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Getting Health Insurance as an Entrepreneur: An Interview With Health Law Expert Kenneth White

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For entrepreneurs, finding good health insurance coverage can be difficult. What are your options for getting the best care? Join Darshan Kulkarni as he talks with national managed care practice leader Kenneth White about finding an effective health plan as an entrepreneur. Plus, we’ll discuss the difference between going to the federal exchange versus a state exchange.

Darshan: Hello, everyone. Welcome to another episode of DarshanTalks. We have Kenneth White with us again. And Kenny is an attorney. He works with managed care organizations.

Narrator: This is the DarshanTalks Podcast, regulatory guy, irregular podcast, with host, Darshan Kulkarni. You can find the show on Twitter, @darshantalks, or the show's website at darshantalks.com.

Darshan: I am thoroughly not doing justice to the many, many things Kenny's done. So, Kenny, would you like to introduce yourself first?

Kenneth: Sure. I'm Kenneth White. I'm the national managed care practice leader for Willis Towers Watson. But before Darshan does it for me, I'll tell you. I'm speaking on my own behalf and not on behalf of Willis Towers Watson. I have been in this role for seven years, almost, now as the senior consultant with regard to risk and solutions for health plans, provide our own health plans, risk-based reimbursement providers, and other entities like that.

And prior to that, I was in private practice for almost 30 years as a healthcare lawyer representing managed care entities, physicians, and hospitals in whatever they got themselves in trouble for.

Darshan: So, Kenny, before you jump into the topic I actually have in mind, I know Kenny from the American Bar Association where I am chair of the Life Sciences section right now. Again, I'm not speaking on behalf of the ABA. But Kenny, do you happen to have a leadership role at the ABA right now or... what do you have?

Kenneth: Yes. I am chair of the Managed Care & Insurance subsection.

Darshan: All these chairs, if we got enough, we could get a dining table-

Kenneth: Yeah, yeah. We could have a whole dining room table, right?

Darshan: But we could-

Kenneth: When they finally made me be chair, I... this is my second year as chair. But I joined the Health Law Section as a... when we first started the Health Law Section years and years ago and had avoided leadership roles for decades.

Darshan: Why did you avoid leadership roles?

Kenneth: Yeah. I mean, you got other things to do, right? So, about, I don't know, eight years ago, maybe nine years ago, I was a vice chair for the Managed Care & Insurance Interest Group. And then, I moved from every vice chair available. They will only let you do it for two years. And then, you have to move. So, I've done all of them.

And they told me last year, 18 months ago now, that if I didn't become chair, that I was going to have to age off, so to speak, the leadership roles for the Interest Group. So, I took the chair. And then, I will be chair until... our appointments run September to September, don't they?

Darshan: Oh, I think July to July. But I don't know.

Kenneth: All right. So until next July.

Darshan: Yeah. Very cool. So, the reason I wanted to emphasize that is because I want to point out how much Kenny knows. He has literally gone through every chair there is... well, every vice chair there is before he's finally been relegated to becoming a leader. I'm so sorry, Kenny.

Kenneth: It's a tough life.

Darshan: It's a tough life. So, the topic we have today is something I have personally been interested in for well over a decade, if not longer. And you briefly alluded to that. I can't remember if it was during the podcast or after the recording. But we were talking about how entrepreneurship is critical for growth in the US. And one of the key components of that is making sure that you have health insurance.

And as you're keeping track of health insurance, one of the things we discussed was that one of the struggles I, as an entrepreneur, feel, but I know several other entrepreneurs feel, is I need a job mostly for the health insurance. So, how do I go about getting health insurance if I don't have a job? And am I stuck in the job until that point? So, Kenny said there are several options. And we decided to make a podcast about it.

So, Ken, do you want to start off by telling us... first of all, what options do we have, if you're an entrepreneur, to get health insurance? Where do I go? Where do I start?

Kenneth: Let's drop back a little bit further than that. The entirety of the insurance business from thousands of years ago, when other people or entities took on risk for other things, jumping into the mid-1400s and 1500s, and when people were insuring voyages on the high seas, et cetera, it's all been entrepreneurship. It's been, how do I take money that I have capital, that I have aggregated capital, and extend it to others, as if you were loaning it to someone, in order to get a return on that investment?

But every entity out there that provides managed care services , we used to call it health insurance. But there are very, very few actual, true health insurance indemnity companies left. Most everything is a managed care entity in one way, shape, form, or fashion, whether it's self-funded health plans or commercial health plans or association plans. Or now, you have the religious-based health accounts that you pay into that aren't really insurance or managed care.

