'Insurance-Free' Primary Care Practices May Have Health Insurers on Alert

As Congress debates a massive overhaul of the U.S. health care system, a growing number of physicians are setting up "insurance-free" primary care practices the physicians say can cut health care costs and extend quality care to many Americans. While those practices handle routine care there is still the need for insurance coverage for hospitalization and other expensive medical treatments.

Qliance Medical Management Inc., which operates these direct primary care clinics, also called "medical homes," in Washington, said last month it closed a $4 million funding round from three institutional investment capital firms, led by Second Avenue Partners, with participation by New Atlantic Ventures and Clear Fir Partners, bringing total money raised to about $7.5 million.

Norman Wu, president and chief executive officer of Qliance Medical, maintains that insurance isn?t needed for inexpensive primary and preventive care. With a direct primary care model, "insurance can go back to its original intention: to protect against risk from catastrophic, unforeseeable, and expensive events," he said.

Qliance operates a clinic in Seattle and is opening another in Kent., Wash. this month, with a third planned around the end of the year. The company wants to expand to other parts of the United States.

Some health insurers seem threatened, but many understand a flat monthly fee model ? supplemented by a "wrap-around" insurance plan, such as a high-deductible plan, is an effective way to control costs, Wu said. "Putting us on the front end of such a plan takes care of all their routine care and minimizes the probability that they will need to use much, if any, of their deductible."

The industry's response? Health plans offer a variety of coverage options with broad access to providers to meet the specific needs of individuals, families, and small businesses across the country, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans. "Consumers should be able to have the flexibility to pick the type of coverage that's right for them."

UnitedHealth Group commented, "We offer many of the services, if not all, that insurance-free might," said Tyler Mason, a spokesman. "Do insurance-free products come with the ability to populate automatically one's electronic health care record, for example?" UnitedHealthcare "can do that and also cover the services that are contracted and most likely at a better price point," he added.

Cigna Corp., another health insurer contacted for this story, declined to comment.

Qliance estimates there are more than 50 direct primary care practices in 19 states but said that number could be considerably higher.

Qliance patients pay monthly membership fees, ranging between $39 and $79. In exchange, they get unrestricted care for things like vaccinations, check-ups, pneumonia, minor fractures, and ongoing care for chronic illnesses such as diabetes or obesity. Other features include no limits for pre-existing medical conditions and open every day, with 24-hour cell phone and e-mail access to a physician.

The model, Wu said, allows primary care providers to focus on "delivering the best care possible rather than over-referring to specialists simply because they don't have the time as they scramble 25 to 30 patients each day to cover overhead."

Zirkelbach said more needs to be done to encourage people to go into primary care and that AHIP supports "the patient-centered medical home."

Qliance recommends that patients buy a wrap-around insurance plan to cover unpredictable, expensive care, such as hospitalization, Wu said. Currently, there are no "custom" wrap-around plans that exclude the hundreds of Current Procedural Terminology-equivalent procedures Qliance provides and cover only the medical care it doesn't provide, he said. So some patients choose an "off-the shelf" high-deductible health plan to complement the primary care, Wu said.

Qliance is in early discussions with some carriers to create "custom" wrap-around plans designed to complement direct primary care practices, he said, but declined to name the carriers.

Meanwhile, "concierge" medical practices caught the eye of Maryland Insurance Commissioner Ralph S. Tyler, who said some arrangements of this specialized patient care may be insurance subject to state regulation. His scrutiny last year came as some insurers, such as UnitedHealthcare and Cigna HealthCare, are dropping from their networks these physicians who receive an annual fee from patients in exchange for more personalized care (BestWire, Feb. 17, 2009).

Qliance's model, however, is different from the concierge model because it offers care for anyone, regardless of income, Wu said. Concierge practices typically have one to three physicians and target the affluent, he said. They charge higher retainer fees, at $150 per month and up, for "noncovered services," usually in addition to charging patients' insurance for the medical care, Wu said.

Washington passed a law in 2007, which clarified that direct practices should not be regulated as insurers, health carriers, HMOs or health care services contractors, he said.