Peak Health Alliance: Summit in Sight

Before the Trailhead

The cost of health insurance has been out of reach for many residents of Summit County for quite some time. In 2014, the Kaiser Family Foundation found that Summit County had the highest insurance prices in the United States. In 2017, FiveThirtyEight, a national data journalism site, covered the “Summit County paradox,” noting that the county has the country’s longest life expectancy even though its health insurance prices are among the most expensive in the nation. While resort communities attract affluent visitors, many year-round residents struggle to pay for health insurance on top of the high cost of housing.

New data from the 2019 Colorado Health Access Survey (CHAS) show that Summit and neighboring ski resort counties (Health Statistics Region 12) have the highest uninsured rate in the state — more than twice the state average. Residents have been open about their struggles to afford health insurance and medical care, which can result in foregoing needed care due to the cost.

Summit County leaders have tried for years to address the high cost of health insurance. When bills they supported failed several years in a row at the state legislature (see timeline below), they took matters into their own hands. 

Enter Peak Health Alliance, a nonprofit county-level health care purchasing alliance made up of small and large group employers and those who buy health insurance on the individual market. Banding together enables Peak to directly negotiate with both providers and insurers to control costs. The innovative model was stood up by the Division of Insurance and buy-in from local legislators, county commissioners, business leaders, and others who collaborated to make Peak a reality.

Peak Health Alliance is not affiliated with Summit County government. The local government has, however, worked closely with Peak through agreeing to participate as an employer and providing early financial support.

Conversations about what would eventually become Peak started in 2013 with the implementation of the Affordable Care Act, but the work began in earnest in 2018. Summit leaders wanted to learn whether residents were leaving the county to get health care. They acquired more than 60 percent of the county’s claims data through working with the All-Payer Claims Database (APCD), and they reached out to the area’s largest self-funded employers to request their insurance claims data as well. Data in hand, they commissioned a market analysis, funded by The Summit Foundation, which was released in March 2018. In total, data from the APCD and the five largest self-insured employers provided claims information for more than 90 percent of covered people in Summit. The analysis showed Summit County businesses and residents could save an estimated $4.6 million if inpatient payments were to be reimbursed at 150 percent of Medicare rates and outpatient payment at 250 percent, rather than at current rates.

The 2019 Colorado legislative session paved the way for Peak by passing Senate Bill (SB) 4, which modernizes existing state statute designed to enable consumers to negotiate insurance rates through health care cooperatives. The bill was championed by the DOI, designed with local input, and sponsored by three legislators from high-cost mountain districts, including Summit’s Rep. Julie McCluskie, a Democrat. SB 4 explicitly allows community purchasing alliances to operate in Colorado and negotiate coverage for individual market enrollees.

Peak’s primary goal is to lower the price of insurance premiums. Its leadership team, made up of health care and health insurance experts, local elected officials, business owners, and consultants, has additional goals, such as using Peak’s coverage to improve access to mental health care for the county’s residents.

Peak Health Alliance faces a steep climb. Given that this model has never been tried, will it work as designed for the local community? Will it be sustainable, weathering both pushback from providers and insurers and ongoing regulatory changes in Colorado’s insurance market? The answers will matter far beyond Summit County, as local leaders and Gov. Jared Polis are eager to try the idea elsewhere in Colorado.

A Lay of the Land

Currently, when employers or individual market customers shop for health insurance, they look directly to insurers for plans and pricing. Those insurance carriers have already negotiated and agreed on reimbursement rates with hospitals and providers, which largely determine the price of health insurance for consumers.

Under the Peak model, Peak Health Alliance assumes the up-front role of negotiating prices with the hospital for its enrollees. In Summit County, the lone hospital is St. Anthony Summit Medical Center, part of the Centura Health network. Peak has also partnered with non-hospital providers in the region such as Summit Community Care Clinic and Swan Mountain Women’s Center. Peak then solicits bids from different carriers to underwrite plans that will reimburse at the rates Peak and the respective providers agreed upon and pass savings on to consumers. Thanks to this process, enrollees will see about a 20 percent decrease, on average, in their premiums next year. In 2020, Bright Health will insure Peak Health Alliance plans for the individual market, and Rocky Mountain Health Plans will insure plans for the small and large group markets.

