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So you want to start a health insurance plan

The first obstacle faced by Martin Hickey: the broken computers.

He had just relocated from upstate New York to New Mexico to launch a new health insurance company. Along with the challenges of building a network of doctors and recruiting patients, the computers in his new office didn't work. Printer paper was nowhere to be found.


"It was very much starting from scratch," Hickey says. "But where else do you have an opportunity to launch something from the ground up?"

Hickey, in a way, is a bit of an anomaly: He's starting a new health plan in a market that has been in a period of contraction. As some small plans fold and others merge, the American Medical Association estimates that 70 percent of the insurance market is "highly concentrated," with few options for consumers to choose from.

Enter New Mexico Health Connections: The plan is one of 24 non-profit ventures funded by the Obama administration. Through the Consumer Oriented and Operated Plan program, it received $70 million to build an insurance plan from scratch. It is among the 24 non-profit plans funded under the Affordable Care Act, before the CO-OP program lost its remaining, unobligated dollars in the "fiscal cliff" deal.

The New Mexico market is relatively concentrated: Two insurance plans, Presbyterian Health Care Services and United Healthcare, control more than half the market. Even supporters of the health-care law question whether these tiny new plans can win what seems to be a David versus Goliath battle.

The Affordable Care Act, however, has the potential to shake up the market. Federal subsidies will roll out in 2014, creating a wave of new customers. They will purchase coverage on an exchange, where big and small insurers alike will be displayed side by side.

Hickey made the case to me in an interview late last week that right now is the exact right time to start a health insurance plan. His pitch: As a local non-profit, New Mexico Health Connections will be able to pioneer new ways to deliver care without pressure to post high earnings.

"Everyone else has to send money back to their home office in Ohio or wherever," he says. "If we end up with money left over, that goes back to the physicians and consumers. Our view is, the health care system is broken. We're here to fix it."

Hickey also found a huge advantage in the Affordable Care Act's CO-OP program. It provided a $6 million loan for operating costs and another $64 million to meet New Mexico's capital reserve requirements.

Private funding for start-up health plans is, according to those who have searched for it, hard to come by.

"Other than the federal government funding, the CO-OP program isn't viable," says Robert Schyberg, who pursued the same grant opportunity in West Virginia, but lost out when the fiscal cliff deal ended funding.

Hickey's approach going forward has also leaned heavily on new markets created by the health-care overhaul. He has largely focused on working with New Mexico's Federally Qualified Health Centers, which tend to see lower-income and uninsured patients. By bringing these facilities into the New Mexico Health Connections network, he hopes gain some footing with their patients, who are likely to qualify for the new, federal subsidies.

Why should these doctors want to work with this unknown plan? Insurance giants can, after all, guarantee a steady volume of patients. Hickey doesn't have a single patient yet, so he had to put something else on the table: Additional dollars for physician groups to invest in social workers or other alternative health care providers. While some health policy experts think these positions can save money, insurance companies often do not reimburse the non-traditional positions.

"What were going to do is give physicians $50,000 to spend on a community health worker," he says. "We're essentially going to be putting the director's baton in the primary care doctor's hands."

A modern health insurance plan cannot, however, exist without hospitals. Nobody will sign up for an insurance policy that does not cover a trip to the emergency room. That means that Hickey has to go from city to city, selling the hospitals on joining his network. He says he has worked out deals so far with about half the hospitals in the state, which seem to view signing up as a defensive tactic.

"Both of the large hospital systems in Albuquerque seem to want to cover their bets," Hickey says. In other words, if his plan does attract a significant portion of New Mexico's 417,000 currently uninsured residents, they want to make sure they get a chunk of that business. Worst case scenario, the hospitals have a year of bad volume, and renegotiate down the line.

That's the health system side - but Hickey also has to figure out how to win over patients, too. He has a bit more time on that front: His plan will start accepting customers in October, when the health insurance exchanges launch for open enrollment. He's still trying to figure out what selling points he can offer.

Hickey has also done outreach to insurance brokers and agents: Getting in their good graces means they might be more likely to recommend his products than those of other plans.

One difference he can highlight is that his plan will be partially-consumer run: All federally-funded CO-OP plans will save spots on their governing boards for patients.  "We don't have a track record," he says, "But I can tell people, if you join our plan and like it, you could be on the board in a year from now."

A public outreach plan is in the works, but not quite done yet. There are still deals to ink with hospitals and physician groups. But, Hickey does now have a functioning computer - and printer paper - significantly more than what he started with last April.







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Evan Soltas · January 28, 2013

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