All of that is a way to use capital to provide a good or a service or a return on investment. So, whether it's a PE company or a venture capital company getting involved in the ground up for an administrative services company that aggregates physician groups to participate in value-based contracting or whether it's Oscar, the health insurance company, the managed care entity, those are all basically the same thing from an entrepreneurship concept. They see a need. They aggregate capital. They put it into the marketplace and, hopefully, get a return back on it.

From an individual standpoint, who is looking to be able to manage their life in a way that they want to, it's the same thing. Was it Maslow? Was it Maslow that had the hierarchy of needs?

Darshan: Yeah. Maslow's hierarchy of needs.

Kenneth: So, I'm sure health insurance is somewhere on that chart. I haven't looked at it lately. But I'm certain it's somewhere between food and clothing and the achievement of Nirvana. It's very, very difficult to live a life, particularly one in entrepreneurship, where you do not have the ability to fall back on a collective effort to provide you with the cost of covering your healthcare, whether it's just you individually or, particularly, if it's you and a family where you need to provide for a spouse or a partner and children in order to be able to concentrate on starting a restaurant or building a business of something else.

No matter what your goals are, one of the things that you need to have in order to proceed forward... and if you have a idea of size and you get it off the ground, and then you start running into the regulatory requirements of either state, like California or New York, or federal under the ACA where you have to provide insurance or pay fines, or you have to be able to provide them with finances so that they can go into the ACA market and get their own insurance, in order to have employees, not only do you need to do that in order for you to have regulatory compliance, legislative compliance, but you're not going to get the employees to work for you, as you mentioned a few minutes ago, without having health insurance.

A lot of people have a job for that very reason. I need the benefits. I need a 401(k). I need a pension plan, if I got one. I need a health savings account. I need something that provides a dissemination of costs associated with healthcare. So, you can't pursue true entrepreneurship where you want to grow without having some backstop for your health, whether or not it's for your employees or for you, personally, or your family. So, that's where you start. That's where we were having the discussion before as to why you'd want to do this.

Now, there are options for you. You can certainly, as an individual or as an employer, depending upon what size of a thing that you're talking about, go into the commercial, small-group market and purchase health plan coverage. You can, if you have lots of money, if you happen to be part of a PE or a venture capital entity where there's a parent holding company, you can extend benefits down to multiple subsidiaries from the parent.

If you're in an industry where administrative companies are frequent... and I'm going to use physicians as an example... where you have companies called medical service organizations, or MSOs, that are cafeteria-style, administrative service companies that you can pay a fee to... and they will provide all sorts of services to you, including employment and leaseback of employees, so that you can get large-group benefits for your small group at a large-group price.

So, you aggregate your employees with others. We used to refer to those as MEWAs. Multi-employer welfare associations, I believe, is what MEWA stood for. But the Department of Labor, years ago, started taking a very jaundiced eye. Look at them, put a lot of rules and regulations in with regard to what you had to be in order to be a legitimate MEWA, and they faded from view. But that was another way of aggregating that stuff.

Obviously, as an entrepreneur, either with a small number of employees or just you and your family, you can go into the affordable care, the ACA exchange market, and buy individual or small-group coverage on the ACA. In some locations, although I wouldn't necessarily advise it, you can get association-related coverage.

And then, they have the newer versions of... and most of them are religious or faith-based where it's a combination of people who pay a fee, like a premium... but it's not a premium because we're not an insurance company... into a common fund. And you can submit claims... you can't see me doing the air quotes, but I am doing them... to this thing. And they will pay in accordance with whatever the contract is that you have with them.

And it's a way of spreading the risk, just like an insurance product. But it's not actually an insurance product. So, it's not regulated by the state, in most cases, or the federal government. And you get what you pay for there. Sometimes they work. Some people call them Ponzi schemes. It just depends. But those are all options that you would have as an entrepreneur without having to go without insurance.

Darshan: I'm sorry. Just because this is fascinating to me, I'm going to list out what I think you just said. So, number one, you can be a PE company. And therefore, if you have a bunch of different organizations below you, spread the health insurance down as well so everyone in the organization gets it. The second one is the MEWA, is where you actually have the administrative companies, which are managed, essentially, medical service organizations. And they let you aggregate your employees and go back down again.

The problem is that MEWAs are basically going out of style because the Department of Labor was not a big fan. Is that correct?

Kenneth: That is correct.

