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Montana journalist explains how one deal years ago changed the state’s insurance market Date: 07/21/20

Katheryn Houghton

By Katheryn Houghton

Late last year, I got a tip that five Montana hospitals were settling a lawsuit with employees over how much workers paid for health insurance. The case pointed me toward a deal made in 2011 between the hospitals and Montana’s largest insurer that changed the landscape of the state’s commercial health insurance market.

The tip came from a former hospital worker who was upset that the proposed settlement went unnoticed, or hadn’t yet been reported on, in the town where it was filed.

From the court documents, I learned that in 2017 hospital workers filed a lawsuit accusing their employers of making a deal with Blue Cross and Blue Shield of Montana that inflated what the employees’ paid for their employer-sponsored health insurance.

The lawsuit showed that the hospitals agreed in 2011 to let Blue Cross sell or manage the plans for their combined 11,000 employees for six years. In exchange, Blue Cross gave each hospital a portion of $26 million. The deal also meant the hospitals would get two seats on the insurer’s board of directors — as long as they didn’t own or belong to an entity competing with Blue Cross.

That last caveat caught my attention.

I wrote my initial story as a short daily piece. That article, “Five Montana hospitals settle employee insurance lawsuit,” ran on Nov. 2. My reporting was based on court documents and the players in the lawsuit, all of whom either declined to comment or gave broad statements that striking the deal with Blue Cross was in their employees’ best interests.

I wanted to follow the story deeper to see how a deal between some of Montana’s largest hospitals and the state’s most powerful insurance company affected Montana’s overall insurance market and whether the deal led to Montanans paying more for coverage. My reporting showed that the deal between the hospitals and insurers had lasting effects and swung power further in Blue Cross Blue Shield's favor in at least some swaths of the market. The resulting story, “‘An earthquake’: the deal that changed Montana’s insurance market,” was published on Jan. 26.

As a large, rural state, Montana’s health industry is a bit like a small town. Most who remembered the deal and had theories about its effects on the health insurance market still work in the business and wouldn’t talk on the record. For this story, I was willing to talk with people on background, as long as they weren’t elected officials or administrators at any of the companies involved. Those discussions pointed me toward more sources and questions I may have missed otherwise.

Digging into the details of the court documents and through sources, I learned about New West Health Services, a commercial health insurance company that the hospitals formed in 1998 and that the employees of the five hospitals named in their 2017 lawsuit. When the hospitals created New West, they said the goal was to compete against Blue Cross’ dominating presence.

Using court documents, U.S. Department of Justice records and insurance market share data, I learned that New West became Blue Cross’ biggest competitor in Montana. Blue Cross remained the largest insurer by far, but industry experts said New West increased competition and helped lower insurance coverage prices for Montanans. But the 2011 deal struck between Blue Cross and the hospitals took New West out of the commercial insurance business.

Department of Justice documents showed the agreement caught the attention of antitrust watchdogs. Here’s the federal Department of Justice announcement of an antitrust case requiring divestiture to preserve competition among health insurers in Montana.

Montana’s then-acting attorney general and the DOJ allowed the divestiture to go through, but not without trying to divide up some of New West’s business to other players beyond Blue Cross. In the antitrust settlement, the agencies spelled out that they were trying to avoid reducing competition in Montana’s market because doing so would hurt consumers and likely lead to higher prices, details I used in my reporting.

A wall I hit in trying to follow the deal’s ripple effects years later was that commercial insurance in Montana doesn't have much state oversight. State officials couldn’t say what the deal meant for Montanans and didn’t have data to show whether it changed the balance of power among the state’s insurers.

One source of data that proved useful came from the Kaiser Family Foundation, which reports on the market share of commercial insurers. That data confirmed Blue Cross’ share of the commercial market swelled the year following the deal and that the company has since held onto the ground it gained in some areas of the market.

Some sources pushed against those numbers, arguing most Montanans are covered through work-based, self-funded plans which the Kaiser data do not include. 

Sources on background pointed me toward another place for useful data: the National Association of Insurance Commissioners. The NAIC’s database (see attached pdf) includes the number of people each insurance company covers and has a category titled "uninsured plans" that represents those who have insurance through self-funded, employer-sponsored health plans. Depending on how much information you need, the NAIC database may require journalists to establish an account to access its database and the site can be difficult to navigate. As an alternative, journalists may be able to request such data through a state insurance commission.

The database showed Blue Cross manages health benefits for 88,400 Montanans in self-funded plans, well ahead of the next-in-line competitor. I double checked my understanding of those numbers with experts who monitor insurance companies and confirmed the numbers with a Blue Cross spokesperson.

I also wanted to know why the hospitals went from competing with Blue Cross to becoming allies. I later learned that the switch likely happened because the insurance business was more complicated and less profitable than the providers imagined.

Those who were part of the decision—the hospitals and Blue Cross—largely remained quiet about the deal.

Through sources on background, I found the former CEO of New West who, no longer in Montana, was willing to talk. He filled in details about the environment in the provider-owned company, from its early days and up to when the deal was struck in 2011.

A missing piece of this story is state officials weighing in on what effect the antitrust settlement had on insurance competition in Montana. The state attorney general at the time of the deal was Steve Bullock, a Democrat, who is now Montana’s governor and a candidate for the U.S. Senate. Bullock never agreed to an interview about whether the antitrust action helped to keep competition in Montana’s market. Some sources said the government's action did its job because it left insurers in the state and from there, it's up to the companies to compete.

One of the important takeaways from this story came from health industry experts who told me the insurance industry is so convoluted and murky, it’s hard to draw absolutes in whether the change in Montana’s insurance market afected what consumers pay for health insurance coverage.

Over the last decade, Montanans have historically seen insurance rate increases from one year to the next, some by double digits. But sources at health insurance companies told me many factors affect insurance premium prices each year, including federal and state policies.

My reporting took nearly three months because I had to balance work on this assignment with daily news. My editors and other reporters were supportive. The week before my Jan. 26 article went to print, for example, others in the newsroom picked up more of the daily covderage for our paper to give me the time to finish the piece.

Since I dove into this story, I’ve received more tips from people in health care and health insurance on unreported issues of the past that likely have an effect today. Those tips are a reminder that there is a wealth of untouched stories in places where health reporters are few.

Katheryn Houghton (@K_Hought) is a freelance health care journalist in Missoula, Mont. Before becoming an independent contractor in May, Houghton spent five years as a daily news reporter covering health and politics in Montana, most recently at the Bozeman Daily Chronicle.