Marketplace challenges led to New West closure

Two weeks after learning of their impending layoffs, the 33 employees at New West Health Services’ Kalispell office are directing thousands of seniors to find new insurance in preparation for the company’s last enrollment season.

One of the state’s only remaining Montana-based health insurers, New West announced last week it will close at the end of the year due to rising health care costs. As a result, all of the Helena-based company’s 84 employees will lose their jobs.

Lisa Huckins, a New West employee for 14 years, said the Kalispell office’s usual hum changed as company meetings shifted from survival mode to dissecting termination packets and caring for customers through the closure.

“We knew there were struggles,” Huckins said. “Each month, we watched our financials as we were paying the bills on rising health care and pharmacy costs ... it was getting concerning.”

“But it’s still a shock,” her co-worker Kelly Toren said, who has been with the company since the branch opened in 2002.

Toren said there’s still months of work to do as departments begin to shutter.

“I don’t have plans after this,” Toren said. “We still have members to serve through 2016, and with two weeks until [Medicare] Open Enrollment starts, that’s our plan right now.”

Of the Medicare company’s 15,000 members, 14,000 rely on Medicare Advantage. The plan typically allows seniors to tap into a wide range of insurance coverage at a reduced cost through private company contracts with the Centers for Medicare and Medicaid Services, or CMS.

New West members will have to find new insurance before the company ends its Advantage policies by the end of the year, or they’ll be returned to Original Medicare on Jan. 1, 2017.

New West Chief Executive Angela Huschka said the company likely won’t know its total financial loss until services conclude. She said the company began to struggle as expensive specialty drugs made it difficult to set reimbursement rates with CMS that could cover expenses.

“We’d set rates 18 months in advance, then a new drug would enter the marketplace that a number of our members needed,” Huschka said. “That set us back financially on what we originally told CMS … and we struggled with certain limits on how quickly we could recoup those losses.”

After years of this balancing act, she said the business became unsustainable.

New West’s increase in expenses isn’t unique.

According to data released by CMS in 2015, health spending grew by 5.3 percent in 2014. That’s compared to 2.9 percent in 2013 and 4 percent from 2009 to 2012.

While analysts predicted an increase in spending in 2014 due to the start of the Patient Protection and Affordable Care Act, a jump in prescription drug spending surprised many providers.

In 2013, spending on prescriptions grew by 2.4 percent. In 2014, that climbed beyond 12 percent.

Some national legislation on the table is attempting counter the costs, such as the Increasing Competition in Pharmaceuticals Act, co-sponsored by U.S. Sen. Jon Tester.

The bipartisan legislation requires the Food and Drug Administration (FDA) to prioritize the review of generic drugs that have a shortage or only one manufacturer. As it stands, the FDA has a backlog of 4,036 generic drug applications awaiting approval, and an average of 47 months to approve each drug.

Huschka said as prices grew, New West faced some disadvantage by serving only Montana customers.

“Being Montana-based meant we’ve had local people on the phone answering member questions, which is great,” Huschka said. “But [national insurers] have other lines of business to share their losses or gains with across the nation, and they can stay in business if one line of business struggles.”

New West members represent 30 percent of the 41,000 Montanans using Medicare Advantage. Blue Cross and Blue Shield of Montana and Humana will be the only remaining companies selling Medicare Advantage in Flathead County, where 1,500 locals use the plan.

New West was created in 1998 by several hospitals in the state as a commercial health insurer.

The company reached its height in 2011 with 44,000 members. But that same year, five of the six hospital boards ended their ownership of New West — they also transferred coverage of their roughly 11,000 hospital employees to Blue Cross Blue Shield of Montana.

New West’s remaining commercial insurance was sold, and the company shifted its focus to Medicare.

Huckins of Kalispell said their office knew it would be a challenge to overhaul its service.

“We started our plan with very limited resources,” she said. “But we grew, and at times had some of the highest star ratings … So we’re very proud as a very small team in a rural state that we still achieved what we did — which meant we were able to serve our Montana neighbors.”

Huckins and Toren sat on a couch in their Kalispell office and talked about the years they’ve worked to adapt the business to keep up with market changes.

Toren said while the office can feel the same as they prepare for enrollment to begin, some employees have already found new jobs, which she said is a testament to the experience they gained at New West.

“And that’s great, they need to think about their families,” Toren said looking toward Huckins. “But we’ll continue to do our job until we don’t have a job.”

To review plan options, visit https://www.medicare.gov. To talk with a local Montana volunteer concerning Medicare enrollment questions, call 1-800-551-3191.