Execs say California health care reform inevitable

Health care reform will happen in California regardless of whether the federal Affordable Care Act is upheld by the U.S. Supreme Court , Sacramento-area health care leaders said Friday.

Other panelists were Pat Brady, chief executive officer of Sutter Roseville Medical Center; Garry Maisel, president and chief executive officer of Western Health Advantage;  Ann Madden Rice, chief executive officer of UC Davis Medical Center; Darryl Cardoza, chief operating officer of Hill Physicians Medical Group; and Trish Rodriguez, senior vice president and hospital chief executive officer for Kaiser Permanente in South Sacramento and Elk Grove.

Everyone is affected by the rising cost of health care, including employers, Rodriguez noted. After wages, health care benefits are the second largest operating cost at Kaiser Permanente itself, she said.

Doctors, hospitals and health plans will have to work together to go the same direction, the executives said. And it will take shared resources to get there because trends in health care — regardless of the fate of the reform law — will mean more demands on the industry and lower reimbursements, speakers agreed.

The key will be a switch from a medical rescue system that fixes problems to a health care delivery system that keeps people healthy and provides more care in less-expensive outpatient settings, Cardoza said.

Money is a growing problem: more costs are coming and reimbursement will drop.

  • While more people will have coverage when health insurance exchanges start in 2014, Medi-Cal enrollment is expected to climb. The government health care program for the poor has one of the lowest rates in the nation and reimbursement from Medicare — the government health care program for seniors — is slated for huge cuts.
  • To make ends meet while serving more patients, all parts of the health care system will have to cut costs and be more efficient.

One unknown is the health of the millions of new patients who will get coverage in two years.

  • “We do know these people; they are accessing our health care system now through ERs,” said Rodriguez of Kaiser Permanente. “We have an opportunity to do it in a more controlled environment, and I’d make sure these individuals are seen in primary care physicians’ offices.”

There will have to be more doctors to make that happen.

“If you look at Massachusetts (where universal health care is already in place), it used to take 16 to 18 days for a non-urgent internal medicine appoint,” said Rice of UC Davis Medical Center. “It’s gone one up to six weeks.”

  •  Three-quarters of the counties in California have fewer than 60 primary-care doctors, she said. The UC Davis School of Medicine — and other medical schools — can churn out more doctors, but there aren’t enough residency spots to accommodate them, Rice said.

“The individual market will look nothing like it does today; the small group market will change, too, but not as much,” Maisel said of the industry in 2014.

  • “Now it’s business to business, through brokers. It’s going to be a business-to-consumer model.
  • The buying decision will no longer be at the employer level, but at the individual level.”

Contrary to perceptions that the cost of health care will go down in 2014, Maisel thinks they’ll go up in the short-term because of demand and slow changes to the delivery system.

  • “In 2014, a lot of individuals think they’ll suddenly go out and buy affordable health care,” he said. “I think there will be sticker shock.”

This article is modified from a Sacramento Business Journal Article published March 2, 2012


Employer-offered health insurance drops to record low

By Kathryn Mayer

The number of Americans getting health insurance from their employer continues to drop, with a record low 44.6 percent getting employer-sponsored coverage in 2011, compared to 45.8 percent in 2010, according to Gallup numbers.

This continues the downward trend Gallup and Healthways have documented for the last few years. In 2008, roughly half of Americans received health insurance from their employer.

Meanwhile, Gallup says, the percentage of Americans who are uninsured has also increased, rising to 17.1 percent this year, the highest seen since 2008.

Increased unemployment is one factor in this trend, but cost and availability are others. Either some workers can no longer afford the rising cost of health insurance the employer offers, Gallup research notes, or simply put, the employer is not offering health insurance any longer.

Additionally, the proportion of the U.S. work force that is composed of part-time workers—a group less likely to receive employer-based health insurance than full-time workers—has increased.

Employer-based health insurance declined among most major population subgroups last year, with the exception of young adults and seniors. It also is down significantly compared with 2008 across all groups.

High-income Americans are by far the most likely to say they get their health insurance from an employer, with 70.4 percent doing so in 2011. Low-income Americans are among the least likely to have employer-based health coverage, at 23.7 percent.

