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No State Exchange for MemorialCare Health Plan

Cascell: Seaside Health Plan expected to start operations in spring

MemorialCare Health System will not offer its new healthcare plan as part of a state-run insurance exchange that’s expected to go into operation next year.

Fountain Valley-based MemorialCare has about $1.6 billion in annual revenue. It owns Orange Coast Memorial Medical Center in Fountain Valley and Saddleback Memorial Medical Center, which has campuses in Laguna Hills and San Clemente, along with three hospitals in Long Beach.

MemorialCare said in late November that it would buy certain assets from Signal Hill-based health plan Universal Care Inc. as a basis to establish Seaside Health Plan.

Seaside’s initial focus will be on providing managed care for publicly subsidized health programs, including Medi-Cal and demonstration projects for California Children’s Services, which covers children with conditions such as cystic fibrosis, cerebral palsy and chronic heart disease. Some of those children also are eligible for the Healthy Families program, which is starting to transition children to Medi-Cal.

The decision to stay out of the exchange confirms MemorialCare’s initial indications that it would not seek commercial accounts for Seaside.

Federal healthcare reform requires people to carry insurance or pay a penalty.

The state’s insurance exchange will be called Covered California. State residents will be able to buy health insurance through the exchange under the plan, with subsidies to those who have relatively low incomes but do not qualify for Medi-Cal.

Insurers that offer plans in the exchange will not be able to charge different prices or deny insurance coverage on clients’ prior health conditions.

“In theory, the exchange is a good way to ensure health insurance is obtainable for people who have historically not had access to coverage,” said John Cascell, the Fountain Valley-based nonprofit hospital operator’s vice president of managed care.

But MemorialCare also expects reduced reimbursements to its hospital operations for patients who get insurance through Covered California. Cascell said the question will likely be “whether or not enough healthy people” sign up for Covered California to balance out risks for health plans and providers.

“From a business perspective, we believe these payment reductions will be at least partially offset by an increase in the number of patients who will be able to pay for their care because they have insurance,” Cascell said.

MemorialCare’s Seaside Health Plan will avoid such concerns by sticking with publicly provided insurance such as Medi-Cal. There are other health plans in the region that have HMOs for Medi-Cal patients, including publicly traded Molina Healthcare Inc., based in Long Beach.

Seaside’s goal is to be operational by the spring, Cascell said.

“Once we receive a response from the Department of Managed Care on our initial application, MemorialCare will be able to better estimate the timeline to full licensure,” he said.

Seaside came about when MemorialCare decided to buy assets from Universal Care as a way to jump-start its managed-care effort. It would have taken 18 months or longer to start a health plan with a new HMO license.

“Running a health plan, however small or whatever population it works with, is wildly different than operating a hospital or a medical group,” MemorialCare Chief Executive Barry Arbuckle said in an earlier interview.

He said it would be “much better” for MemorialCare if it could buy assets of a functioning, operating health plan, such as computer systems and personnel.

Cascell said that because Seaside’s services are aimed initially at Medi-Cal and California Children’s Services’ patients, “we do not anticipate a need for a full sales department in the commercial health plan sense of the word.”

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