Peak does not cut private insurance companies’ role out of the market. Instead, it has taken over their role of negotiating with hospitals, acting on the belief that Peak will be able to drive a better bargain for its members than traditional insurance companies. Insurers still play key roles in the Peak system, including a responsibility to manage care to ensure that savings from lower hospital prices aren’t offset by an increase in the use of health care by Peak members.

The contracted insurers also bear the financial risk for covering all claims, which sets Peak apart from co-op models.

Peak plans are offered on the state exchange, Connect for Health Colorado, and also off the exchange. Its products are available across all metal tiers. Local residents can buy Peak coverage through brokers or directly from the contracted carriers, Bright Health and Rocky Mountain Health Plans. Enrollment for the plans began November 1, with coverage beginning on January 1, 2020. More comprehensive Peak plans feature a $0 copay for mental health visits and three free primary care visits among their benefits. All plans offer pre-deductible coverage for mental health services.

Peak has generated interest and excitement around the state and nationwide. But with great expectations comes great pressure. “Peak has to work,” McCluskie said.

The Road Less Traveled 

Is Peak Health Alliance truly a unique model and the first of its kind, as proponents have claimed? The answer appears to be yes. 

“I can safely say that I am not aware of any purchasing collaborative like Peak anywhere else in the country,” said Dan Meuse, deputy director at Princeton University’s State Health and Value Strategies.

Employer coalitions and purchasing collaboratives exist elsewhere in the country, but they focus on negotiating with insurers. Peak is different. Its leadership went straight to both carriers and providers and publicly disclosed the prices it had negotiated. Hospitals and insurers often blame each other when consumers complain about the high price of insurance. Peak’s financial transparency could make it harder to credibly engage in this sort of finger-pointing.

A few notable initiatives across the country are thinking along the same lines. For example, The Alliance in Madison, Wisconsin, brings together the purchasing power of hundreds of small employers. A national effort called the Health Transformation Alliance is working to make group purchasing arrangements in certain markets across the country. Some regional business coalitions, such as Employers Health in Ohio, purchase Pharmacy Benefit Manager (PBM) and other services jointly. And closer to home, St. Vrain Valley and Boulder Valley school districts succeeded at securing a discount on administrative fees from health plans.

While the names sound similar, Peak is also not designed the same way as other “health alliances” operating in Colorado, such as the Valley Health Alliance or North Colorado Health Alliance.

Trail Markers

Hikers in the high country know to look for cairns — rock piles that mark the trail. Peak Health Alliance has its own trail markers that will indicate whether it is on the right path and measure how far it has gone.

LOWER PRICES: Summit residents who join Peak will see substantial savings in 2020 from the combination of lower rates for Peak and the statewide reinsurance program. Rates in Summit County will be 39 to 47 percent lower than they would have been without the two programs. The reinsurance program alone has brought a 30 percent price cut in neighboring counties where Peak does not operate. Prices will be the key factor on which Peak is judged, and success will depend on the alliance’s continued ability to keep prices low in 2021 and beyond.

NUMBER OF COVERED LIVES: Peak’s leadership team hopes to gain 6,000 enrollees in the first year from a combination of local governments, the group market, and the individual market. There are about 22,000 possible customers in Summit County, and currently about 2,000 people enroll in plans through the exchange. We will know by January 15, 2020 — the last day of the open enrollment period — whether Peak reaches its individual enrollment target. Group enrollment extends throughout the year.

WHO ENROLLS: The demographics of the new Peak enrollment pool will affect costs and risk for carriers. Could enrollees be less healthy on average than projected, or could the program end up catering to wealthier Summit residents rather than those who need financial relief the most? 

WHAT PLANS THEY SELECT: Insurance carriers set their prices based on probability of revenue. Peak’s silver and bronze plans offer different levels of benefits, and the alliance has priced plans based on expected enrollment. But people might select a different mix of plans than expected, which would complicate business for Peak’s carriers and possibly lead to price hikes in 2021.

WHERE THEY GO FOR CARE: The Peak model is partially based on a belief that incentivizing local care is both beneficial financially for its contracted providers and more sustainable long-term for the community’s rural health system. Keeping patients in Summit County should help Peak’s hospital partner, St. Anthony Summit Medical Center, but the benefits depend on how much more business Peak members will bring to the hospital. The market analysis commisioned by Summit County leaders showed local hospital officials that residents were often leaving the county to seek medical care. Peak therefore hopes to incentivize enrollees to get care locally whenever possible rather than traveling to Denver or Vail.

