Insurers see veterans' care as growth business

Health plans are positioning for government contracts to provide mental health care and other services to a growing number of wounded soldiers and their families.

By Emily Berry — Posted Dec. 10, 2007

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

When Health Net held a conference call to discuss its third-quarter earnings, investment analysts pointed out one particular growth industry -- covering mental health services for military members and their families.

Health Net President and CEO Jay Gellert agreed. He called the demand, fueled by the large number of Iraq and Afghanistan war veterans, a "positive surprise, which I think we anticipate to be ongoing."

By "positive," Health Net spokeswoman Margita Thompson said, Gellert meant the business is good for the company. "We want to be in a position to help the returning military members who need these necessary services," she said.

Health Net isn't the only insurer looking at the growing number of returning veterans as a business opportunity, although plans take pains not to sound like they are coldly profiteering on a potential market of thousands of wounded and their families.

Like Congress, the Dept. of Veterans Affairs and the Dept. of Defense, insurers are adjusting to veterans with needs that surpass those of other wars. "We probably have never been in a circumstance like this before," said Steve Tough, Health Net's president for federal health services.

Mary Helen Davis, MD, a member of the board of trustees for the American Psychiatric Assn., said the government is increasingly going to rely on private plans because "I think the [veterans' health] needs are tremendous, and I think they have probably been grossly underestimated."

She and health industry analysts say it is not yet clear what effect the private plans' greater interest in military care will have on physicians, though no improvements in payments are expected from a Tricare and VA system that Dr. Davis said is notorious among doctors for its low reimbursement and bureaucracy.

Health plans are looking for growth markets. Various plans noted in their earnings releases for the third quarter of 2007 that commercial growth had just about topped out because of a lack of available plans to acquire and because more employers are dropping coverage.

Instead, plans acknowledge they are looking for faster growth by administering government plans, including Medicare Advantage, Medicare Part D and military plans.

The aging American population is creating growth in Medicare, and the long wars in Iraq and Afghanistan are creating growth in military care.

Anywhere from $350 billion to $700 billion is needed to cover the lifetime disability and medical costs for the, so far, 1.4 million active-duty and reserve troops who have been deployed to Iraq and Afghanistan, according to a study by Harvard University government professor and former Clinton Commerce Dept. Chief Financial Officer Linda Bilmes.

About 30,000 troops have been wounded in action, according to an Oct. 17 report by the Congressional Budget Office. Some 229,000 troops have sought VA care, with 84,000 of those receiving "at least a preliminary diagnosis of mental health problems," the CBO reported. About 39,000 have been diagnosed with posttraumatic stress disorder.

Several plans are preparing bids to become one of three insurers given six-year contracts to administer Tricare, the Dept. of Defense's health plan for troops and their families. Current Tricare contract holder Humana is among bidders, as is another current Tricare administrator, Health Net. However, Health Net announced Nov. 27 its bid will be done jointly with UnitedHealth Group. The other current Tricare contract holder, TriWest Healthcare Alliance, is also expected to bid. TriWest is a joint venture made up mostly of Blue Cross Blue Shield plans in the West and Midwest.

A group of southern Blue Cross Blue Shield plans calling itself the TriServ Alliance also has announced plans to bid for Tricare. So has another new military care entrant, Aetna.

Funding still not clear

The amount of money available for plans is not yet known -- the new Tricare request-for-proposal documents aren't due until early next year. But current Tricare contract holders each collect revenue up to about $3 billion per year. Aetna and United recently formed new military health services units in preparation for their bids.

"What we have heard is that the military health system is very interested in maintaining the good parts of the system they have -- they've made some very good advances -- and at the same time they're also interested in what's the best out there in the commercial sector and how can that be integrated in the military," said Sue Peters, Aetna's president of government health plans.

Meanwhile, plans also are securing private contracts to administer care for the VA and preparing products for wounded troops who either choose not to use the VA system or have trouble getting into it because of the great demand for services.

The VA spends $7 billion of its $35 billion budget acquiring services from outside the department, according to an October report by the Government Accountability Office.

The amount of private services earmarked under the VA's congressionally approved -- though not yet signed by President Bush -- $43.1 billion budget for fiscal 2008 has not yet been determined.

Humana Chief Financial Officer Jim Bloem said at a recent investors' conference that the VA "is starting to look at the same kinds of programs and techniques that the Dept. of Defense uses for the deserving people that have served in the military."

For example, the VA earlier this year awarded Humana contracts to administer a pilot program called Project HERO, for Healthcare Effectiveness Through Resource Optimization. Humana's Military Health Care division will use its current Tricare network to manage the health of veterans in four regions. Those contracts are worth $474 million, according to government bid documents.

"The VA, like Medicare, represents a growing market in health benefits," Humana CEO and President Mike McCallister said during an Oct. 29 conference call with analysts reviewing the insurer's third quarter 2007 earnings.

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn