Higher Quality, Lower Costs
The Pacific Health Coalition brings together healthcare providers and self-insured businesses for a healthier Alaska
The Affordable Care Act has specific requirements for many businesses to provide some sort of healthcare benefit to their employees. In general, businesses with more than fifty full-time employees are considered “applicable large employers” and are subject to employer shared responsibility provisions, meaning they must provide affordable healthcare coverage with “minimum value” to employees and their dependents. If these employers choose not to provide this benefit, they may be required to pay an employer shared responsibility payment to the IRS.
Smaller businesses with fewer than fifty employees may not be required to provide benefits, but both in Alaska and across the country businesses are competing for qualified workers in a shrinking workforce. Increasingly, employees want to work for companies that offer more than just competitive wages, and a commitment to a healthy work-life balance and generous benefits can tip the favor to one company over another.
Bottom line: every business with even one employee needs to at least consider if or how to provide healthcare benefits.
That holds true in Alaska, which has the distinction of being an unfortunate “number one” when it comes to healthcare: worldwide, the cost of healthcare is highest in the United States, and among the states, healthcare is highest in Alaska. Alaskans and Alaska companies contend with the highest healthcare costs in the world.
So how a company pursues providing health insurance options to its employees is an important decision. Many businesses choose to partner with an insurance broker or directly with a healthcare insurance provider, while others find self-insurance a viable option. According to HealthCare.gov, a self-insurance plan is “usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third party administrator, or they can be self-administered.
The clear advantage of self-insurance is the amount of control and autonomy a company has. The business can set rates for its employees, control administrative practices if it chooses, and determine the level of coverage (as long as it meets minimum federal requirements); however, the cost of healthcare services is of course determined by healthcare providers.
Insurance companies such as Premera Blue Cross and Moda Health help reduce costs for their customers by negotiating the cost of services with healthcare providers. Insurance providers leverage their number of customers to their advantage by creating networks of preferred healthcare providers: healthcare providers reduce their costs but see a higher influx of patients backed by insurance in return. But Premera Blue Cross serves more than 2 million people; even a large company with 5,000-plus employees doesn’t have nearly the same negotiating power when it comes to reducing healthcare costs for itself and its employees.
So how can self-insuring organizations provide a high level of access to quality care while keeping costs manageable? That’s where organizations like the Pacific Health Coalition can make a difference.
Pacific Health Coalition Overview
“This Coalition was created in 1994,” says Pacific Health Coalition Executive Director Fred Brown. “Originally the idea was if they [iron workers, laborers, electric workers, and teamsters] could aggregate their purchasing power, without sacrificing their autonomy, they could not only get better pricing in the marketplace but also have some influence over ensuring quality outcome.”
In the mid-90s the organization’s name was the Healthcare Cost Management Corporation of Alaska, but by 2009 it had grown to represent fourteen different employee groups—about 45,000 people—and was growing into the Pacific Northwest. The Alaska-grown Pacific Health Coalition, as it’s called today, represents more than 250,000 people, the majority of whom are in the Pacific Northwest, including members in Washington, Oregon, Idaho, Colorado, Montana, California, and Nevada, in addition to Alaska.
The Pacific Health Coalition negotiates discounts with hospitals, physicians, and physician groups as well as vision, hearing, disease management, and prescription drug service providers. The employees ultimately represented by the Coalition work at organizations ranging from nonprofits and unions to government entities or large corporations. Member organizations range from 100 to more than 7,000 employees.
Because of this variety in size and organization type and goals, it’s important for every member of the Pacific Health Coalition to have flexibility and to retain a personal connection to their healthcare. “We have a menu of options; there are more than thirty programs, and none of our plans buy everything. [Members] pick and choose,” says Greg Loudon, principal and benefits practice leader at Parker, Smith & Feek and healthcare consultant for the Coalition, which he’s been working with since 1996. “You might choose them all, you might choose one or two, you might just use our health fairs, or you might just use our clinics—we’re not trying to merge everybody together,” Brown says.
The Pacific Health Coalition is a nonprofit organization funded by member fees. There’s a one-time, per-employee fee to join the Coalition, after which members pay small administrative fees, depending on which programs they choose to participate in.