“If this trend continues, it is likely that the percentage of Americans who get their health insurance from their employer will continue to decline,” Gallup reports. “Whether more Americans then become uninsured or are able to gain access to coverage may be largely reliant on the fate of the health care law.”

The Gallup survey was conducted Jan. 1 to Dec. 31, 2011, with a random sample of 353,492 adults. The margin of error is plus or minus 1 percentage point.


California health insurers to raise average rates 8% to 14%

California’s largest health insurers are raising average rates by about 8% to 14% for hundreds of thousands of consumers with individual coverage, outpacing the costs of overall medical care.

The cost of goods and services associated with medical care grew just 3.6% over the last 12 months nationally, government figures show. But insurance premiums have kept climbing at a faster pace in California.

Insurers defended their rate hikes, saying they are based on their claims experience with the customers they insure and not just the broader rate of medical inflation. They also say that healthier members dropped out of the individual market as premiums rose and the economy worsened in recent years, leaving behind a group of policyholders who have higher average costs.

“We will continue to examine the fundamental issues at the heart of rising healthcare costs, including the prevention of chronic disease, increasing the quality of care and reducing unnecessary health expenses,” said Darrel Ng, spokesman for Anthem Blue Cross, the state’s largest for-profit health insurer.

Consumer advocates and others are skeptical, however, questioning whether insurers are doing enough to hold down costs. These latest increases follow years of 20% to 30% rate hikes for families that are at the center of a looming fight between the insurance industry and its critics over a proposed ballot measure seeking tougher rate regulation.

“Consumers should be outraged that premiums continue to grow faster than underlying costs,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “There’s help on the horizon for millions of Californians from health reform, but things may get worse before they get better.”

Anthem has proposed raising premiums 9.6% to 13.8% on average, effective May 1 or July 1, for about 700,000 individual policyholders and their family members. The rate increases are under review by state officials.

Nonprofit Kaiser Permanente increased premiums 9% on average for nearly 300,000 customers last month.

Blue Shield of California, also a nonprofit, is boosting average rates by 7.9% for 265,000 members and by 8.9% for 56,000 members, both effective March 1.

Insurers in California must submit proposed rate hikes for review to determine whether they meet certain state requirements, but state officials don’t have the authority to reject rate hikes for being unreasonable. But regulators have been challenging insurers’ arithmetic in calculating rates.


Annual PCIP Member Claims Average $28,994 – Will this be the trend after 2014?

The Pre-existing Condition Insurance Plan (PCIP) — a new health insurance program for people with health problems — ended 2011 with 48,879 enrollees. The consumers who have enrolled have turned out to be far sicker than officials had anticipated: Enrollees are averaging about $29,000 in claims per year. That’s twice the average traditional state high risk pools have experienced in recent years, officials say. Many PCIP participants need treatment for conditions such as cancer, ischemic heart disease, degenerative bone diseases or hemophilia.

People who enroll in the PCIP program are not charged a higher premium because of their medical condition. Premiums may vary only on the basis of age, geographic area and tobacco use. The Affordable Care Act of 2010 (PPACA) requires health insurers to sell subsidized coverage on a guaranteed issue, mostly community-rated basis starting in 2014.

Officials say that other program features may contribute to high per-member medical costs. “Coverage related to the care or treatment of an enrollee’s pre-existing condition begins immediately upon the plan’s effective date, unlike other types of insurance coverage currently available in the individual market, which may impose pre-existing condition limits or exclusion periods,” officials say.

  “PCIP may attract individuals who have been recently diagnosed with a severe illness or condition that requires immediate care or treatment”.  “Additionally, people who may otherwise qualify for PCIP may postpone enrolling until they have an immediate need for coverage.”

*This article is modified from a Life Health Pro article by Elizabeth Festa


PPACA-Based Age Rating Pinch Could Leave a Million More Uninsured

Whatever states do about health insurance prices for older and younger adults, one thing remains certain: it will be unlikely to please everyone.

If a state chooses to eliminate age rating in an attempt to be kinder to consumers ages 45-64, it could decrease premiums by about 13% (to $8,300) for people in that age group who earn more than 400% of the federal poverty level, and it could decrease the total uninsurance rate in that age group to 6.6%, from 7.6%, or by about a million people, the researchers say.

