Collaborative Culture Helps Portland, Ore., Gear Up for National Health Reform

Media Advisory
July 23, 2013

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—Shaped by Oregon’s collaborative culture and activist history on health care issues, the Portland metropolitan area appears well prepared for national health reform, according to a new Community Report released today by the Center for Studying Health System Change (HSC).

Funded by the Robert Wood Johnson Foundation (RWJF) and based on interviews with local health care leaders in 2012-13, the study examined the Portland region’s commercial and Medicaid insurance markets.

Longstanding bipartisan support for health reform helped Oregon be in the vanguard of states authorizing a state health insurance exchange. With highly regarded leadership at the exchange’s helm, there is broad-based consensus that Oregon is among the states best prepared to roll out open enrollment on Oct. 1, 2013, although substantial work and testing still needs to be accomplished to meet the deadline. Key findings of the report, Portland, Oregon: Geared Up for National Health Reform, which is available available here, include:

• A highly competitive commercial insurance market. Portland has an abundance of local/regional commercial health plans, with national carriers playing a limited role in the market. In contrast to other states, there are no concerns about the willingness of commercial plans to participate in Cover Oregon, the state insurance exchange.
• Middle-of-the-road health benefits. Except for Kaiser Permanente’s closed-panel health maintenance organization (HMO) model, Portland’s commercial market is dominated by preferred provider organization (PPO) products. Overall, the comprehensiveness of employer-sponsored coverage in Portland appears on par with nationwide metropolitan averages.
• A competitive but collaborative hospital market.Besides Kaiser Permanente Northwest, Portland has five main hospital systems: Providence Health & Services, Legacy Health, Oregon Health & Sciences University (OHSU) Healthcare, Adventist Health, and Tuality Healthcare. Respondents characterized Portland as having neither the unbalanced leverage nor the aggressive, contentious provider-plan relationships seen in markets with a dominant hospital system.
• Nascent narrow-network options. In a market where PPOs historically featured broad provider networks, commercial health plans are aligning with select providers in limited-network collaborations. Plans and providers are still working out shared-savings/risk arrangements—a challenge given that most providers have little experience bearing financial risk for patient care under commercial contracts.
• Medicaid driving payment and care delivery innovations. Medicaid, rather than the commercial sector or Medicare, is leading care delivery and payment innovation in the Portland market. With the roll out of coordinated care organizations (CCOs) in 2012, the state embarked on an ambitious transformation of Medicaid financing and organization.
• Uncertainty about CCOs’ ability to restructure care delivery and control costs. Portland’s largest CCO includes multiple health plans and delivery systems. The plans operate separately, with each independently managing risk for enrollees. How CCO partners will share risk, and which functions and services they will integrate and coordinate, are still being established. Also uncertain is whether CCOs can constrain spending growth sufficiently to comply with a federal Medicaid waiver. Oregon will gain nearly $2 billion in federal funding to support the CCO initiative if it can reduce per-capita Medicaid spending by 2 percentage points by 2015, from a base growth rate of 5.4 percent.
• Pricing concerns. While most commercial carriers plan to participate in the exchange, they are anxious about remaining financially viable while designing products and setting premiums that will attract customers. As in other markets, there was widespread concern that rate shock would result from the need to “buy up” benefits in Portland’s small-group and nongroup markets to meet Affordable Care Act (ACA) requirements. However, when health plans released proposed 2014 premiums in May 2013 for nongroup and small-group products, the rates were lower than many expected, allaying the worst fears about rate shock.
• A key role for brokers in the exchange. With nearly all small-group and most nongroup policies sold through brokers, the state exchange expects brokers to play a major role in selling exchange products. Broker commissions will be set by each health plan and included in premiums; it is uncertain whether commissions will be of the same magnitude now earned by brokers.

As health reform unfolds in the coming years, there will be ongoing issues to track in the Portland-area health care market, including:

• Will health plans in the Portland market begin to consolidate and if so, how will that change health plan competition?
• How much traction will the new limited-network products gain in the commercial market? To what extent can commercial plans and providers create sustainable risk-sharing arrangements?
• How will competition among the hospital systems evolve? Will hospitals continue to have cordial relations with health plans or will increased competition lead to more adversarial interactions?
• Will Medicaid CCOs be able to introduce sufficient efficiencies in care delivery to operate within their constrained global budgets without resorting to rate cuts while delivering coordinated, high-quality care?

Portland is one of eight metropolitan areas, HSC researchers are studying on behalf of RWJF’s State Health Reform Assistance Network initiative—the others are Baltimore; Denver; Long Island, N.Y.; Minneapolis/St. Paul; Birmingham, Ala.; Richmond, Va.; and Albuquerque, N.M.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.