Darshan: Okay. Then, there's the Affordable Care Act exchange which is usually thought of as the federal exchange. But there's also the state exchanges, which is another location. As an individual, as a family, or as a small group, you might be able to get it for yourselves. Is that a selector?

Kenneth: That is correct.

Darshan: Okay. Then, there's the association-related coverage, which is not always advisable. And we'll talk about that in a few seconds... well, a few minutes because I have some other questions. And then, there's the religion or faith-based common fund. And they are either really great or a Ponzi scheme, depending on who you ask and which group you're talking about.

Kenneth: Correct.

Darshan: Okay. So, let's start with the state exchanges. First of all, I mean, everyone knows about going online and going to the federal exchange. How do you even know if I should be going to the federal exchange or to a state exchange? Is there a list somewhere?

Kenneth: Yes. There is a list at the Department of Health and Human Services or at any state-level Department of Health and Human Services, whatever individual states refer to them. You wouldn't have a federal exchange and a state exchange in the same state. In states where they have created their own state exchange, there is no federal exchange. The federal exchanges are for those states that did not create one.

And I will use California and New York or... California, New York, Massachusetts, and a number of other states created their own state exchange. The state exchange is nothing more than a state-regulated... as far as eligibility to participate as a insurance carrier. And I'm going to call them insurance carriers even though they're health plans. To participate on that exchange, you have to meet the requirements, the overriding requirements of the ACA.

But your state may have additional requirements as well in terms of what things have to be covered, what bronze, silver, gold, platinum means in terms of benefits. And rates would all be covered or regulated at the state level. So, in those states that created their own exchange, the state controls what entities can offer insurance coverage, or health plan coverage, on the state exchange and what those insurance policies or health plans must provide as a matter of benefits and what they can charge in terms of rates.

Darshan: So, that-

Kenneth: The federal exchange is basically the same thing. But it's run by the Department of Health and Human Services or CMS. It's not run at the state level. And you have to apply to be part of it and offer the coverage, et cetera, et cetera, comply with the ACA.

Darshan: So, here's my first question. Why do states think that they can do it better?

Kenneth: Historically, healthcare was always delivered at the local level. It wasn't until halfway through the 20th century, 70 years ago, before you had any mega healthcare provider entity, with the exception of four. I guess it's four or five large health plan entities out there. Now, most all health plans are either regional or local because they're regulated at the state level, that whole McCarran-Ferguson Act stuff.

You have Aetnas. But Aetna, in many cases, actually operates on a state-by-state basis under a different name, like Aetna of Texas or Aetna of Georgia. And Aetna is part of CVS now. Centene and WellCare do the same thing. Anthem is thought of as a huge company, which it is. But it's huge because it owns 14 separate Blue Cross Blue Shield plans that operate geographically and that it has several non-branded entities, like Amerigroup, that operate in multiple states.

But most, if you're not talking about Cigna or Anthem or Centene or United, Aetna, and Humana, if you're not talking about them... and quite frankly, they control 80% of the market share... everything else was done at a local level. So, state regulation of insurance has always been the way that it has gone. So, states would prefer to regulate the insurance.

Whether it's called health plan, property insurance, auto insurance, whatever insurance it is, that's offered to the citizens of their state because, in most cases, if the insurance fails, then it falls back onto the state as a matter of taxpayer liability. So, they want to regulate. They want to ensure that the entities have the sufficient capital to pay the claims, et cetera, et cetera. So, they'd rather do it at the state level.

Now, obviously, with the Affordable Care Act, there was a great deal of politics involved, not just finance. So, many states refused to set up a state exchange because they just didn't want to play. Now, I'm not jumping into that battle at the moment. And that's why we ended up with the federal exchanges in those states that did not have a state exchange and then the state exchange.

But that doesn't mean if you were Centene and you're on the federal exchange in the state of Idaho... I'm just picking Idaho as an example... that the state wouldn't also have regulatory authority over Centene in the state of Idaho.

Darshan: Please correct me if I'm wrong. But what I hear you saying is that if I am offering health insurance in the state of Idaho and it's available in the Affordable Care Act, on the federal exchange, if you will, my health insurance will be regulated by both the federal and the state governments? Is that what I hear you saying?

Kenneth: That is correct.

Darshan: Okay.

Kenneth: Your exchange membership and your compliance with the Affordable Care Act would be more regulated by the federal government. And your existence as a health plan in the state of Idaho would be regulated by the state of Idaho.