But eliminating age rating would increase rates by 22% for relatively high-income consumers ages 18 to 34 and increase the uninsurance rate for those consumers from 9.9% to 10.6%. Moreover, the overall uninsurance rate for nonelderly adults might increase from 26.2% to 27.2%, the researchers say.

Frederic Blavin and his colleagues at the Urban Institute in Washington, D.C., have published data on how efforts to keep or eliminate age-based pricing differences might affect U.S. residents. The researcher published their data, in Health Affairs, an academic journal that focuses on the finance and delivery of health care. The researchers discusse the choices states will have before them should the Patient Protection and Affordable Care Act of 2010 (PPACA) be implemented as written.

Mired in controversy, legal wrangling and political argument since its signing into law in 2010, PPACA faces a multiple-front effort to get the law repealed outright in Congress, as well as to have it overturned in the Supreme Court. Oral arguments before the Supreme Court over the constitutionality of PPACA’s individual mandate begin in March.

However, if PPACA survives these efforts to undo the law, and if PPACA is fully implemented on schedule (by 2014), it will create, among other thing, a Small Business Health Options Program (SHOP) exchange system for small businesses and another exchange system for individuals. Exchanges are no-frills online venues consumers can use to buy health insurance; each state must set up its own exchange by 2014 or let the federal government provide exchange services for its residents. The exchanges are supposed to help individuals meet new PPACA health insurance ownership requirements.

Individuals with incomes under 400% of the federal poverty level will be able to use new tax subsidies to buy coverage through the exchanges, and many small businesses will qualify for a 2-year health insurance purchase subsidy.

Insurers will have to see coverage on a guaranteed-issue, mostly community-rated basis, but the researchers point out that states will have the authority to let health insurers charge the oldest consumers in the individual market a three times what they charge the youngest adults.

States also will be able to choose whether to merge their individual and small group markets, and, until 2016, they will be able to decide whether a “small group” is an employer group with 50 or fewer workers or 100 or fewer workers.

The researchers used a simulation model they have developed to predict how various decisions might affect the cost of coverage and who has what type of coverage.

The researchers found that the choice of small-group cut-off has little effect on how the health insurance market performed in their simulations. Groups with 50 to 100 lives would, for example, have little incentive to buy coverage through an exchange, the researchers say.

Merging the individual and small group markets seems likely to lower individual market rates without having much effect on small group rates, the researchers report.

Merging the markets might cut prices about 10% for individuals who buy through an exchange and about 8% for individuals who coverage outside the exchange system while leaving small group prices unchanged, the researchers say.

Because merging the markets could lower prices for some without having a significant impact on the rates that others pay, that change could increase the percentage of insured U.S. residents from 90.2% to 90.6%, the researchers say.



Obamacare architect: Expect steep increase in health care premiums

Medical insurance premiums in the United States are on the rise, the chief architect of President Barack Obama’s health care overhaul has told The Daily Caller.

Massachusetts Institute of Technology economist Jonathan Gruber, who also devised former Massachusetts Gov. Mitt Romney’s statewide health care reforms, is backtracking on an analysis he provided the White House in support of the 2010 Affordable Care Act, informing officials in three states that the price of insurance premiums will dramatically increase under the reforms.

In an email to The Daily Caller, Gruber framed this new reality in terms of the same human self-interest that some conservatives had warned in 2010 would ultimately rule the marketplace.

“The market was so discriminatory,” Gruber told TheDC, “that only the healthy bought non-group insurance and the sick just stayed [uninsured].”

“It is true that even after tax credits some individuals are ‘losers,’” he conceded, “in that they pay more than before [Obama’s] reform.”

Gruber, whom the Obama administration hired to provide an independent analysis of reforms, was widely criticized for failing to disclose the conflict of interest created by $392,600 in no-bid contracts the Department of Health and Human Services awarded him while he was advising the president’s policy advisers.

Gruber also received $566,310 during 2008 and 2009 from the National Institutes of Health to conduct a study on the Medicare Part D plan. (RELATED: Full coverage of the health reform law)

In 2011, officials in Wisconsin, Minnesota and Colorado ordered reports from Gruber which offer a drastically different portrait in 2012 from the one Obama painted just 17 months ago.

“As a consequence of the Affordable Care Act,” the president said in September 2010, ”premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise.”

