Dr. Peter Beilenson thought fighting the intractable rates of drug use and sexually transmitted diseases in Baltimore was tough. Then the former city health commissioner took on health insurance.
"It's the hardest job I've had," said Beilenson, founder and CEO of Evergreen Health Cooperative, a nonprofit insurer created under the federal Affordable Care Act to offer "patient-centered" care and bring cost-curbing competition to the market.
"We're first new commercial insurer in 20 years in Maryland as far as we know," he said. "It's not easy to have a successful startup in a state that basically has a monopoly."
Beilenson is referring to CareFirst BlueCross BlueShield, the state's dominant insurer. Evergreen is one of 24 such co-ops, officially called Consumer Operated and Oriented Plans, established nationwide, and many of them face similar behemoths.
That fierce competition is the biggest hurdle to the co-ops' success, executives and observers say, as the nascent operations enter their second year of business. But there are a host of other potential stumbling blocks, including name recognition and funding, and the co-ops are responding by boosting their industry knowledge, aggressively marketing their services and cutting premium prices to lure customers.
"They're coming on as strong as they can," said Jonathan Weiner, professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health. "No startup organization can be expected to grow more rapidly than they are. But I think it would be tough to judge any organization before three to five years."
Weiner said federal officials gave the co-ops a leg up with billions in federal loans and grants, which competing insurers derided as unfair. But the co-ops only enrolled about 450,000 in the inaugural year, missing government projections by 125,000, largely because of dysfunction on many new health exchange websites such as Maryland's, where the co-ops expected to get their customers.
Evergreen set up a traditional network of doctors in preparation for the business but also opened its own health centers to directly employ health care providers. But it struggled, only getting about 400 customers last year from the troubled exchange.
That near-death experience pushed Evergreen to look to small businesses that it could attract on its own and enroll in groups. So far, about 1,000 small businesses employing about 12,000 people have switched to the co-op.
Studies suggest these customers pose less risk because they previously had health care unlike most of those from the exchanges. A Kaiser Family Foundation survey found that about 60 percent of individuals buying policies on exchanges were previously uninsured for two years or more and in worse health than those who already had insurance.
And this year has been different on the exchange too, bringing 2,129 people to Evergreen as of early January, though still well behind CareFirst's enrollment of 72,000.
Beilenson hopes to enroll a total of 25,000 people by the end of the year.
"That's break-even," he said. "Hopefully, we do it by the end of the second year and we can start paying back our loans. It should be quite doable if things continue as they are now."
Evergreen got more than $65 million in federal startup money, most of which went to a required reserve fund. All the co-ops received such funding from the federal government, and it's not known how many will be able to pay back their loans.
There were some strings attached to the money. Government rules precluded the co-ops from using federal dollars for marketing, limiting their ability to build name recognition and explain their mission. And the rules also made it hard to sign up many large employers that could bring many paying customers at once, though some other state co-ops already are doing that and Beilenson has plans.
The co-ops are reviving a concept first developed by nonprofit health insurers in the 1990s, some of which didn't survive. Called "capitation," it is designed to control costs and improve care by paying doctors and other providers per patient rather than fee-for-service. To work, such a system requires aggressive medical management, or keeping customers well and out of the hospital.
The model has worked well enough initially that a half dozen co-ops, including Evergreen, lowered premiums this year, according to the newsletter Inside Health Insurance Exchanges, which polled many of the co-ops.
Co-ops now have the lowest-cost silver (or middle-range) plans on health exchanges in all or parts of nine states, including Maryland, the newsletter said.
In New Mexico, a co-op called Health Connections has targeted businesses as well as individuals, much like Evergreen. It now has about 25,000 enrolled, including 2,000 in large business and 12,000 in small businesses.
That gives Health Connections a "50-50 chance of making a profit this year," said Martin Hickey, CEO of the co-op and also board chairman of the National Alliance of State Health CO-OPs.
Most of these new insurers appear to be adapting and surviving the initial years, Hickey said. However, one co-op serving Iowa and Nebraska took on a larger population of risky new Medicaid recipients than expected and was taken over by state regulators in December and may be liquidated.
They're all small and they're not yet curbing health care costs significantly in their markets, though Hickey said they plan to be "disruptive" eventually. Research shows those insurers that follow the model could save around 20 percent on hospitalizations alone, one of their biggest costs. His co-op, for example, hired community outreach workers to visit patients to ensure they're following doctor's advice on medications and office visits.
Medical management also could make the community healthier and happier. And, he said, "That's the punch line, or what we're in this business for, right?"
Hickey said Evergreen is the only co-op he knows of that is operating its own health centers, giving it direct control over patient care.
Evergreen is actually two companies, the insurance company with a traditional network of doctors and the health system that directly employs doctors, nurses, health coaches and others who work in concert for each patient.
The centers have been most attractive to consumers who didn't already have insurance and didn't mind new doctors and found the center locations convenient, Beilenson said.
Jean Donnell of Pikesville wasn't among them. The church she works for switched to Evergreen after several years with another insurer on the advice of a broker, and she was frustrated that she couldn't have the doctor who operated on her knee do the other one.
"Anybody would be concerned about switching," said Donnell, who visited the White Marsh center for a flu shot and other issues on a recent day.
But she said she was pleasantly surprised.
"I've had nice doctors before and maybe I'd tell them some things," she said, "but no one ever inquired about my health quite like this — and was willing to do something about it."
She said Evergreen treats the "whole person," something she didn't realize was a health care model. They also haven't made her sweat the details. Evergreen, for example, lined up a specialist to operate on her knee and a physical therapist convenient for her.
Beilenson said Evergreen looks at "social determinants of health," the factors contributing to illness such as stress or smoking that leads to heart trouble.
Doctors, nurses and staff "huddle" each morning to discuss the day's patients and who may need what services, which means everything from intervention in domestic violence situations to help quitting smoking.
A "health coach" conducts a complete history of each new patient, asking sometimes probing questions that can take people aback at first, said Meghan Crosby Budinger, the White Marsh center's coach.
Dr. Joy Baldwin, the center's salaried doctor, also spends 30 minutes with each patient. At her previous job in a traditional medical office, she said she was often triple-booked for 15-minute appointments.
But there still are growing pains. There are only four centers that share staff, though more are planned, and patients have to go elsewhere for specialists for now. Psychiatrists are available by video conferencing, a system Evergreen also plans to expand.
And Evergreen isn't the only shop working on the medical management model. It is promoted by the Affordable Care Act and used by hospitals with primary care groups such as Greater Baltimore Medical Center and insurers including CareFirst and Kaiser Permenente, though implementation varies.
"Clearly, the model is working," Beilenson said. "The challenge for us is to get it to scale."