Darshan: So, really simple question at a practical level for individuals or families, are state exchanges generally better or worse? Again, this is an opinion-based question. So, what do you mean by the word better or worse, as we define it, as-

Kenneth: I would assume that that is very, very dependent upon the state, obviously, larger states with a much larger pool of people who may or may not sign up for a state exchange. Now, remember something. When the Affordable Care Act was passed, they were talking about 40 million people not having insurance. Well, under the ACA exchanges, there's only about 10 million people that have insurance coverage or the exchanges, out of 300 and however many million people we got in this country.

Darshan: Interesting.

Kenneth: The number of people who got coverage through the expanded Medicaid almost doubles what the coverage is under the Affordable Care Act. I mean, that's one of the things with the Supreme Court decision coming up. If they rule that the individual mandate goes down and that the exchanges are unconstitutional or whatever... but don't sever that from the rest of the Affordable Care Act, which is a huge piece of legislation.

The real concern there is not so much the exchanges. It's the Medicaid piece because that's much larger in terms of numbers of people covered. There are probably a number of people who have insurance on the exchanges now. They could probably get health insurance, not on the exchanges. There would be a few or some that would be hurt by it. So, saying something is better. Some states have a lot of choices, some states don't. Some federal exchanges in certain states have a lot of options, some don't.

There are more options now in most states than there were three or four years ago. There were a lot of options at the very, very beginning. There was three years of extraordinarily bumpy rides in terms of finances. And a lot of entities dropped out of providing coverage or providing coverage on an exchange across a given geographic area. But there are more participants now in terms of the exchange members than there were a couple years ago.

So, there are options in most places. Most people have two or three options. Some places, you have five, six, seven to choose from. I mean, one part of better is the number of options you have to choose from. The other is what benefits are covered. In most states, I mean, the bottom level is the ACA requirements. And then, certain states have additional requirements. So that's dependent on the state. And then, of course, it's a matter of cost.

Darshan: Right.

Kenneth: I mean, that's one of the biggest things for an entrepreneur. I mean, if you're a standard entrepreneur, you've got you, your finances, your small business association loan, and whatever few employees you may have as you're trying to get something off the ground. Whether or not you're a small physician office, whether you're a four-lawyer law firm, whatever, you have to provide these things in order to attract and keep employees, not only just pay for yourself and your family.

So, cost is huge. I mean, I know a lot of physicians who have gone the MSO route in order to get benefits at a lower cost because you're also having to pay work comp, payroll, taxes, everything else along with it. And that's a very difficult thing to do if your health insurance costs are going up and up and up. I know several chiropractors who have jumped from the exchange market to those combined pay into the bucket.

Hopefully, the bucket pays you that agreements simply because it was affordable when buying insurance for themselves. And their few employees just wasn't affordable. They couldn't cover it. And they couldn't pay their employees enough for the employee to go out. Now, I suppose that you could go out and only hire people who have other access to insurance.

Lots of people out there, if their spouse works for the state government or the federal government, they'll use that insurance to cover that so you don't have to pay for them. But you can't rely on that.

Darshan: So, before we continue, I just want to make sure I understand. You mentioned-

Kenneth: Or maybe the answer is just go marry somebody who's got really good benefits.

Darshan: That's a really sad state of affairs if you're-

Kenneth: Isn't it? We used to marry people just so that we can immigrate. Now, it's to get benefits.

Darshan: Well, I believe that. But I'm not sure this is that much better. Okay. Here's a question. You mentioned the chiropractor example. You talked about they're paying into a bucket. And hopefully, the bucket pays you back. And you referenced that to be like the medical service organizations. My question for you is... two questions.

Number one, were you saying that the chiropractors belong to MSO? Or they have organizations like MSOs? And if there are organizations like MSOs, do lawyers have similar ones and, I don't know, engineers have other ones or... how does that work?

Kenneth: Well, all right. So, let's look at two different kinds of association products.

Darshan: Okay. So, this one is an association product?

Kenneth: Sort of. Lawyers, physicians, any trade organization unions, particularly unions, offer benefits to members of that trade association that are usually contracted with through an insurance partner. So if you are a member of the American Pharmacists Society... I've forgotten the name of it, sorry... I'm certain that you get emails or things in the mail offering you insurance through that entity.

I get them from The Florida Bar Association. I get them from the Alabama Bar Association. We get them from the American Bar Association. I get them from AHLA where they send me because that entity has an agreement with an insurance carrier that is offering a discounted price on a group policy that you can access because you were a member of the group.