Gruber’s new reports are in direct contrast Obama’s words — and with claims Gruber himself made in 2009. Then, the economics professor said that based on figures provided by the independent Congressional Budget Office, “[health care] reform will significantly reduce, not increase, non-group premiums.”

During his presentation to Wisconsin officials in August 2011, Gruber revealed that while about 57 percent of those who get their insurance through the individual market will benefit in one way or another from the law’s subsides, an even larger majority of the individual market will end up paying drastically more overall.

“After the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent,” Gruber reported.

The reason for this is that an estimated 40 percent of Wisconsin residents who are covered by individual market insurance don’t meet the Affordable Care Act’s minimum coverage requirements. Under the Affordable Care Act, they will be required to purchase more expensive plans.

Asked for his own explanation for the expected health-insurance rate hikes, Gruber told TheDC that his reports “reflect the high cost of folding state high risk pools into the [federal government’s] exchange — without using the money the state was already spending to subsidize those high risk pools.”

Gruber’s Wisconsin presentation, previously available on the website of Wisconsin’s Office of Free Market Health Care, disappeared from the state government’s Web servers shortly after Wisconsin Gov. Scott Walker issued a Jan. 18 executive order scrapping the agency’s mission.

Minnesotans have already seen a 15 percent average rate increase because their state government is spending approximately $100 million to subsidize those high-risk pools. Gruber said they, too, will see a premium increase — even after subsidies are factored in.

In his presentation there in November, he estimated 32 percent of Minnesotans will face premiums hike similar to those of their neighbors in the Badger State.

In his Colorado analysis, which he delivered last month, Gruber wrote that while some may benefit from new tax credits folded into Obama’s health care overhaul, “13 percent of people will still face a premium increase even after the application of tax subsidies, and seven percent will see an increase of more than ten percent.”

Sally Pipes, president of the Pacific Research Institute in San Francisco, told TheDC that the health care law’s mandates will ultimately result in far greater costs across the board.

“If [instead] we change the tax code and allow a competitive market to build, and put doctors and patients in power, then that would really solve a lot of the problem,” Pipes said.

Pipes said she believes applying the Affordable Care Act, as written, will result in care “being rationed and more expensive.

South Carolina Republican Rep. Trey Gowdy, who chairs the House Subcommittee on Health Care, told TheDC that consumers are beginning to understand that the president’s 2010 promises are out of sync with reality.

“What a shock,” Gowdy said, feigning surprise. “Obamacare doesn’t lower costs, doesn’t increase coverage, and has turned into a wildly unpopular, labyrinthine government overreach.”

“’If you like your health insurance, you can keep it’ has morphed into ‘I, President Barack Obama, will decide what you need and make others pay for it.’”

White House deputy press secretary Jamie Smith was unable to immediately respond to a request for comment.


Researcher: Discourage Small Groups from Reinsuring

A health law specialist says states can keep small employers with younger, healthier employees from abandoning the insured plan market in 2014 by limiting the small employers’ ability to self-insure.

Mark Hall, a public health law professor at Wake Forest University, makes that argument in a commentary in the new issue of Health Affairs, an academic journal that publishes articles about the finance and delivery of health care.

The latest issue includes many articles on how the Patient Protection and Affordable Care Act of 2010 (PPACA) might affect small groups.

PPACA is supposed to start requiring health insurers to sell small group coverage on a guaranteed issue, community-rated basis starting in 2014.

If the law takes effect on schedule and works as drafters expect, some small employers will be able to use federal tax subsidies to buy coverage through a new system of health insurance distribution exchanges, and, in some cases, small employers’ employees may be able to use tax subsidies to buy individual coverage through the exchanges.

Today, many small employers hold down coverage costs by buying plans with high deductibles or limited benefits. PPACA will put limits on small employers’ ability to use benefit design to hold down costs, because PPACA will require insured plans to cover at least 60% of the actuarial value of a standardized “essential health benefits” package, Hall says.

PPACA does not provide any new subsidies for individuals paid over 400% of the federal poverty level, or about $89,000 per year, or for small employers with many highly paid employees.

PPACA requires insurers to spend 80% of small group revenue on health care and quality improvement efforts, but the law sets no limits on small group rates.

The PPACA small-group community rating rule may help small employers with sick employees get cheaper coverage, and it might reduce insurers’ administrative costs, but it gives small employers with younger, healthier employees an incentive to try to avoid subsidizing the insurance of employers with older, sicker employees, Hall says.

