Sarah Kliff’s post on a Massachusetts chain of hospitals offering a health insurance product is a must read.
Right now, health insurers and hospitals are separate entities. This is something different: a hospital selling coverage, with the restriction that you only seek care at its locations. The hospital chain is Steward, a Massachusetts-based business that has been buying up community-based hospitals for more than a year now. And the gamble it made was rolling out a health insurance plan that almost-exclusively serve its hospitals (there are a few exceptions). The plan, administered through Tenet Health Plans, is called Steward Community Choice.
Why would a hospital chain integrate with an insurer? Some possible answers, several speculative:
- To control referrals, capturing a larger share of patients than it would otherwise
- To raise the costs of other insurers by charging them more than the integrated product for access to the hospital chain
- To offer a more price-competitive product by cutting out the administrative costs of hospital-insurer negotiation and streamlining coordination
- To avoid the challenging negotiations with other large and powerful insurers (like Blue Cross/Blue Shield)
The rationale given in Kliff’s post is to cut premiums by restricting choice. This doesn’t make sense to me. If that worked, why aren’t insurers doing it already? Put another way, severely restricted networks can exist without hospital-insurer integration. So why integrate? There’s got to be another reason.
Of course the premium reductions suggested by Steward–20 to 30% below other products–could be an attempt to gain market share with unsustainably low prices. If that’s the case, they won’t last.
Am I missing anything?