Kaiser Faces Pressure from State after Public Employee Health Plan Deemed Inefficient

Despite some success in keeping costs down since 2012, the state’s public employee plans are not significantly outperforming nationwide figures, and its legacy Providence plan, which has not adopted coordinated care reforms, was the most efficient plan in eight of Oregon’s 20 largest counties.

Kaiser Permanente should be prepared for increased scrutiny of its premiums and health spending priorities for public employees after a report Tuesday that showed it was easily the least efficient of the health insurers that contract with the Public Employees Benefit Board.

Kaiser was the least efficient PEBB insurer in 2017 in every county that it has a significant presence except for Clackamas County, where it fell between Moda Health and Providence Health Plan. The PEBB board, which oversees health insurance for state and university employees, will review premium rates in the spring and sign off on terms for 2019 at that time.

Poor performance and high prices have already led PEBB to cut two smaller plans since it revamped its contract in 2015. One of those, Trillium Health Plan in Lane County, was dropped after just one year, and PEBB ended its contract with AllCare Health for coverage this year, citing lagging results and higher costs.

Kaiser may be more likely to escape that fate -- unlike AllCare, which shared most of its providers with Providence and Moda, Kaiser has an exclusive network. Pulling the plug on Kaiser members’ coverage would mean severing the doctor-patient relationship for thousands of state workers.

But the numbers fuel the perception that the Kaiser HMO is scooping up the healthier state employees and leaving Moda and Providence with workers who have more complex health issues -- without properly adjusting its premium costs downward for risk. The data may push PEBB to lower premiums for Kaiser or demand that it do more to justify its rates.

The normalized plan costs for the Kaiser HMO were $541 per member per month, compared to $441 for Moda and $456 to $477 for Providence.

Ironically, consulting firm Mercer revealed that the statewide Providence plan -- which has none of the medical management of the other PEBB options -- was the most efficient plan in a plurality of eight of Oregon’s top 20 counties, including Clackamas, outperforming even the Providence Choice plan.

The Providence Choice plan attempts to save costs by corralling members into a more limited network where Providence has more favorable contracts, while delivering care more rationally from primary care homes.

The efficiency of the statewide plan has been disguised by the high cost of medical care in rural Oregon, where PEBB members have just two options. In the Portland area, where healthcare is cheaper to insure due to higher competition among doctors and hospitals, public employees are split among five health plans.

Mercer actuary Emery Chen said some rural counties have 40 percent higher costs than Multnomah County, putting the statewide plan at a disadvantage of 3 to 8 percent. “Counties with fewer providers tend to be more costly,” Chen said.

PEBB’s current contract was designed with fanfare to implement care strategies in use in Oregon’s Medicaid system, which relies on coordinated care organizations, managed care companies that integrate mental health with physical health and often partner directly with community hospitals.

The cost controls and low inflation that PEBB has experienced in the past five years is also barely better than Mercer’s national customer base. Its clients overall have had less than 3.4 percent inflation annually in three of the past five years, while PEBB has met that target in four of the past five years. But even in the two years where Mercer’s other clients missed that mark, their inflation was still under 4 percent, while PEBB saw 7 percent inflation in 2016.

National comparisons and the uncoordinated statewide plan’s ability to outperform the other PEBB plans in counties as diverse as Clackamas and Deschutes seriously undercuts the notion that PEBB’s coordinated care strategies are doing anything special to keep down costs.

But Chen pointed out that efficiency and addressing the cost of care is just one of PEBB’s goals. The state would also like to improve the care state workers receive as well as their long-term health.

In the quality of care, Kaiser did a better job of meeting expectations, missing only one target, which pertained to the management of blood sugar for diabetics. Both Providence coordinated and uncoordinated plans also missed just one target -- for adolescent checkups. The coordinated Providence Choice plan performed only slightly better than the company’s default statewide plan.

Moda Health pulled up the rear on quality, along with AllCare Health, which each failed three targets. Both missed the diabetic metric and one on contraceptive use, while Moda charted low child vaccination rates and AllCare had low primary care home enrollment.

Reach Chris Gray at chris@thelundreport.org.