Health Insurance - Connecticut

After five months of unsuccessful negotiations, Bristol Hospital has terminated its relationship with Anthem Blue Cross and Blue Shield, the health insurer doing the most business with the hospital and covering its employees.

Unless the two sides resume negotiations and reach an agreement, Anthem customers won't be able to use their insurance at Bristol Hospital after Dec. 8.

'Blue Cross is 60 percent of our managed care business,' said Peter Freytag, chief financial officer at the hospital. 'We didn't make this decision lightly, but we have no other choice. Our survival is dependent on that.'

More than 700 hospital employees are on the Anthem plan so it will be changing its health insurance, said Freytag.City employees ' including people who work for the Board of Education ' also use the Anthem plan, according to Diane Ferguson, city personnel director. She said the employee plan covers 2,150 people, including family members.

Ferguson said it's too early to say what the impact on city employees will be.

State workers also have coverage through Anthem.

'They've become so big in this market that essentially they're driving our organization,' said Freytag.

He estimated that Anthem claims about half of the insurance market in the state.

'That's not good for competition,' Freytag said.

Lower reimbursements would reduce hospital net revenues by almost $3.4 million in the next fiscal year and would undermine the hospital's ability to provide quality care while staying financially healthy, he said.

As the end of the two-year contract approached, Bristol Hospital sought to have Anthem's rates be more in line with what other insurance companies were paying.

The Anthem contract for services was for two years, said Freytag, and ends Dec. 8.

However, in a statement released late Tuesday, Anthem said the ending date of the contract is Dec. 31.

'Bristol Hospital has demanded a substantial rate increase from Anthem for the services it provides to our members,' the statement from the insurance company said.

Meeting the hospital's proposal would result in customers bearing an 'unconscionable' increase in costs, but the company will continue to seek an agreement with the hospital, while notifying customers of alternative area hospitals in its network, said the insurer.

In general, hospital reimbursement rates from Medicare and Medicaid don't cover the cost of the services, so medical providers rely on insurance companies to make up the difference.

'A hospital still has to have some kind of margin,' said Freytag. 'All hospitals have that same issue.'

But Bristol Hospital ranks 27th out of 30 state hospitals for Medicaid reimbursement, said Freytag, meaning that most other hospitals get a higher rate.

When talks with Anthem began, said Freytag, the hospital and the insurance company's offers were about 20 percent apart.

'They ... told us we were drawing a line in the sand,' said Freytag. 'Essentially, we were negotiating with ourself.'

'We're not negotiating any longer,' said Freytag. 'We all feel badly ... but we know we're doing the right thing at the end of the day.'

Freytag said Anthem is likely paying higher rates to other hospitals and only wants the rate that comparable hospitals have. He said it will cost the insurance company more for its clients to use other hospitals.

The hospital showed 'complete transparency' to Anthem, said Freytag, revealing the 2008 audit report, internal financial statements for 2009 and next year's budget.

Medicaid and Medicare patients make up almost 60 percent of the hospital's business, according to Freytag.

The hospital has contracts with United Healthcare and CIGNA and is working on contracts with ConnectiCare, Health Net and Aetna, said Freytag.

While hospital officials hope the situation with Anthem will change, Freytag said that if it doesn't, they're also looking for support in town when employers choose a health care plan.

'We've got to rally the community behind the hospital,' said Freytag.