“Community rating, along with other [PPACA] market reforms, will founder or fail, however, if younger or healthier groups can easily avoid reforms by self-insuring,” Hall says.

“Self-insurance threatens not only the integrity of market regulations but also consumer protection,” Hall says. “For example, stop-loss coverage is not subject to any requirement of guaranteed renewability. Nor can self-insured employers use normal appeals channels for coverage denials.”

Many employers that self insure, and most small employers that self insure, use stop-loss arrangements — insurance for health plans — to limit their exposure to catastrophic losses.

Hall says states could keep small employers from leaving the insured small group market by banning stop-loss for small employers, limiting the comprehensiveness of stop-loss coverage, or applying the same rules to stop-loss coverage that they apply to the primary coverage. North Carolina already regulates small group stop-loss programs the same way it regulates ordinary small group health insurance, Hall says.

“This regulatory approach preserves small employers’ ability to select either purchased or self-funded insurance,” Hall says. “Its main effect is to ensure that the choice is not driven principally by the group’s risk profile or the employer’s desire to avoid health benefit regulation.”


Clinics halt Lap-Band surgeries

By Stuart Pfeifer, Los Angeles Times

February 8, 2012

Two clinics tied to 1-800-GET-THIN have temporarily halted Lap-Band weight-loss surgeries after the device’s maker said it would no longer sell to companies affiliated with the massive advertising campaign.

The two brothers identified in lawsuits as owners of the surgery centers also hired a top Los Angeles defense attorney to represent them in a flood of pending lawsuits. They retained John Hueston, a white-collar defense lawyer now at Irell & Manella who helped lead the Justice Department’s criminal prosecution of Enron Corp. executives Kenneth Lay and Jeffrey Skilling.

Those steps come days after Allergan Inc., the Irvine-based maker of the Lap-Band, said it would no longer sell the device to clinics affiliated with the marketing company. The Food and Drug Administration, California Department of Insurance and Los Angeles County Board of Supervisors are investigating the ad campaign and its affiliated surgery centers.

At least five Southern California patients have died since 2009 after Lap-Band surgeries at clinics affiliated with 1-800-GET-THIN, according to lawsuits, autopsy reports and other public records. Each of the patients had been treated at surgery centers in Beverly Hills and West Hills tied to the ad campaign, according to the records.

“Unfortunately, recent allegations question the safety of the Lap-Band procedures at two centers,” the clinics said in a statement Tuesday. “While we strongly believe these allegations paint a false picture of the care provided and discount our capabilities and success rate, we have stopped scheduling new Lap-Band surgeries at those centers, effective immediately.”

The New Life Surgery Center in Beverly Hills and Valley Surgical Center in West Hills have stopped performing Lap-Band surgeries while they perform “a top-to-bottom medical and operational review” of their Lap-Band surgery business, the companies said.

The surgery centers are among several clinics affiliated with 1-800-GET-THIN, whose ads for Lap-Band surgery have become fixtures on Southern California roadside billboards, radio, television and the Internet.

The Lap-Band is a ring that is surgically implanted around the stomach to discourage patients from overeating and help them lose weight. Allergan declined to say why it made the decision to stop selling the device to the surgery centers.

Tuesday’s announcement that the clinics would at least temporarily halt Lap-Band procedures comes as 1-800-GET-THIN and its affiliated companies face a stream of government investigations and civil lawsuits.

Among them is a whistle-blower lawsuit, filed by two former surgery center workers, that alleged unsanitary conditions at the clinics and accused the centers of billing insurers for medically unnecessary procedures and surgeries that were never performed. There are also several pending wrongful-death lawsuits and a lawsuit, filed by patients, accusing the firms of false advertising.

Hueston said he has agreed to represent brothers Michael and Julian Omidi in “all matters arising out of the lawsuits that have been filed with respect to 1-800-GET-THIN.” The two brothers have been named in lawsuits as owners of the marketing company. Hueston said he was unaware of any criminal investigations against them.

Further, Hueston has extensive experience in crisis management. His past clients include Angelo R. Mozilo, the former chief of mortgage giant Countrywide Financial Corp.