The Coalition functions like a rental network, according to Loudon. In a rental network, an employer looking to save costs reaches out to a vendor that negotiates lower healthcare costs. Then the employer pays the vendor a percentage of the money saved. “Our access fees are 1.5 percent of the gross discounted charges,” Loudon says. “If you’re saving 60 percent, for example [‘And that’s not a ridiculous number,’ Brown interjects], you’re going to pay a 1.5 percent access fee on the discounted 40 percent charge, and that’s how we fund the organization.”
From time to time, fees for specific programs are waived or returned. “Over time trustees or the board of directors have decided to waive access fees if we didn’t need it on a particular product or we have met goals. We have had events where we’ve returned some money back to participating health plans, because our goal is not to build a huge entity—our goal is to save money for our members,” Loudon explains.
The Coalition also provides additional perks for free, such as health fairs every fall across the state that are open and available to its members. The fairs provide access to preventative care services and low-cost screenings including flu shots, blood screening, prostate-specific antigen testing, and thyroid testing.
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In many ways the Coalition operates similarly to like-organizations around the country. But the Pacific Health Coalition has also been a forerunner in developing innovative ways to meet its goals of saving money and increasing access to care.
“One of the concepts that we had maybe ten or twelve years ago was on-site clinics, which are really popular,” Loudon says. The clinics, or Coalition Health Centers, are an alternative to a traditional doctor office visit. Currently there are two year-round clinics, one on the Alaska Regional Hospital campus in Anchorage and the other in the Riverview Business Park in Fairbanks. The clinics provide primary and preventative care, chronic and acute illness prevention and management, and urgent care to Coalition member health plan participants. There are also x-ray, laboratory, EKG, and prescription medication services.
The Pacific Health Coalition owns the clinics, which are staffed and operated by Beacon Occupational Health & Safety Services, a specialist in onsite and rural healthcare and safety services.
The cost of primary care services has been cut by approximately 50 percent at the clinics, Loudon says. “There’s more competition,” Brown adds.
The organization is looking at how to make these clinics available to even more people. “There are some outlying communities [such as Dillingham and King Salmon] that operate really heavily during the fishing or crabbing season where there’s either a single [healthcare] provider or no provider. So we’ve been trying to see what kind of interest there is from fishing companies,” Loudon says.
The difficulty is that fishing in many communities is so seasonal that it’s hard to make even a small or specialized clinic pencil out. But with Beacon’s expertise in rural Alaska and the Coalition’s ability to target a specific audience, a seasonal clinic may be a good option. “It could be a way that our Coalition could provide value to those employers that don’t have any resources to start a clinic and run it on their own,” Loudon says.
Another way the Pacific Health Coalition is addressing healthcare issues is finding ways to include a wider range of businesses.
The Coalition is partnering with Aetna in Southcentral to give smaller employers access to its rates through the Anchorage Mat-Su Community Plan. “We’re trying to be responsive to legislators and others who are saying, ‘It’s great what you do for your plans, your large employers or your union group, but what about small mom-and-pop, small businesses? They’re getting drowned in the cost of healthcare, they’re not able to afford providing it for their employees anymore. What can you do to help them?” Brown explains.
“So being responsive to that, and certainly aware of political sensitivities, we established this program with Aetna where we are making our direct contracts available… using Aetna, for regulatory reasons, as the conduit,” he says. At present, businesses with as few as fifty employees can access Pacific Health Coalition rates through Aetna, but the goal is that companies with five or even fewer employees will have the same opportunity. “There are some regulatory hoops to get approved by the state to do that, but we’re actively moving in that direction,” Brown says.
The extremely high cost of healthcare in Alaska, combined with the state’s well-known obstacles like severe climate, lack of infrastructure, and expensive and often limited transportation, have driven the Coalition to find solutions through innovative initiatives and programs. But although that innovation was born in Alaska, it can have applications elsewhere, and the Pacific Health Coalition’s programs here and in the Pacific Northwest have gotten attention on a national level.
In 1996 the Coalition joined with similar groups from around the country and formed the National Labor Alliance of Healthcare Coalitions (NLAHCC). As of October, Brown is the president of the executive committee that guides the NLAHCC. He was elected after running on a platform of “providing better service to coalition members, increasing strategic engagement in national healthcare policy and efficiencies leading to better care and more savings.” Brown has been the executive director of the Pacific Health Coalition since 2009, and in that time its membership and revenue have grown more than fourfold.
