Kaiser comes to town, and local hospitals launch a new insurance plan.

There’s a new health insurance plan in town, and it’s being underwritten by your local hospitals.

Community Hospital of the Monterey Peninsula parent Montage and Salinas Valley Memorial Healthcare System are already in the insurance business together, having launched Aspire, a Medicare plan, in 2013. Now, they’re teaming up with another unlikely partner – Blue Shield of California – to offer a commercial insurance plan effective Jan. 1, 2022.

The idea of health care providers becoming insurers is meant to solve a fundamental problem of health care. In the old model, hospitals get paid more by insurance companies when they have more patients in beds for more days – the sicker people are, the more dollars come in. When a hospital has skin in the insurance game, the incentive is to keep patients healthy and out of the hospital. Blue Shield also gets pre-negotiated rates with hospitals

All three parties (SVMH, Montage and Blue Shield) expect their new plan, called Trio, will be good business, so they are passing that along in the form of lower premiums to patients. “We’re incredibly excited about Trio, because it offers relief to people who live in this market,” says Laura Zehm, CEO of Aspire and Chief Administrative Officer of Montage.

So far, about 400 local providers have agreed to accept Trio insurance. Another big name in insurance has been knocking on doors, and getting a chillier reception.

Kaiser Permanente has approached all four Monterey County hospitals asking if they’ll accept Kaiser insurance. So far, it’s been a hard “no thanks” as Kaiser looks to open up in Salinas, and a potential second location on the Monterey Peninsula, according to doctors who have been in talks with Kaiser representatives. Those doctors say Kaiser plans to bring 15 primary care physicians to Monterey County, and is looking to contract for specialists; without local specialists participating, referrals will likely go to Kaiser’s already-established Bay Area facilities.

It’s what Zehm calls a “closed system,” in which it’s all Kaiser from imaging to surgery to pharmacy. “A closed system is not the culture of healthcare delivery in Monterey County, which is collaborative and open,” she says.

For local hospitals – and now also insurers – Kaiser looks like a competitive threat on multiple levels. Private insurance companies (like Blue Shield) and government insurance (like Medicare and Medi-Cal) pay doctors and hospitals for the care they deliver to patients. Private insurance pays better rates, which has the effect of subsidizing all of the government insurance plans. In Monterey County, only about a quarter of hospital patients have private insurance, and hospitals rely on that subsidy model to cover care for the majority of patients who are uninsured or have lower-paying public insurance plans.

If Kaiser peels away some of those privately insured patients, it means the subsidy system that barely balances out for local hospitals is compromised.

“Our medical community mostly is not interested in contracting with Kaiser,” Zehm says. “The main reason is they only take care of their members. The rest of the health care system in Monterey County is taking care of uninsured, under-insured people. We have that burden, but we are happy to do it; we believe it’s important that those providing care in this community serve everyone.”

Kaiser representatives declined an interview, and did not answer specific questions. Instead, they provided a statement: “We’re excited about the opportunity to serve our customers, our existing members and the larger community throughout the South Bay and Central Coast. We are always exploring the possibility of expanding Kaiser Permanente services into new areas.”

What’s most remarkable to me about Trio is how local hospitals have decided to band together and collaborate. It was just a few years ago that it looked like SVMH’s path forward was to get bought out by a big, corporate hospital chain. That didn’t materialize, luckily – because local oversight of local health care is going to be better for patients, especially when there’s an incentive to deliver care at a lower cost.

SARA RUBIN is the Weekly’s editor. Reach her at sara@mcweekly.com or follow her at twitter.com/sarahayleyrubin