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The Community Snapshots Project

Capturing Health System Change

Des Moines, Iowa


es Moines is a close-knit community where business is often done with a handshake, and old ties are not lightly broken. The health care market is no exception. Major stakeholders in this market have long and loyal working relationships, and there is a history of generous indemnity health insurance coverage. Insurance companies are prominent players in the employer community, and several are headquartered in Des Moines. The restructuring now beginning to take place in the health care system, the development of managed care, hospital consolidation, hospital-physician integration, and direct contracting of employers with providers, portends big changes for this market.

Despite these developments, enrollment in managed care has been limited to date and largely centered in preferred provider organizations (PPOs). In addition, most HMOs resemble independent practice associations (IPAs). Before 1992, employers had taken limited actions to lower health care expenditures or to enroll employees into managed care for several reasons. Health care costs in the Des Moines area were relatively low compared with the national average. Furthermore, there was a great desire on the part of employers to maintain good relations with employees because of the low unemployment rate and the large number of "headquarters employees" accustomed to generous indemnity benefits packages. Thus, until recently, employees made small out-of-pocket premium contributions and few co-payments for their health insurance. Given this history, employers have been understandably reluctant to accept change in their health insurance, particularly restrictions on provider choice and covered benefits.

When the national debate on health care reform heated up in the early 1990s, so did pressure for change in Des Moines. Large employers formed an advisory group for government officials to help stem the growth in health care costs. But not until 1994 did they form a purchasing coalition to contract directly with delivery systems instead of working through insurers. In the meantime, insurers had developed HMO plans. In response to these changes, hospitals began to consolidate, and two major health systems now dominate the Des Moines area market. However, consumers have resisted efforts to restrict their access to one of these delivery systems.

Although there are multiple insurers in Des Moines, only The Principal Financial Group and Blue Cross and Blue Shield of Iowa are major players in the managed care market. Principal’s HMO subsidiary, Principal Health Care, began in 1993 to use employer price incentives to move enrollees out of products that did not restrict access to physicians, into products that do. They have doubled the fraction of enrollees in gatekeeper arrangements from one-quarter to one-half their HMO enrollment. Blue Cross and Blue Shield took a very different approach in the same year. They started a joint gatekeeper plan, Unity Choice Health Plan with one of the two dominant delivery systems in the area, Iowa Health System. Their approach included 20 percent provider equity in the start-up, with plans to increase the provider share in the financial risk. Growth in the gatekeeper plans of both insurers has been slower than hoped, largely because of employer reluctance to restrict the access of employees to providers.

Public policy has encouraged some changes in the health care system, although policymakers have generally adopted a voluntary, incremental approach to reform. Three recent state laws have facilitated reform. First, the country’s first statewide voluntary purchasing cooperative of independent insurance agents was formed. Second, a new state licensure category for health plans was created: "organized delivery systems" (ODS) are provider-sponsored health plans that contract directly with employers, essentially bypassing insurance companies. Third, a new system, developed in partnership with employers, will provide purchasers, providers, and the public with information previously held solely by insurers about the cost and quality of health plans. The new system is intended to establish competition on the basis of quality as well as price.

As a health care purchaser in its own right, the state government is moving tentatively toward managed care. While Medicaid recipients are being aggressively enrolled into primary care case management (PCCM) programs, efforts to enroll eligibles in HMOs have not been as strong. The state government is examining various incentives to encourage public employees to enroll in managed care plans.

The Des Moines market has lost much of the momentum for change spurred by the prospect of national health care reform. Even though managed care penetration is limited (especially with regard to capitated plans), and very little clinical integration and management of care has occurred, an infrastructure designed to accommodate anticipated changes in the marketplace is being built.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.