What happened in the past and the reason why the Department of Labor took a dim view of MEWAs and association health plans is that entrepreneurs, some of them fraud, created groups like the left-handed, red-headed people. You were supposed to have an association where the purpose of the association was something other than offering insurance. And in many cases, it was completely just for the insurance part. And the rest of the association was a fraud.

And a lot of times, you thought that you were getting really good coverage when what you were getting was really horrible coverage. And they didn't pay claims, and it was a complete mess. What I was talking about with the chiropractor example wasn't an association health plan. It was one of these... a lot of them are face-based... I don't think they all are... where you pay a stipend, because it's not... I can't call it a premium because it's not... into a bucket.

If there's 10 of you, you all pay in. If there's a million of you, you all pay into the bucket. And you all pay in what you have to pay monthly. And then, you submit claims. And they pay out according... it works like insurance, but it's not regulated like insurance. So, you have to be cognizant of the fact that if they have lots and lots and lots of claims and didn't have a lot of money or someone ran off with all the money... that's not unheard of... then there won't be any money to pay your claim.

And you may have paid in for months or years into this bucket and then suddenly have a $1-million claim for which there is no money to pay you back. And because it's not regulated as insurance, the state isn't going to step in, liquidate the insurance company, and then pick up the costs of the coverage problems for the citizens of the state.

So, faith is a good idea because you have some faith that these people are not fraudsters and that it's going to be run with a degree of actuarial soundness so that, if you ever have a claim, that the money will be there to pay. I mean, not that I'm saying that all of them are like this. But not everybody lost money in Bernie Madoff's Ponzi scheme, no. More people lost money than made money.

But there were a few of them that made a lot of money off of that because all of their stuff was getting paid for by the... you just had to keep getting more and more and more and more people to support the weight of the pyramid. And eventually, those things crash. Same problem with Social Security, although you get many people yell at you for calling Social Security a Ponzi scheme. But that's what it is.

But in that way, you can provide for yourself and your family some benefits related to healthcare costs as long as that entity that you have joined is financially secure and not being run as a fraud. And you just have to have faith that it's not, I suppose.

Darshan: So, we covered state exchanges. You briefly spoke about association exchanges. But we'll talk about association-related coverage. I'll go back to it. But since we're in the middle of talking about religious or faith-based funds, if you will, here's a really simple... well, a couple of questions that pop out of it for me. Number one, how do you ensure... do these funds negotiate rates? Or if a hospital says, "This thing's worth [crosstalk 00:32:41]," I'm paying $2,000.

Kenneth: Okay. So, that depends on the sophistication of the entity, no matter what it is, whether it's the medical services organization providing group benefits, to a combination of small groups that have joined, whether it's a bunch of unions that are together, whether it's an actual MEWA, whether or not it's one of these groups, or even if it's a self-funded health plan. The sophistication level of the entity depends upon what you do, and also the size.

Let's jump back a little bit. So, you're an employer. You've got 100 employees. And you've decided that what you want to do is you wanted to be self-insured. Or you're making this decision as to be self insured or fully insured. If you're in Florida, where I am, you can go to Blue Cross and Blue Shield of Florida and sign up for group health insurance and cover everybody and pay the premium.

Or you could create a self-funded health plan, meet the requirements of that, and then hire, for an administrative fee, Blue Cross and Blue Shield of Florida to run your self-funded health plan. So now, Blue Cross and Blue Shield of Florida provides all of the administrative services that the health plan needs.

But it doesn't pay the claims. They're using the employer's money to pay the claims as opposed to using their own money. It's just a matter of who's taking the risk. Is the employer taking the risk? Or is the insurance company taking the risk? So, what you want to do with those groups is the more sophisticated you become, the larger you have, the more resources you have because you have to pay for this as a fee.

You would want to engage a third-party administrator, a claims administrator, and network-building entity in order to shift the administrative headaches of running that plan to another party. And then, you would get their benefit. So, if you had access for the fee that you were paying Blue Cross and Blue Shield of Florida to run your self-funded health plan, you would have access to the Blue Cross and Blue Shield of Florida network and their contracted rates. So, yes, in that situation, you would.

In the association plans, that's hit or miss. I mean, if you're looking at the AARP association plan or the AAA association plan, those things have been around for a long time. They are very sophisticated, have lots of members. And they have other entities that are participating in running those. If it's the left-handed, red-headed people, probably not.

