Interesting Wrinkles in New GIC Study
By Steve PoftakMay 22nd, 2009
A new study, published by the Rappaport Institute and Collins Center, examines Springfield’s experience with the transition to GIC. The author, Bob Carey, provides a lot of interesting details. My observations:
1) High Out-of-Pocket — one of the typical objections to the GIC is their (deliberately) high out-of-pocket costs. It turns out that Springfield had moved to a new health insurance plan two years earlier that had some of the highest out-of-pocket costs I have seen. That made GIC a lot more palatable to municipal workers.
2) Shedding 5% of Insureds Helps to Cut Costs — By tightening criteria (e.g. no more coverage for the Symphony) and requiring documentation (thereby reducing fraud), Springfield reduced the number of subscribers by 5%.
3) HMO Brand Equity Helps — HMOs are (usually) the cheapest of health insurance options (relative to PPOs and Indemnity). For eastern Massachusetts, GIC’s HMO choices are not that well-known (Health New England, Neighborhood, Fallon), which has the effect of driving subscribers into PPOs (offered by Harvard and Tufts). In Springfield, Health New England offered an HMO in the pre-GIC system, so was a known quantity during GIC enrollment.
4) Inclusive Limited Networks — GIC’s limited network products (Health New England HMO and Unicare Community Choice Plan) are almost always the lowest priced. In Springfield, these limited network plans allow access to the major teaching hospital in the community. This is not the case with limited network plans in eastern Massachusetts. Thus, Springfield’s proportion of enrollees in (lower priced) limited network plans is higher than GIC’s distribution.
It is a very interesting piece of work. Certain aspects of Springfield’s situation can and should be replicated by other communities. Other aspects are unique to that community. I encourage you to give it a read.
Entry Filed under: News
2 Comments Add your own
1. Elaine McGrath | June 22nd, 2009 at 12:15 pm
The study summarizes where the cost savings are – shifting the cost of insurance to Medicare, joining a larger risk pool and shifting from PPOs to HMOs.
I don’t think any of these address the cost of healthcare itself and I think that is where the real savings need to occur. This study points to Springfield just moving their costs to someone else and that to me, is not a solution.
According to Trustees of the Social Security and Medicare trust funds, Medicare is predicted to go broke by 2017.
The larger risk pool is absorbing the more expensive costs of Springfield members so I am not seeing real savings there other than to Springfield. What happens when greater numbers of more expensive customers join? There has to be a point where price starts creeping up.
It is not clear what is driving the cost difference between HMOs and PPOs. If quality and access are comparable for less cost then perhaps this is a viable solution.
2. Shawn Duhamel | July 14th, 2009 at 4:36 pm
This study does raise some interesting points, but I have to agree with Elaine. The real issue that must be addressed is the overall cost of health care. These other steps, while helpful in the short term, are simply stop-gaps.
The one are where I may disagree here is over the issue of “greater numbers of more expensive customers” joining the GIC. From what we know so far, the risk across the public sector in MA is relatively the same community to community. If that holds true, then there should be no spike in cost to the GIC. Time will tell though.
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