WHAT TYPE OF CARE IS RECEIVED: It will be critical to monitor use of pre-deductible services, such as mental health visits.Lower insurance premiums may entice more Summit residents to buy or upgrade coverage, which in turn could increase the use of health care services. Too much new utilization for health services could negate premium savings for Peak’s carriers and complicate future efforts to renew their contracts. 

AVAILABLE DATA: Peak leadership used APCD data and claims from self-insured employers to help it negotiate with the local hospital. Additional data specific to cost drivers, claims, and utilization will be instrumental in measuring the impact and evaluating the success of Peak over its first year. 

CONSISTENCY: Insurers need the predictability of repeat customers to accurately price their policies. Will Peak’s enrollment pool be stable in both the individual and group markets?

THE HOSPITAL'S ROLE: How, if at all, will Peak affect the financial performance of St. Anthony Summit Medical Center, which has enjoyed a profit margin of upwards of 30 percent? The legislature put new financial transparency requirements on hospitals in 2019, and the disclosures could provide a more accurate picture of hospitals’ financial conditions than has been available to date.

SUSTAINABILITY: Does Peak continue to enjoy solid backing from local leaders, community members, and statewide partners, specifically the area hospital, the DOI, and the governor’s office? Sustainability looks more likely if prices stay down and enrollment is stable or growing.

Parallel Paths?

Peak isn’t the only new idea in Colorado health policy. The legislature has launched a reinsurance program and the Polis administration is working on a state “public option” proposal, among other developments.

These programs were developed independently, and legislators have been focused more on passing bills improving affordability than on figuring out how the various plans fit together. Different initiatives can’t necessarily prove their strengths — or have their weaknesses exposed — independent of each other. “What we don’t have,” said Rep. McCluskie, “is the luxury of time.”

Reinsurance 

Like Peak, the reinsurance program will start operating in 2020. It will lower premiums on the individual market by a statewide average of 20 percent — even more on the Western Slope and along the I-70 mountain corridor. 

The savings will be substantial. Polis’ office calculates that the average family of four on the Western Slope who buys individual market insurance will save $10,000 in 2020.

However, the reinsurance program is funded in part by a fee on hospitals. Peak was able to reduce insurance prices by negotiating lower payments to the local hospital for services. Both programs rely to a degree on the same funding source, and it’s unclear how much money hospitals have to give over the long term.

The reinsurance program was only approved by the legislature for two years, but legislators are expected to try to extend its authorization during the 2020 session.

Public Option

Colorado is moving forward with developing a public option, an affordable insurance plan offered by private insurance carriers that Coloradans could buy beginning in 2022, if everything goes according to plan. A draft has been released and the final plan is due to the legislature on November 15. 

Similar to Peak, a public option would have impacts beyond the individual market, though it would be limited to this market initially. This new option could conflict with Peak, luring some of its enrollees away with the prospect of a more affordable plan.

Like Peak, savings from the public option would come primarily from lower prices paid to hospitals. Providers may feel as if they are defending themselves from greater government intervention on all sides. The result could be a long and costly political battle over Colorado’s various health care cost-savings efforts.

This approach would generate savings by capping some hospital payments, and therefore tackling one substantial piece of the health care price puzzle.

Statewide Purchasing Alliance

Polis has been a vocal supporter of Peak, so much so that he is recommending a statewide version. 

Few details are known about a statewide alliance at this point. Per the DOI, it would require administration and oversight by a licensed entity and could involve insurance plans for current and retired state employees, private businesses, or other employer groups. Stakeholders wonder how the plan would intersect with both Peak Health Alliance and a potential public option (and how it would fundamentally be different from the public option). 

All these developments raise questions. How would Peak — or multiple local alliances — work with a statewide alliance? Is Peak simply designed to be a pilot for a larger model that will eventually subsume it? Would many local alliances eventually be knit together to form a statewide network? Or are alliances like Peak best suited to smaller communities? Peak leadership maintains that these different alliances could work together to realize better outcomes, but the system could also lead to confusion.

