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October 21, 2013

With consumer focus, HealthyCT pitches insurance plans

Photo | contributed HealthyCT CEO Ken Lalime (in back) listens to the Wallingford insurers' chief medical officer Dr. Russell J. Munson discuss how being a new insurer in the market offers opportunities and challenges.

Ken Lalime knows a little something about starting a business from scratch.

In 1985, he opened a small drug store in Norwalk, converting a 1,600-square-foot hardware store into Cranbury Pharmacy. He ran the company for a decade, serving his hometown where he returned after graduating from UConn in 1979.

During that time, Lalime, now 57 and a pharmacist by trade, said he learned a valuable lesson about the health care industry: the need to talk to consumers face-to-face.

“Pharmacists have a tendency to literally look down on the customer because they are required to work on an elevated platform,” Lalime said. “Whenever a customer had a question I would always walk around the counter to talk to them. When you meet the consumer in their space it improves the conversation dramatically.”

Lalime is now drawing on his consumer-driven philosophy to help with his latest startup venture.

Lalime is the CEO of HealthyCT, a nonprofit health insurer in Wallingford. The company got its start in 2012 with a $76 million loan from the federal government, which, as part of the Affordable Care Act, is trying to improve competition in the insurance industry.

HealthyCT's mission is to operate as a consumer-oriented health plan. It differentiates itself in Connecticut as the only nonprofit insurer. Lalime said because the company doesn't have to pay or satisfy shareholders all profits will be reinvesed in the firm to add new programs or help stabilize and possibly lower insurance premiums.

More importantly, HealthyCT's focus will be on improving the customer relationship by testing new care delivery models and encouraging physicians to change how they interact with patients, Lalime said.

To that end, HealthyCT's board includes consumers and small business owners, who will help shape policies.

Similar to pharmacists, Lalime said insurers have a tendency to talk over consumers' heads when explaining complex products.

“We must talk to them in a way so they understand it,” Lalime said.

HealthyCT began selling its products — targeted at small businesses with 50 or fewer employees and individuals — Oct. 1, the same day federally mandated insurance exchanges went live across the country.

Lalime wouldn't say how many members signed up for a HealthyCT plan, but the company received 100,000 hits on its website in the first five days of operation.

If HealthyCT is going to succeed, it needs to build a strong customer base relatively quickly.

The firm's $76 million loan must be repaid in installments within 15 years. To become self-sufficient, HealthyCT must have 25,000 to 40,000 members by the end of 2014. By Jan. 1, the company expects to capture up to 15 percent of Connecticut's insurance exchange market. That equates to about 10,000 to 15,000 members, Lalime said.

The company faces significant challenges.

The loan agreement limits HealthyCT's marketing spend, making it harder to stir brand awareness in an industry dominated by well-known, national firms.

For now, HealthyCT's products also cost more than the competition, potentially creating a roadblock to attracting price-sensitive customers. The company sells health plans on and off the state's new insurance exchange, Access Health CT, against firms like Anthem Blue Cross and Blue Shield, UnitedHealthcare, and Connecticare Benefits.

“We are not the lowest-priced products in the marketplace,” Lalime said. “That is a bit of a challenge.”

Quinnipiac University management professor Angela Mattie says pricing likely won't be a major issue for HealthyCT, since the average rates charged by all insurers competing on the exchange are similar.

“There is not a huge discrepancy on price,” said Mattie, adding that HealthyCT's success will more likely be “determined by how effectively they do outreach and how well they facilitate consumer entry into the system.”

“It comes down to how well the organization is run, and how effective they are providing a service that there is a demand for,” she said.

HealthyCT's main advantage, Mattie said, is its local presence. Despite being a startup, the firm's management team is familiar and has relationships with doctors and hospitals in Connecticut, Mattie said.

The company's main challenge is lacking the size, scale and industry experience of its much larger competitors, she added.

Long-term, Lalime is bullish about HealthyCT's ability to control costs and deliver high quality care.

That confidence is driven, in part, by the company's nonprofit model, he said. HealthyCT also is working to develop a patient-centered medical home delivery system, a model being tested by other providers and insurers.

Medical homes use primary care physicians as central figures in coordinating patient care among specialists, hospitals, and other providers. Doctors are required to improve communication and access to care, increase preventive care services, and use electronic medical records, among other things. The model aims to reduce health care costs by keeping patients healthy, instead of only providing sick care.

HealthyCT is investing in Connecticut physician practices to become certified as medical homes through the National Committee on Quality Assurance (NCQA). So far, the company has worked with 25 medical practices, which will be eligible for extra reimbursements for adopting the medical home model.

The company's goal, Lalime said, is to experiment with different provider contracts to eventually eliminate, or rely less on, the traditional fee-for-service model, which has been viewed as inefficient and a key driver of health care costs.

Most insurers in Connecticut— Cigna, Connecticare, Aetna, UnitedHealthcare, Cigna, Anthem—are also experimenting with new models of care.

HealthyCT, which received its license in April, has provider contracts with about 5,500 physicians and 70 percent of Connecticut hospitals, Lalime said.

While HealthyCT waits to be embraced by consumers, others are happy to see a new player in the state's insurance market.

Connecticut has the fourth highest health care costs in the nation, a major issue for businesses, which shoulder much of that burden. In recent years, only a handful of insurers have competed in the state.

“We are delighted any time there is a new entrant,” said Anne Melissa Dowling, deputy commissioner of the Connecticut Insurance Department. Dowling said her office is in talks with other insurers interested in Connecticut. Massachusetts's Harvard Pilgrim Health Care will offer coverage in Connecticut next year.

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