MANKATO — It's sort of a tale of two outcomes, with one player quite happy with how things turned out, and the other, well, not so much.
With roughly 7,000 state employees in the Mankato area, they're a big target when it comes to health insurance. State employees have three insurance providers to choose from, and each provider offers a variety of plan options.
One of those providers is a company called Preferred One. And their pricing this year worked out beautifully for Mayo Clinic Health System in Mankato, and not so beautifully for the Mankato Clinic.
After the annual negotiation process, Mayo found itself bumped from a cost level of tier 4 down to a much more inexpensive tier 2. Mankato Clinic, meanwhile, found itself bumped up to tier 3 from tier 2, even though its prices went down.
Mayo says the arrangement will mean lower deductibles and copays for employees in the State Employee Group Insurance Program at Mayo Clinic Health System in Mankato facilities.
Dr. Stephen Campbell of Mayo Clinic Health System said that for many years they'd been on the costlier end of the spectrum, and therefore, have had difficulties capturing state employees.
Now that they're the only service provider in the low tier for employees choosing Preferred One, they're hoping more people choose MCHS for their primary care.
It's a complicated system, though. In fact, while MCHS is in tier 2 for Preferred One, they're in tier 4 for Blue Cross and Blue Shield. It all comes down to what kind of prices can be negotiated with an insurance company.
Take the Mankato Clinic, for example. When negotiating with Preferred One, they were given an idea of where they needed to be, cost-wise, to come in at tier 2, but it was extremely difficult for them to cut any more.
Randy Farrow, Mankato Clinic CEO, said it's more difficult for the clinic to compete with an organization such as Mayo Clinic Health System, which has a hospital and other services on site, and can send people to Rochester without leaving the system.
The Mankato Clinic only controls about 30 percent of the costs incurred by its patients. The other 70 percent is incurred at hospitals or other service providers. So when Preferred One asked them to reduce costs by 20 percent to hit its tier 2 price standard, it struggled.
"They wanted a 20 percent reduction to stay at tier 2," Farrow said. "We looked at it and thought it wasn’t reasonable or sustainable."
Farrow said they've been told by insurance companies that their rates are competitive. "They've told us we're a good bargain." But the clinic's overall patient costs are determined by all costs incurred, not just costs incurred at the clinic. They're still trying to work to get their rates down to tier 2 status.
Mayo, meanwhile, says the Preferred One rates will apply at its clinics in Mankato, Le Sueur, St. Peter and Lake Crystal. Anyone in those communities who is looking to sign on with Mayo can do so.
Whether that's a good idea or not is another question.
For some, Campbell says, it may be an easy choice based merely on cost. But for others, the decision to switch from one doctor to another is one that shouldn't be entered into lightly.
"I can’t say I’d advise people to switch," Campbell said. "I think they need to do what's in the best interest of their families."
To that end, Campbell says he hopes the new tier assignment could encourage people to look at Mayo and consider everything they offer and their reputation.
Farrow agrees that the decision shouldn't be taken lightly. "I would caution patients to think about it carefully," he said. "You’re switching providers, stopping continuity of care, to save a few hundred bucks, when it all could change again in the next cycle."
Which is true.
Negotiations take place regularly to set rates and next year, all of this could change. The other providers are Blue Cross and Blue Shield, and Health Partners.
“We heard from many state employees that they wanted access to Mayo Clinic in their local plan, with a higher level of coverage," Campbell said. "By working to reduce our costs and improve the quality of care we deliver, including providing more access to medical information via the phone and online, we’ve made our care more accessible."