Faced with spiraling costs and funding gaps, state Medicaid programs continue to be a breeding ground for innovation. The latest clever attempt to reform Medicaid comes from Tennessee, where Governor Phil Bredesen created a new “mini-medical” health insurance plan called CoverTN to meet the needs of the Tennessee’s uninsured. Unlike Medicaid innovators in other states who are looking at replacing universal coverage with plans that provide people with protection against catastrophic costs, CoverTN covers only a maximum of $25,000 for health expenses annually, and only $15,000 of that can go to hospital bills.

Governor Bredesen went to the uninsured, blue-collar workers of Tennessee and found “They weren’t interested in buying insurance for catastrophic costs. They wanted access to the emergency room next month, access to the pharmacy next month. Let’s give people what they want instead of what some advocate says they want,” said Bredesen. His plan offers coverage to some of the uninsured without making them pay a significant amount upfront. The program makes only a small dent in the state budget.

CoverTN is open initially to businesses with fewer than 25 workers that haven’t offered health benefits in at least six months. Many of these businesses were forced to cut back or eliminate health care benefits when their cost reached $300 or $400 per month per employee. CoverTN premiums are split three ways, with the employee, the employer, and the state with each paying between $34 and $99 a month. Extra costs apply for smokers and the obese.

BlueCross BlueShield of Tennessee administers the CoverTN plan. Participants have access to a network of doctors and hospitals assembled by BlueCross BlueShield. Response to CoverTN from the medical community has been positive, with 89 of Tennessee’s 138 hospitals and 10,000 of the states 17,000 doctors participating in the CoverTN network.

Stan Roberts, health practice director of Milliman, Inc, a Seattle-based consulting and actuarial firm, estimates that less than 2% of enrollees will exceed the $25,000 annual cap. Unfortunately, those people could account for a third of overall medical spending among enrollees due to catastrophic claims. The overall implication, however, is that this plan will meet the needs and pay the bills of most enrollees.

Because enrollment in the CoverTN plan is aimed at individuals who are currently uninsured, hospitals and laboratories providing both emergency and routine care are likely to benefit. Before the Cover TN plan was instituted, it was common for hospitals or laboratories to treat uninsured as charity. Now, a large portion of their medical bills for CoverTN beneficiaries will be covered. For routine care, a laboratory can expect all its fees to be covered, leaving little or no balance to be collected from the patient.

The CoverTN plan stands to benefit both the uninsured of Tennessee and the medical community. It provides another example of how innovations in the design and function of health insurance plans can provide beneficiaries with affordable coverage, and keep larger numbers of people participating in the insurance pool. What remains to be seen is whether innovative health programs like CoverTN want to drive down provider reimbursement through the use of exclusive provider networks, or whether they adopt an “any willing provider” policy. Most clinical laboratories and pathology group practices would support the concept of open provider networks.

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