Why the PEBB award to Regence is a big deal in Washington State

Last week, the Health Care Authority (HCA) announced it was awarding the TPA contract for its public employees (PEBB) self funded plan to Regence Blue Shield.  The 113,000 public employees (over 250,000 when including their enrolled dependents) that receive benefits under the Uniform Medical Plan (UMP) represent one of the largest contracts available in the market for carriers to pursue.  It’s comparable to large accounts like Amazon, Starbucks, Costco or Boeing, and in some ways is an even more important account for a plan to win than some of those other big names.

For the broader health care marketplace, this may be the most important announcement of 2018.  Follow my logic on this for a minute.


1.  The HCA purchases care for more than 2m beneficiaries among the 7m residents of Washington State.   Between the 1.8m beneficiaries in Apple Health (Medicaid) and the 250,000 public employees and dependents in the PEBB program, Washington State is far and away the largest purchaser of health care services in the state.  It has an out-sized influence on the overall market as both a regulator and a purchaser of medical services, given that it pays for the care of 24% of the overall population.


2.  The HCA is aligning all of its purchasing to drive towards value.  The agency has the goal of making 90% of provider payments which are paid for with public dollars will be linked to quality and value by 2021. Accomplishing that task means aligning both Medicaid and public employee purchasing to achieve the goal.  So, this contract is a big step in that direction.


3.  This contract is built on an ACO model that has already been showing results.  We covered the success of the PEBB ACO in an interview with Lou McDermott two years ago.  McDermott led the PEBB program before being promoted to Deputy Director of the HCA.  Since then, the program has continued to expand as outlined by the HCA last fall.  This award extends that model of care out into the future, and adds new “enhanced” benefits to the model.

According to Dave Iseminger, the HCA’s Director of Employees and Retiree Benefits, this contract adds elements like improving the provider directory for beneficiaries.  You might think this sounds simple, and in concept it is.  However, it turns out in practice it is extraordinarily difficult for a health plan to have an up-to-date and timely list of providers available, and even harder to be able to list which providers are accepting new patients.  Regence, as a result of this contract, will now be moving towards that goal of an up-to-date provider directory, which will be the first of its kind in Washington State.


4.  This contract requires Regence to extend this model to the rest of its “book of business.”  This is the potential game changer.

Recall that the HCA wants to use its contracting authority to move the market forward towards greater value.  So, this contract, while a big one, isn’t enough on its own to change the totality of the market.  However, requiring one of the state’s largest health plans to change the way it does business and to catalyze it’s progress towards a value based payer model is a way to move the market.

According to Amy Blondin, Chief Communications Officer at the HCA, the contract will require Regence to offer a product with this same ACO model, with its infrastructure, processes and cultural approach to care, to the entire commercial and ERISA market.

Section 8.3 of the Contract requires Regence to offer an ACO to its “Book-of-Business,” which is defined to include “fully-insured and self-insured products within [Regence’s] accounts, including individual products and networks.” However, certain plans, such as “Medicare, Medicaid, Employer Group Waiver Plan, or other similar programs,” are excluded from Regence’s “Book-of-Business” for ACO purposes.

The ACO needs to include upside risk for all covered products, and also downside risk for products with a population equal to or over 2,500 covered lives. Other required features include enhanced patient services and timely data given to providers. A goal of 80% of primary care clinics with more than 7 providers achieve NCQA PCMH Level III recognition.

The scale with which this contract is deployed – with 250,000 lives to begin with and on the backbone of 1.8m lives in a Medicaid purchasing model – is going to continue to build pressure on the market to move towards value.

Moreover, with key provider partners already demonstrating success as part of this model, it’s clear this is not simply a “narrow network” strategy, as has been tried in other lines of business and other markets.  With partners like Virginia Mason, MultiCare and UW Medicine already in the program, and having success, this model has a footprint that is established in the market.


5.  Expect this to be a model for the School Employee Benefit Board (SEBB) to consider.  The SEBB benefit model is new, and rolling out in 2019 for launch in 2020.  There is a great deal of work left to be done there.  Tbe SEB Board is still in its “storming” phase.  But, a self-insured model like the one at PEBB is clearly on their radar screen as one to pursue.  At the January 29th meeting of the board, it reviewed Proposed Resolution SEBB 2018-05 for discussion and future consideration.  It states:

“Resolved, that beginning January 1, 2020, the SEBB program will offer self-insured medical plans that leverage features of the Uniform Medical Plans such as the covered benefits, provider networks, clinical policies, and an integrated pharmacy benefit, subject to final financing decisions.”

Dave Iseminger of the HCA said that an offering like the Uniform Medical Program for school employees is possible, but that a lot of work remains to be completed before that will be a go.

“That is certainly one pathway that the School Employee Benefits Board could take, and we think SEBB’s work will be informed by the work and success at PEBB, but that’s part of a bigger conversation about risk and self-funding.  So, we’re a little ways off from knowing for sure about a self-insured offering for school employees.”

OSPI says there are approximately 64,323 “total classroom teachers” in Washington State, all of which would be eligible under the SEBB program assuming they meet eligibility criteria (like working a minimum of 630 hours per year).  That’s another large chunk of lives to add to the purchasing strategy the HCA is employing.


Bottom line:  Moving to value is hard, and it takes a commitment from the leadership of a health care community to make it happen.  The HCA is doing that.  It started with Medicaid, and has rolled out, over time, into the PEBB community.  It may extend into school employees, and the rest of Regence’s book of business in Washington State.

That will drive investment in infrastructure, processes, and culture at Regence that will inure to the benefit of the market at large, and ultimately, push its competitors, providers and customers to respond.  And that could drive the market in significant ways in 2018.