So, with regard to the faith-based... and I'm just using that because they're not all faith-based... the buckets that you just pay into, I'm not really sure whether or not those work or whether... I think most of them have an agreement with doctors or facilities who have contracted with the entity for a specific rate. But it's not going to be the deep discounted rates that you might get from a major health plan because they just don't have the volume.

I mean, if I'm Blue Cross and Blue Shield of Florida and I've got millions of millions of members in the state of Florida, I can't go out to a hospital system and negotiate a rate lower than a lot of people could because I've got the lives. And if you're not on my network, then those people are not coming to your facility to get healthcare.

So, I don't think that those... the bucket-type things have that. They don't have that negotiating power. But I think that most of them do have some loose arrangements with other entities. And they're also what I used to call... and I know it's a terrible thing to call them... the second-tier networks, Three Rivers, MultiPlan, all of those, where it's a secondary network that a lot of insurance companies use as well to expand coverage into geographic areas where they don't have a network built. I mean, you could access those.

You wouldn't get the same discounts that you would in terms of adjustments. It's that little line on your EOB when you get it in the mail or online that has insurance adjustment. They sent you a bill for $1 million. And then, the insurance adjustment was $900,000. That's the contracted rate part. And then, your plan pays its part. And you pay your part, which is called co-insurance. I mean, that's-

Darshan: I'm sorry. Did you say blue insurance?

Kenneth: Co-insurance, C-O.

Darshan: Oh. Thank you, co.

Kenneth: So, that 80-20 thing or 70-30, where they pay 70% and you pay 30%, your 30% is called co-insurance.

Darshan: Got it. So, what I'm hearing... and correct me if I'm wrong, Kenny. Number one, I think the association-related coverage is actually very similar to the faith-based or the bucket coverage. They're basically just buckets of money or pools of money, if you will. And whether it's an association of red-headed stepchildren or red-headed and left-handers or it's Catholics or it's for this or whatever it is, they're all managing a pool of money.

The only difference being that the association-related coverage may actually be coverage while the faith-based one may not actually qualify as insurance. Is that the distinction?

Kenneth: Yeah. The short answer is yes. The associations in some states are, in fact, regulated. They are loosely regulated by the Department of Labor. The buckets aren't regulated at all, in most states, because it's just a matter of contract. There's no insurance aspect to it at all. So, you wouldn't have hardly any regulation of those at all. There's been pushes, I think, in multiple locations to try to regulate them. But I'm not sure how you would.

Darshan: Right.

Kenneth: I mean, it's not illegal.

Darshan: So, here are a couple other questions that pop out of it for me. One is, obviously, we spoke... well, I'm going to recap and then go from there. So, we talked about companies providing insurance through themselves. We talked about MSOs. We talked about state and federal exchanges. Then, we talked about association-related coverage. And we spoke about faith-based or religious funds, if you will.

Obviously, there are two other... well, one other I can think of, which would be COBRA, which is really a continuation of your company providing the insurance. But I'm in a situation where my [inaudible 00:40:20] expiring. And I'm looking at, okay, what do I do next? And they referred me to... I think it's called HealthSherpa. But then, you mentioned Oscar. And I know Amazon's doing some stuff. How did these things fit in?

Kenneth: Oscar is an insurance company. It's a health plan. I mean, it was founded by Ivanka's husband's brother and some other people that formed Oscar in the northeast. I think it's headquartered in New York. And they have expanded to multiple states. That's a full-fledged health plan that is growing. I mean, that falls into the, are there new entities joining that rank? And there are very, very few of them.

Darshan: Why into that market? It seems to already be dominated with-

Kenneth: Well, then, that's the problem. That's why nobody wants to put money into it. I mean, I guess if you have a new mousetrap and Oscar considered themselves to be a new mousetrap... plus, they had lots of financing, lots of money behind them. And they have done fairly well. But there are very, very few of those. You have more entities joining the government program stuff, the Medicare Advantage marketplace, Medicaid managed care marketplaces, where you can trade on your name.

I mean, if you're... and I'm just picking this out of the air... you're Emory and you're in Atlanta and you've got a great name and reputation as being a healthcare provider, you could start a Medicare Advantage plan and be fairly confident that you could grow the numbers of people joining your health plan by trading on your name in a given area. I know that the UAB medical complex in Birmingham has a health plan. It's a company that's called VITAS or... not Veritas, something like that.

But that's the same thing. They trade on their reputation as a provider in order to get membership on the health plan side all the way up to entities, obviously, like Kaiser and Geisinger and Partners, that all started as a combination provider health plan to entities like Spectrum, which is a large hospital system in Northwest Michigan, that has a health plan that's called Priority. And revenue-wise, Priority is actually bringing in more money than the health plan on the health provider side does.