These ideas could result in big wins for Coloradans, but moving forward with so many simultaneous innovations could also feel like navigating a slippery slope.

Scouting Ahead

Assuming Peak makes it past its first year of operation, will the second open enrollment period in fall 2020 be more successful, or less? How will premiums change from the first year to the second?

Preliminary rates for 2021 will be an early indicator of stability, or lack thereof. Carriers have to submit their proposed plans and prices by May, just a few months after Peak’s coverage takes effect. That deadline gives Peak and the carriers with which it contracts little time to figure out any potential changes to prices or benefits for 2021. 

Peak could do much more for its members than negotiate lower prices at the local hospital. In 2021 and beyond, its leaders hope to tackle several topics, such as:

• Promoting mental health access and evaluating the impact of the $0 copay for mental health visits. 
• Lowering drug prices by working with PBMs.
• Improving the quality of care for its members.
• Placing a greater focus on member education and engagement.
• Improving the negotiating process with carriers, brokers, and others.

If Peak can keep premiums down, which is not an easy task, the community can shift its focus to other key cost drivers. 

The Next Summit

Peak Health Alliance is a politically popular answer to tackling high health insurance prices because it employs principles such as local control and market-based incentives. It’s far more palatable to a broad swath of Coloradans than ideas like single-payer health coverage.

It’s not surprising, then, that the Peak model has quickly become one of the hottest ideas in health care around Colorado. The alliance has announced plans to expand into Grand County and five counties in southwestern Colorado, which are all part of the state’s most expensive insurance rating region. This expansion will add to Peak’s potential enrollees, which would further increase negotiating power. Peak plans to provide technical assistance for affiliates in other parts of the state but these other programs will be directed by local leadership. 

Eagle, Mesa, Larimer, and Routt counties are other regions interested in setting up their own community purchasing alliances. 

There’s little question that Summit County is the ideal test case for this model. But will it work elsewhere?

Among the factors working in Peak’s favor in Summit County: 

• Peak benefits from a “captive audience” — a small community that is somewhat geographically isolated. 
• It accessed valuable new data from the APCD, administered by the Center for Improving Value in Health Care, and self-funded employers that provided a detailed look at claims, utilization, and potential savings. 
• Smaller communities with only one hospital may have less negotiating power, but they make up for it in the form of political pressure and stronger local relationships. Said one Summit leader, “Everyone’s going to see the hospital CEO at the soccer game on Saturday.” This dynamic changes negotiations in a way that can benefit community purchasing alliances.
• Summit residents tend to be healthier than most Coloradans. In fact, the county has the highest life expectancy in the United States.
• Summit County has an engaged public that is smart on health care issues and fed up with high costs. According to state and local leaders, residents have been willing to be a disruptive force and give policymakers a license to experiment with new initiatives.  
• The Summit Foundation provided local funding and leadership for initial data collection and organization. Not every community has a well-endowed local foundation.

However, the Peak experience in Summit County points to success factors that many other communities can employ. These include being up front in negotiations with providers by using comprehensive claims and price data and clearly communicating what those data show; rallying support from strong civic leadership with buy-in from community members; working with the DOI to provide consistent, institutionalized backing and oversight of new programs; and coordinating an approach to raise sufficient funds to get a new alliance off the ground. The funding criterion should not be ignored, although there is widespread agreement that Peak’s work in pioneering the model will make it cheaper to launch in subsequent communities. 

A big question for other communities: will local carriers, providers, and employers come to the table? Local dynamics and relationships will shape the extent to which they buy in.

Conclusion

Peak Health Alliance is one of the most revolutionary changes to Colorado’s health insurance landscape in years. Its debut is happening just as the state is implementing a reinsurance system, considering a public option for coverage, and pushing hospitals to lower the price of care.

These new policy ideas and programs do not happen in siloes. Hospitals and carriers will also have to manage new legislatively mandated financial transparency requirements and affordability standards, and both groups anticipate more policy and regulatory changes in 2020. Political instability in federal health policy looms over all of these developments, leaving the opportunity for sudden and disruptive changes that could eclipse or complicate Colorado’s health care initiatives.  

Additional innovations are bound to present themselves. The question is whether they will complement Peak’s efforts or leave it with another mountain to climb.