CHI Takes the Plunge into the Insurance Business

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For several years now hospital systems have been tip-toeing around the business of health insurance. They’ve been signing up for Medicare Advantage plans, taking on more and more risk, managing care and raiding health insurance companies for executive talent.

Now a major national health system is diving head-first into the insurance business. Modern Healthcare reports that Catholic Health Initiatives, the Colorado-based system with 93 hospitals across the country, has applied to licensing authorities in 18 states for permission to sell commercial health insurance.

The health system, which already has insurance companies in Washington and Arkansas, is blunt in stating its intention to go head-to-head with health insurance companies and third-party administrators. Senior VP of payer strategy Juan Serrano says that CHI is ready to work directly with employers, cutting out the insurers and plan administrators in the middle.

The move is not without risk. Health systems have a world of experience in providing care, but much less in underwriting and in managing risk. After all, the traditional business model of providers is to get patients; the traditional model of insurers is to cover people unlikely to become patients.

The move is also fraught with legal issues. Faith-based systems like CHI are typically tax exempt; insurance companies are typically not. Health systems look primarily to federal law—and particularly Medicare—for regulation; insurers are regulated primarily on a state-by-state basis.

That’s why observers—other providers, insurers and major employers alike—will be watching so closely.

Topics:  Medicare, Medicare Advantage

Published In: Health Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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