“The executive director of the NLAHCC [Louis Malzone] said, ‘We want to do what you do in Alaska. You’re innovative, you’ve shown a lot of growth, so here’s your reward—you’re president, tell us what to do,’” Brown laughs.
As an example, the Pacific Health Coalition partnered with Bridge Health, which has a business model in which it contracts with healthcare “centers of excellence” across the United States. A center of excellence is a healthcare provider with health outcomes that place it in the top 20 to 25 percent of healthcare providers in the country. Bridge Health then develops contracts with those centers that reduce costs in return for bringing patients from across the United States to the centers.
“The NLAHCC has already incorporated our contract [with Bridge Health] and they offer it to members across the United States,” Brown explains. The national organization has also contracted with a telehealth provider that the Pacific Health Coalition helped pioneer.
A benefit of the NLAHCC implementing contracts is that the negotiating power behind them is no longer regional but on a national scale, with twenty-two member coalitions and more than 6 million individuals represented.
“Some of [the coalitions] have focused on different things,” Loudon explains. “One that’s based out of Wisconsin focuses on prescription drugs. So they hired their own pharmacists and auditors and staff people, and we use them to monitor our pharmacy benefit managers and our drug plans, and that’s all they do.”
As a group, the twenty-two coalitions have many opportunities to share both lessons learned and success stories to improve the affordability of—and access to—care.
Without healthcare service providers that are also invested in quality outcomes and affordable costs, the whole system would fall apart. The Pacific Health Coalition’s longest-running partner in Alaska is Alaska Regional Hospital. “In the late ’90s the Coalition contracted with Alaska Regional, and the deal was that we would send our people there or give them incentives to go there and, in exchange, we wanted arrangements on pricing and the opportunity to talk about quality if there were ever any issues. To this day, we still have regular meetings with them to talk about whatever issues may come up,” Brown says.
“Our collaboration with the Pacific Health Coalition is all about decreasing the cost of care and improving healthcare quality in Alaska,” Alaska Regional CEO Julie Taylor explains. “We work together to provide value-added services, such as annual health fairs, to ensure minor illnesses don’t become major ones that are more difficult and expensive to treat.”
And the partnership has been working for both organizations. In its first year under contract with Alaska Regional, the Pacific Health Coalition saved millions of dollars, and the contract with Alaska Regional is one of the reasons the State of Alaska joined the Coalition several years ago.
While each of the organizations have their individual goals, they often overlap. “We agree on many policies and issues that protect patients… Both of our organizations are invested in quality care and reasonable costs. We are both committed to Alaska and see opportunities to grow our economy through efficient healthcare delivery,” Taylor states. “Both of us serve a variety of Alaskans, including healthcare workers, office workers, law enforcement officers, teachers, and people in the building trades.”
One of the newest healthcare providers to enter an agreement with the Coalition is the Anchorage Fracture & Orthopedic Clinic, which has locations in Anchorage and Eagle River. “We see the Pacific Health Coalition as an organization that takes care of the people who build Alaska, who teach our kids, and keep our towns running. Being in a PPO [Preferred Provider Organization] agreement with the Coalition just deepens our involvement with the community as a whole,” said Brandon Ousley, Anchorage Fracture & Orthopedic’s CEO, in an announcement about the partnership. Brown says Anchorage Fracture & Orthopedic was one of a few orthopedic groups that submitted proposals, but it rose to the top, and the final contract has “drastic savings” for Coalition members.
The healthcare industry in Alaska is one of its bright spots, providing a large number of well-paying jobs. But the cost to patients and businesses for healthcare services or insurance is the other side of Alaska’s healthcare coin, and it’s an ongoing effort to find solutions in the state and beyond. “It starts with being the best we can be with patients in mind,” Taylor says. Brown says, “We’re going to try to replicate what we do with our coalition across the country. And I think that some of the other coalitions are pretty excited about what we’re doing—our growth and level of influence speaks for itself. We think we do have ideas, and concepts, and policies that could be applicable across the country, and so we’re excited to be given the opportunity to take a leadership role in that effort.”
In This Issue
Industrial Support Services Sirectory
The August issue of Alaska Business features the inaugural Industrial Support Services special section and directory in which we place a spotlight on the organizations that help keep the state’s industries running smoothly. Alaska’s network of support services companies is nearly as vast as the state itself, encompassing an extensive and varied collection of companies.