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Empower3 looks to alter health care

Firm provides primary care and other health services for monthly membership fee

You have fire insurance on your house. You certainly don't want to use it.

You have auto insurance -- liability and collision. You certainly don't want to use it, either.

You have health insurance. You almost certainly use it. And if you're middle aged or older, you probably use it frequently. If you have a chronic illness, you may use it more times than you care to consider.

Dr. Zane Gates of Altoona thinks this characteristic of health insurance accounts for the widely accepted illness of the U.S. health care system -- prodigiously expensive, prodigiously wasteful and prodigiously uneven in quality of care from patient to patient.

Accordingly, Gates and his business partner Patrick Reilly have devised a method they believe can relegate health insurance to a usage rate much closer to the norm for the insurance industry in general -- so that only about 20 percent of patient medical encounters result in a claim, instead of the 80 percent that currently prevails in the U.S.

Their firm, Empower3, provides primary care and a host of other services -- labwork, generic drugs, dietary counseling, imaging, physical therapy, pulmonary testing, cardiology testing, outpatient psychology, durable medical equipment and home health -- for a monthly membership fee, currently $173 for an individual, twice that for a couple and three times that for a family -- no matter what the size of the household.

It is not an insurance plan, and there are no deductibles, co-insurance or co-pay requirements.

The organization emphasizes prevention and health maintenance and encourages members to come as often as needed for service. That availability is especially valuable for patients with illnesses like diabetes or chronic obstructive pulmonary disease, because frequent visits to the doctor can keep those illnesses under control.

Open to all

Gates, a native of Altoona who earned his medical degree at the University of Pittsburgh, has overseen a succession of health care clinics, beginning in Pittsburgh and continuing here, first serving Medicaid recipients and those who didn't qualify for Medicaid but couldn't afford regular insurance.

Empower3, the current iteration, is open to anyone.

"A millionaire can join," he said recently, in his small office within the Empower3 suite in Blair Medical Center on Howard Avenue.

The Empower3 plan requires supplementary insurance to cover other medical needs, although the membership is designed to minimize the need for those less frequently accessed -- but generally more expensive -- services: in patient hospitalization, emergency room care, brand-name drugs and surgery.

By vastly reducing the frequency of insurance claims, the Empower3 model eliminates much of the paperwork burden for physicians and patients, according to the partners.

Gates and Reilly say their plan is suitable for replication throughout the country, and they believe it could recast the way health care is delivered. Ultimately, it could reduce the cost of care by 30 percent, according to Reilly.

Empower3 works with companies that provide group insurance coverage to discount premiums in recognition of the value provided by the membership, Gates said.

The membership plan works even better for self-funded groups like the Altoona Area School District, which recently accepted Empower3 as an option for employees, according to Reilly.

Empower3 may be attractive especially for those who can't afford regular coverage, according to Superintendent Charles Prijatelj.

Standard modern health care is generally paid for by fees paid for service provided, with providers -- hospitals, primary care practices, cardiology practices, pharmacies -- and insurance companies all trying to maximize revenues at one-another's expense, Reilly said.

The providers and insurers have competing interests, with providers using computer programs nowadays to tag all the billing codes they can manage for services provided, while insurance companies try to minimize payments and services, Gates and Reilly said.

Empower3 has taken a different approach, based on cooperative negotiation, according to the partners and Penn State Altoona professor Mark Agee, who co-wrote a paper with Gates on the negotiating strategy. The partners call on all parties -- themselves, insurance companies, hospitals and the contract providers that provide the additional member services -- to tell one another what profit margins they need to operate, so they can arrange deals that meet everyone's requirements without taking advantage of anyone.

That will help keep costs from escalating, especially when plans like Empower3 grow to attract an optimum number of subscribers to benefit from economies of scale, Gates and Reilly said.

The Empower3 membership plan would seem to be vulnerable to charges that it creates an economic incentive for Empower3 and its contractors to stint on care, as with "capitation" arrangements that insurance companies made with doctor groups in the early 1990s, with fixed payments based on the number of "covered lives."

That criticism isn't justified, however, due to the reasonable payment arrangements that have been negotiated cooperatively, because Empower3's payments are received directly from patients -- not from insurance companies that tried to ration care -- and because there is an even more powerful economic incentive for Empower3 and its contractor to keep patients healthy, Reilly said.

The healthier those patients are, and the more readily they can obtain routine care that keeps illness at bay, the fewer costly services they will need, Reilly said.

Life-changing benefits

Empower3 has changed the life of Thompson Pharmacy employee Susan Hippo of Altoona, according to Thompson owner Bill Thompson Jr., whose company contracts with Empower3 to provide generic drugs to subscribers.

After her husband died in 2014, Hippo was unemployed and living on proceeds from her husband's life insurance, Hippo said.

She bought health insurance through the Affordable Care Act exchange, paying $500 a month in premiums, with a deductible of about $5,000, she said.