Or if you jump to Texas, where the Baylor Scott & White system is, they have the Scott and White Health Plan. But that's their traditional tail-and-dog situation. The Health Plan is much smaller in terms of everything than the actual health system. Priority and Spectrum is actually reversed where Priority is bigger than Spectrum in terms of revenue. But you have to have money to make money, so they say.

Darshan: Right.

Kenneth: So, a lot of the entrepreneurial dollars, the PE money, the venture capital is going into administrative services companies, companies that provide administrative services to providers. Providers, historically, have not been very good business people, left-brain, right-brain thing, I think. So, they will often pay someone else to handle that type of thing for them. And they get benefits of scale.

So, if I'm putting my money into the health insurance or health plan world, rather than starting a PBM... I'll put it in pharma words... rather than starting a pharmacy benefit management entity, what I'll do is I'll create a company that assists other PBMs on identifying specific targets for reduction in utilization.

Darshan: Yeah.

Kenneth: So, I don't have to pay claims. I don't have to bring in members. I don't have to worry about rebates. I don't have to do any of that stuff. My job is to help that other company save money. And there are lots of those companies, companies that do utilization review management, companies that do pre- and prior-off and post-off reviews of cases, tons of back-to-work entities that assist workers' comp plans and plans to get people back on the job faster so that you reduce the amount of workers' comp expenses that a company has.

I was looking at this earlier where Lyft, today, has announced that they're now interoperable with Epic, which is a big thing. So, if you're using non-urgent ridesharing to get your membership to the doctor or to the pharmacy so that they actually get the care that they're supposed to get... because I told people all the time, when I practiced law, "It is cheaper to keep people healthy or to treat them after they first get sick than it is to treat them after they got really sick."

So, you still have to pay the bill. So, treating someone and paying for their stage-one cancer is much, much less expensive than treating them and paying for their stage four cancer.

Darshan: Right.

Kenneth: So, that's just an example. I mean, if you got into the rideshare part of things, there are entities out there for value-based contracting that not only provide services for the administration of the office, but they do the contracting. They do all the billing and coding. They provide best practices and streamlining on how the care is provided to ensure or help ensure that you're reducing your utilization while increasing quality so that you get the bonus payments at the end of the year.

And they're willing because they feel that they're doing this really well. They're willing to... I'll split with you if you make 100 bucks on the bonus at the end of the year. I'll split it with you 50-50 so that you make 50, and I will make 50.

Darshan: Right.

Kenneth: But if you lose 100 bucks, it's all on me.

Darshan: Right, right.

Kenneth: So, there's a lot of those companies springing up. And all of those companies are geared towards healthcare savings, reduction in cost, quality reduction and utilization. You can't just say, "Don't everybody go to the doctor?" For that very reason. You don't go to the doctor. You don't get diagnosed. You don't diagnose. Your blood pressure swings way out of control. You have a stroke. And it costs a whole lot more money to take care of you after you've had a stroke than you did if we could just manage blood pressure.

Darshan: Right.

Kenneth: So, there's a lot of those companies out there. So, when you think about being entrepreneurial on that side, there's a lot of these companies that are not, oh, I'm going to be an insurance company. That's a bad move unless you're Oscar.

Darshan: Right.

Kenneth: But again, if you're on the entrepreneur side, if you're the, "I need to get healthcare coverage so that my family has healthcare coverage or my few employees," hopefully, more employees later, "will have healthcare coverage," there are options. I can't tell you that any of them are cheap. Most of them are not, which is why I think some of these people are drawn to the pay-into-a-bucket concept because they're looking at it from the same thing that a corporation looks at the cost of insurance.

It's an asset to the entity, but it has to have a return. If I pay out $300,000 over my lifetime in disability insurance but I'm never disabled, I, at the end of my life, collected nothing and burned $300,000 in my backyard.

Darshan: Right.

Kenneth: You buy disability insurance, but you hope never to be disabled. So, it's a weird thing. But if you're a corporation and you're buying errors and omissions coverage, you know that you're going to have errors and omissions claims. What you want is to pay less in premium over the years. And you get back in the insurance coverage. Same thing with health insurance. There are lots of people out there who are healthy most of their lives through good living or genetics.

And they or someone has paid on their behalf hundreds of thousands of dollars over their lifetime in insurance. And they've collected almost none of it back. But almost all of that has gone to pay for someone else because someone out there is draining the system.

