Direct-to-Employer Pacts Face Challenges Despite High-Profile Deals

From Health Plan Weekly

Detroit-based Henry Ford Health System launched its first-ever direct-to-employer contract this month. Yet industry insiders say these types of direct-to-employer narrow network arrangements have failed so far to take off in a significant way.

Blue Cross Blue Shield of Michigan — General Motors' longtime third-party administrator — will process claims for General Motors’ new ConnectedCare option with Henry Ford Health System, according to General Motors.

ConnectedCare will be added as a new option in General Motors' open enrollment for 2019 for nearly 24,000 salaried employees and their families. The plan includes Henry Ford Health System's network of more than 3,000 providers, plus integrated electronic medical records, same-day primary care appointments and care management tools.

The health system says it is sharing risk with General Motors, and the program will monitor outcomes and customer satisfaction.

Ashraf Shehata, principal and health care leader at KPMG in Cincinnati, says multiple IDNs — integrated delivery systems that are licensed to provide insurance — are selling in the Medicare Advantage and individual markets, and would like to move into the direct-to-employer space.

The problem, he says, is that most of these plans have membership in the 100,000 to 500,000 range, and "based on what I see in the market, they really need to be north of half a million to be sustainable, and they need to be north of one million to be profitable….What I'm not really seeing is organic growth. It would be very difficult for them to compete to grow at that scale."

An IDN with an associated health plan product might be happy with membership of 500,000, he says. But that network, as a product, also might be a tough sell to an employer, he adds.

"If I'm a national employer with a manufacturing facility in that local market, I'd likely be looking for a national entity to handle contracting for me, even if I have a cluster of covered lives locally," Shehata says.

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