She didn't qualify for a subsidy, because she was unemployed, she said.

Because of the high deductible, she had to pay full price when she went to the doctor.

After five months, with her bank account dwindling from the premium payments, doctor visits, house payments, utility bills and food costs, she dropped her coverage, so she could extend her savings.

Her insurance had paid her nothing during that time, because of the deductible.

She got a job at Thompson and in January 2016 signed up for Empower3, after a year and a half without insurance -- during which time she had discontinued medication for a thyroid condition and migraine headaches.

Her premium payment on the Thompson plan was an extra $10 per pay.

"It was the best thing ever," she said.

The Empower3 employees are caring, respectful, thorough and professional, she said.

They got her back on meds for the problems she knew she had and discovered two she didn't know about -- anemia and vitamin B deficiency -- and placed her on supplements for those.

Her health is much better, she said.

Old wine, new bottles

But health care expert David Dausey of Mercyhurst University isn't impressed.

The Empower3 plan is not much different than a high-deductible policy, he said.

Most reasonably healthy people wouldn't get their money's-worth, given the $2,076 annual membership fee per individual, according to Dausey.

Someone with a chronic condition might be willing to pay that membership fee, but not a healthy person who just needs an annual physical and blood pressure check -- especially considering that membership doesn't include "catastrophic" coverage, Dausey said.

Dausey also questioned how Empower3 would fare if lots of sick patients signed up.

He guessed that the program doesn't cover dialysis.

He was right.

"Old wine in new bottles," Dausey said. "A panacea it's not."

Dausey doesn't understand, replied Gates, citing the premium payments and paperwork associated with traditional plans and the myriad of services covered by the single membership fee of Empower3.

An Empower membership costs $4,152 for a couple, with the additional cost of supplementary insurance -- a cost that varies depending on the group and the risk associated with coverage, Gates said.

A UPMC bronze plan for a couple, both age 40, non-smokers, with annual income of $35,000, on the Blair County insurance exchange, carries a deductible of nearly $7,000, with annual premiums of $1,764 and an annual maximum cost of about $9,000.

A UPMC silver plan for the same hypothetical couple carries a deductible of $3,000, annual premiums of $2,592 and annual maximum cost of $8,296.

The ACA may be a better deal for some people, but for most people, it's not, Gates said.

Like Dausey, Nancy Nielsen, senior associate dean for health policy at the University of Buffalo, isn't impressed with Empower3.

It's a form of concierge care, based on concepts promoted by accountable care organizations, she said.

"I don't think it's going to revolutionize things," she said.

Asked to evaluate the plan based on a description from the Mirror, the Pennsylvania Insurance Department questioned its compliance with the Affordable Care Act's requirement that health care plans provide "essential health benefits."

Subscribers who don't have appropriate supplementary insurance coverage could be subject to a tax penalty for being "non-ACA compliant," according to an email from the department.

The Empower3 program seems to lack the required guarantee that there be no annual or lifetime limits on benefits, according to the department.

In addition, the plan would seem to violate the ACA by potentially requiring individual subscribers to "piece together policies," the department stated.

There's also concern in the department that the cost of total coverage would be high when adding the membership fee to the cost of premiums, deductibles, co-insurance and co-pays associated with supplementary insurance, according to the department. Empower3 also hasn't filed with the department, as required for insurance plans, according to the department.

"While the Empower3 plan may look appealing in some ways at first glance, for most consumers, it would provide far less coverage at far higher cost than what is now available under the ACA," the department stated, adding that most people in Pennsylvania buying insurance under the ACA pay less than $100 a month for comprehensive coverage, with the help of ACA subsidies.

"We're not providing insurance," replied Gates, in defense of the Empower3 plan. "It's a membership."

Empower3 doesn't need to file as an insurance plan with the department because it doesn't indemnify losses of other providers or individuals, and because it collects a flat service fee from subscribers, including fees for services from other providers that go straight to those providers, Reilly said.

"We are registered properly as a Third Party Administrator" with the department, Reilly said.

Empower3 coordinates with insurance plans as a broker, he said.

People who sign up for the membership program learn they're subject to the ACA penalty if they don't obtain supplementary coverage, Gates said.

The partners would welcome the day when the ACA offers a supplementary insurance plan that would fit with the Empower3 program, with an appropriate discount for Empower3 coverage, Gates said.

In contrast to the critics, Pittsburgh-area insurance broker Dave Scott of the Arms Insurance Group said "the concept is great," and the plan has "a lot of promise." It seems like it could be successfully replicated, Scott said.

Similarly, Robert Field, professor of health management and policy at the Dornsife School of Public Health at Drexel University, said "the model is very intriguing and it could spread."

Similar in concept to prepaid plans like those of Kaiser Permanente, it's a creative way to try to solve some of the most serious problems in health insurance, Field said.

"The trick to its success will be making sure that patients do not overuse its services," he said.