Darshan: Right, right.

Kenneth: So, if your family is healthy and you're basically just worried about the catastrophic situation, a cancer diagnosis, a stroke, a long-term medical condition where the costs are going to be very, very high, you're paying into this thing to help defray the cost of others in hopes that, if it ever happens to you, that bucket will be there to pull you out.

Darshan: Right. So, two questions from that. And I know we're running tight on time right now. But one is, is it possible to just get catastrophic coverage? Is that a thing?

Kenneth: Well, most people would consider the lower tier ACA coverage to be catastrophic. One, most of them have high deductibles. So, you're looking at a $3,000, $4,000, $5,000, $6,000 deductible. I mean, let's face it. If you had to have 90% subsidization by the federal government to afford your insurance coverage, you're not going to be able to afford a $6,000 deductible.

Darshan: Right, right.

Kenneth: So, most people consider that to be catastrophic coverage. Does it provide other things? Yeah. All plans like that have to cover the 10 basic... I forgot what they call them. I mean, contraception and preventative care and immunizations and stuff like that, you get. So, it's not completely without benefit. I mean, it's possible, even if you're only paying 10% or 20% of the cost, that you'll pay 10% or 20% of the cost and never get a dime back, which I always thought was one of the dumbest things in the world.

Why are we paying subsidies? It's just subsidizing the insurance companies. That's all it is. But you can buy catastrophic coverage. The question is, is that what you really want to do. I mean, I suppose it just depends on your financial circumstances. I mean-

Darshan: My last question is something you hinted at and I'd heard of, but I didn't fully understand what grouping it would fall under. You talked about the Kaiser plan. And you talked about all these other hospital entities that have plans. Am I able, sitting in Pennsylvania, sitting in Philadelphia, to go, "You know what, Kaiser? I've heard great things about your plan. I'd like to have it." And the side effect that comes out of it is, "Can I get coverage outside Texas?" Or California, wherever it is.

Kenneth: Those plans, whether it's a Priority for Spectrum or whether it's Geisinger or whether it's Kaiser or whether it's any of the provider-based plans, you were only going to be able to access that plan where they have a network. Most of those entities, the primary network for hospitals and physicians is themselves.

Darshan: Got it.

Kenneth: So, my guess is 75% of the care that Priority pays for is from Spectrum or Spectrum physicians. But they wouldn't have a network in Detroit or in Chicago. So, you can't buy the Priority plan at... that's one of the primary differences between the indemnity plans for health coverage and health plans. So, indemnity plans just paid you back. You paid in. There was a schedule of benefits. Claims got submitted. It didn't matter who provided it or where it was. They paid whatever the insurance contract required them to pay.

On a health plan, most of those are network tied. So, even though you're not tied like the old HMOs, although there are still HMOs around and they are coming back, they just call them narrow networks. So, where you're tied to a given list of physicians, specialists, DME providers, hospitals, et cetera, even on the expanded versions, the point of service or the PPOs where you've got a larger network, you're still tied in to that network except for urgent or emergent care.

I'll use Blue Cross and Blue Shield of Florida as an example. I mean, they've got the largest network in Florida. You could walk in basically anywhere in the state of Florida. And whoever it was that you're being treated for is probably contracted with Blue Cross and Blue Shield of Florida. If you happen to be in Atlanta and you need healthcare coverage, because of the Blue card, you could go there and get coverage basically anywhere because the Blues have that reciprocal arrangement between the Blues that allows you to use your card basically anywhere there's a Blue Cross Blue Shield physician or provider.

I mean, if you're an AvMed member in Florida, you have to use the AvMed network unless it's an urgent or emergent situation. And the same thing would be true if you were out of the network area. You can't just go get elective care in California and then send the bill to AvMed and expect AvMed to pay it. If you have been in an emergency room in California, that's a different story, but not if you just went to California and decided to have your tonsils out, whatever.

Darshan: Right, right, right. Kenny, you've been extremely kind of the time, but this was incredible. Thank you. Thank you. Thank you so much.

Kenneth: You're welcome.

Darshan: I'm looking forward to having you on again.

Kenneth: All right. I will talk to you soon. And just for you, go Eagles. I now have to go wash my mouth out with soap.

Darshan: Thank you.

Kenneth: I'll talk to you later.

Narrator: This is the DarshanTalks Podcast, regulatory guy, irregular podcast, with host, Darshan Kulkarni. You can find the show on Twitter, @darshantalks, or the show's website at darshantalks.com.

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