An opposing attorney who represents former surgery center workers said he believes hiring Hueston is a sign that the Omidis view the pending investigations as a serious matter.

“I think they do see the handwriting on the wall,” said Alexander Robertson, an attorney representing former surgery center workers. “They’re circling the wagons and getting ready for the onslaught.”

In a separate development, Dan E. Chambers, an attorney who represents the two surgery centers, sent a letter to the Los Angeles County coroner defending the treatment of a patient named Paula Rojeski, who died following Lap-Band surgery in September.

The letter challenged allegations in the whistle-blower lawsuit that a series of mishaps contributed to Rojeski’s death. The coroner’s office has not yet released the cause of Rojeski’s death, even though her autopsy was performed five months ago.


Understanding HSA Tax Forms

This information, from HSA Resources, is a good summary of the IRS forms needed if you have a Health Savings Account (HSA)

HSA Tax Forms.

HSAs give you fantastic tax benefits. The IRS, however, checks to make sure you follow the rules.

•1099-SA – Distribution Report. HSA custodians are required to send an IRS Form1099- SA to you and the IRS each year you take a distribution from your HSA. The purpose of this form is to give the IRS a report showing if you took any money out of your HSA for the year. Most HSA distributions are “normal” or “code 1” distributions. This includes distributions for eligible medical expenses (a doctor visit) and most non-eligible medical expenses (a car muffler). This surprises a lot of people as the qualified medical and non-qualified distributions are lumped together. The IRS looks to you to clarify the distributions on the IRS Form 8889. You need to state that you used all the money for an eligible medical expense or you will generally need to pay taxes and penalties. Other codes include: excess (code 2), disability (code 3), and death distribution (code 4 or 6). If all of your HSA distributions were for eligible medical expenses you will not owe any taxes or penalties.

• Form 5498-SA- Contribution Report. HSA custodians must send an IRS Form 5498-SA to you and the IRS each year. The main purpose of this form is to inform the IRS how much you contributed to your HSA. The IRS then uses this to check to make sure you do not claim an HSA deduction above the amount of your HSA contribution. You will not get this form until after tax season (required by June 1) because the IRS wants custodians to record all 2011 contributions, including those made as late as your tax filing due date for 2011 (April 17, 2012 for most taxpayers). Accordingly, think of this form as an IRS tool to check on you – it’s not to help you complete your tax return. You need to know how much you contributed to your HSA. The amount will be on your HSA statements and possibly your W-2 if the contributions were made through an employer (look at box 12 for a Code W – that’s HSA).

•1040 Line 25. This is where you take your HSA contribution deduction. It’s an “above-the-line” deduction meaning that you get the deduction whether or not you itemize. The deduction is not based on income thresholds. Pre-tax employer contributions and pre-tax payroll deferral are not put on this line because your employer already excluded them the contributions from income on the Form W-2 – see Form 8889 below for details. Look also in box 12 of your W-2 Form, Code W refers to amounts that an employer put in your HSA pre-tax (both employer and employee payroll deferral amounts).

• Form 8889-Schedule to 1040. You must file a Form 8889, an attachment to the 1040 form, for each year you make an HSA contribution or receive a distribution from your HSA. If you use tax preparation software, the software will do the form for you.

Contributions – Part I Lines 1-13. The top part of the form determines the deduction amount for line 25 on the 1040. The form separates employer contributions that were already pre-tax from those you can deduct. Generally contributions made through your employer are not taxable income on the W-2 and therefore you cannot deduct the HSA contribution on the 1040. Contributions that you made on your own generally are deductible on the 1040. The form also checks to make sure you are eligible for an HSA and that you did not exceed the federal limits. The form reviews factors like family versus single health coverage, your age for catch-up contributions and whether your spouse also has an HSA.

Distributions – Part II – Lines 14-17. The lower part of the form validates that you used your HSA distributions for qualified medical expenses. Remember the 1099-SA just lumps both eligible and non-eligible together. Line 15 is the key. You must write the dollar amount of your eligible medical expense distributions from the HSA on this line. For many of you this will match your 1099-SA total distribution because you only used your HSA to pay for qualified medical expenses. If not, you may have to pay taxes plus add a 20% penalty for the non-eligible distributions.


An Rx? Pay More to Family Doctors


The nation’s second-largest health insurer is shaking up its approach to paying doctors, putting a major investment behind the idea that spending more for better primary care can save money down the road.

