry, there was the “North Atlantic Cod Fillet” by Culver’s; Fuse’s “Pork Pastrami Panni”; the “Double Cronovan with Bacon” by Grumpy’s; the “No. 13-The Original Italian” by Jersey Mike’s Subs; the “Sweet Heat Louis” by Hildebrandt’s; Taqueria El Rey’s “Torta Hawaiana”; Philly CheeseSteak Factory 1’s “Who’s Your Daddy NOW” (which gets my vote for best name); The Hive’s “Bleu Devil”; Twisted Burrito’s “The Chuck Norris”; Your Pie’s “Pesto Turkey Panini”; TBonz’ “ Giving Thanks’ Turkey Sandwich”; The Fat Butcher’s “Fat Butcher Special”; and Wild Wings Cafe’s “The God Father.”

Stick a fork in me. I’m done.

Reach Damon Cline at (706) 823-3352 or damon.cline@augustachronicle.com.

 

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