 This community health plan differentiates itself by maintaining a high level of flexibility.
Since its founding some 20 years ago, Preferred One’s approach to the health insurance industry has been to limit the rules. In the beginning it was by using its PPO product to help fee-for-service physicians compete with capitated physicians. In those days, said Marcus Merz, president and CEO, managed care was predicted to become capitated. “We provided an option for physicians without HMO contracts to have a managed care opportunity.”
 Marcus Merz, President and CEO
“We started with a gatekeeper care-team model, which lasted about two or three years,” Merz said. “We weren’t growing, and we couldn’t sell our product, so we converted to open-access, fee-for-service. Shortly thereafter, we got into the third-party administrator (TPA) business, too.”
Market demand for large, open-access networks still exists, which is why Preferred One decided to move into the payer business. By gaining direct access to employers, the company was no longer dependent on TPAs or indemnity insurance carriers. As employers started flocking to single-carrier offerings, Preferred One was ready.
“Many of our competitors can change the plan design or the network configuration with any payer they work with, but we can customize a network and benefit design,” Merz said. “That’s where we are now: open access, large networks, and very few payers.”
IT evolution
The company’s IT infrastructure co-evolved with its product offerings. On the early PPO side, Preferred One started by repricing claims, which required a minimal IT commitment. But when the company entered the HMO business, it searched for 18 months to find the perfect IT match to its flexible infrastructure before jumping in.
“We wanted a flexible and creative partner willing to work with us as a start-up company and customize our product as we grew,” said Merz. “TriZetto was a good fit.”
Headquartered in California, TriZetto Group has a wide variety of IT products and services for the healthcare industry, including Facets, its healthcare administration software solution. “With Facets, we had a combination homegrown utilization management tool, but it didn’t have the Web-based consumer interface that the new technology has, and its case management components were a bit too complex,” said Merz.
When TriZetto acquired a freestanding company focused on utilization review, utilization management, and case management, it expanded its scope to include chronic care management, and Preferred One was ready to accept the innovation. “The system built in the other criteria we needed and developed a much more consumer-friendly case management system.”
The upgrade to TriZetto’s case management system was an important step for Preferred One. As the company grows, it needs the tools to maintain a high level of customer service and efficiency, as well as the ability to expand its service offerings. “We contract with many outside disease management vendors, so we also have an opportunity to do more with our current enrollee base,” Merz said.
Shift of focus
One of Preferred One’s greatest challenges is competing with three larger competitors in its region. In 2007, the company completed a strategic planning process to assess its strengths that included focus groups of employers, brokers, and consultants. The number one response from all stakeholders was that Preferred One is more flexible than the big three. According to Merz, some of that is technology driven, and some of that is by design.
Because of its size, Preferred One must be more flexible because the larger competitors have a more extensive enrollee base, bigger balance sheets, and can price business more competitively when they choose to. “Flexibility has to be a corporate value because we can’t force policies or procedures on people the way one of the big three can,” he said. “Many of our customers come to us saying, ‘They charged us extra money to do this customization,’ or ‘Can you do this because they won’t?’ We can create those rules on the fly because we don’t have many rules. We want to limit the number of rules.”
As with many in its industry, Preferred One struggles to handle a cost trend that has been consistently growing at 8% and 10% per year for the past 30. An increased demand from employers and purchasers prompted the company to look into consumer-directed accounts, also known as account-based health plans, as a way to help those individual members deal with the transition from co-payments to deductibles.
As Preferred One customer service representatives become more engaged in discussion individual members’ options, the TriZetto system will provide the behind-the-scenes information, Web materials, and scripts to guide CSRs through the discussions.
“We want to educate employers on what they can do to keep employees healthy and make better choices, but we also want to more directly engage the employees and individual members by helping them navigate the system and understand their options,” Merz said. “The TriZetto case management system will benefit us in fulfilling this goal as well.”
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