The nation’s second-largest health insurer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase with the possibility of additional payments, Christopher Weaver reports on Markets Hub.

Starting this summer, WellPoint Inc., which insures some 34 million Americans, will offer primary-care doctors a fee increase, typically of around 10%, with the possibility of additional payments that could boost what they get for treating the patients it covers by as much as 50%.

The new approach could pour an additional $1 billion or more into primary care, which WellPoint is betting will pay off in the form of fewer emergency-room visits and hospital stays.

“This will fundamentally change our relationship with primary-care physicians,” said Harlan Levine, WellPoint’s executive vice president of comprehensive health solutions.

Health-policy experts have long faulted the U.S. health-care system for placing too little value on traditional primary care, the front-line medical work that ranges from immunizing children to ensuring that diabetics get their blood-sugar tests. They also say that the current fee system, which sometimes fails to reward such services as planning outpatient care after a hospital stay, leads to bigger bills and worse results for patients.

Some doctors already are seeing some of the benefits that WellPoint is after. John Bender, a Fort Collins, Colo., physician whose practice is part of a pilot project involving WellPoint and six other insurers, cites a patient who was treated for a heart attack last February. She soon returned to the hospital, via an air-ambulance trip, for chest pain.

WellPoint flagged her case to Dr. Bender’s practice, Miramont Family Medicine. Doctors there took a closer look at her case and diagnosed an anxiety disorder. They referred her to their staff psychologist, started her on a low-fat diet and exercise regimen and controlled her blood pressure.

“She hasn’t visited the emergency room since,” said Dr. Bender, Miramont’s owner. “We create a tremendous amount of value.” As part of the pilot program, Miramont earned a roughly $100,000 bonus from the insurers last year, he said.

Primary-care doctors, such as pediatricians and family physicians, often make less than half of what top-paid specialists like orthopedic surgeons earn, and the idea of changing how they are paid has been around for years. Insurers and government agencies are experimenting with a variety of approaches. But WellPoint, with its network of about 100,000 primary-care doctors, could have a much broader influence.

The “scale is so much bolder than things we’ve seen,” said Paul Ginsburg, president of the Center for Studying Health System Change, a Washington nonprofit group. “This isn’t an experiment.”

In addition to its fee increase for visits, which will vary by market, WellPoint will offer primary-care doctors payments for services such as developing treatment plans for patients with chronic diseases. It says physicians will get a chance to make even more if they help pare the overall cost of patients’ care: a bonus amounting to as much as 20% to 30% of any savings they achieve.

WellPoint is also promising that it will give doctors data and staffing help to improve their practices. In return, those doctors will have to meet requirements including some form of 24-hour access for patients and keeping a registry to monitor chronic-disease care.

The insurer said the program, which will include only primary-care doctors who meet certain quality goals, could add as much as one or two percentage points to its primary-care spending, which now represents about 6% to 8% of the about $100 billion in claims it processes annually.

WellPoint officials said they think the company’s upfront investment in primary care could reduce its projected medical costs by as much as 20% by 2015 by improving overall patient health and reducing the need for costlier medical services.

Elizabeth Curran, who oversees the insurer’s national network programs, said Aetna wants to “make the appropriate investment to help support” doctors as they seek to improve their practices.

Several early medical-home pilot projects have shown signs of improved quality and patient satisfaction, researchers said. Some regional insurers, such as Maryland-based CareFirst BlueCross BlueShield, have moved ahead with broader programs.

Still, “we have no strong evidence of cost savings yet,” at least based on short-term results published so far, said Meredith Rosenthal, a Harvard researcher who studies health-care payment.

WellPoint said its savings projections are based largely on its own data from medical-home pilot projects.

One big question is whether higher payments from any one insurer can change the way doctors work, given that many patients will still have more-traditional coverage. Bruce Bagley, medical director for quality improvement at the American Academy of Family Physicians, said he welcomed the new efforts. But, he said, “if you only have 10% of your practice that you’re getting paid extra for, that’s not enough to get your attention.”

WellPoint pointed to its substantial market share of 15% to 46% of people with coverage in the 14 states it serves. It said it expects around 70% of the primary-care doctors in its network to join its new program by the end of 2014.