Florida Blue threatens to drop Health First from network, but experts say it's unlikely

Florida’s largest health insurance provider is threatening to remove Health First from its network, saying the health system is asking for too-high increases to its reimbursement rates.

Florida Blue and Health First are in the process of renegotiating contracts that outline how much Florida Blue will pay Health First for its services in Brevard County.

If the two companies can’t come to an agreement, Florida Blue will not cover services by Health First hospitals and physicians starting Dec. 7, according to a Florida Blue internal memo obtained by FLORIDA TODAY. Florida Blue has already sent notifications to 4,667 employer groups or members who had seen a Health First provider in the past six months in the county warning them that it might drop the provider from its network.

An independent expert, however, says it's likely that Florida Blue and Health First will reach an agreement before that time.

"It's a game of chicken," said Ge Bai, an associate professor of health policy and management at Johns Hopkins. "They want to see who will blink first."

GuideWell Mutual Holding Corporation, Florida Blue's parent company, controlled 44 percent of the Florida health insurance market in 2018 with an enrollment of 932,239, according to the Kaiser Family Foundation.

If the contract expires, Florida Blue will no longer cover Cape Canaveral Hospital, Holmes Regional Medical Center, Palm Bay Hospital and Viera Hospital, cutting its hospital network by more than half. Parrish Medical Center, Melbourne Regional Medical Center and Rockledge Regional Medical Center would remain in the network.

Florida Blue would also stop covering services by physicians affiliated with Health First. 

More:Health First to relocate Cape Canaveral Hospital to Merritt Island, open new facilities

Florida Blue spokesperson Christie DeNave said Health First has asked for significant rate increases on top of reimbursements Florida Blue has already offered.

"Florida Blue has been in contract negotiations with Health First," McNave said in a statement. "However, the hospital system will not agree to a relationship that partners to improve the affordability of health care for the community."

In its internal communications and customer notifications, Florida Blue says that Health First has asked for higher than normal reimbursements that are “inconsistent with (Florida Blue’s) members’ best interest.”

“Health First is insisting on a significant increase in reimbursement rates that would raise its payment structure well above similar hospital systems in the state,” reads the internal memo. “If Florida Blue agreed to Health First’s contract demands, the cost of care would rise significantly for Brevard-area members who use Health First facilities.”

Florida Blue spokesperson Christie DeNave said removing Health First from the Florida Blue network would only impact the 3% of Brevard County's population that use Florida Blue and see Health First physicians.

Health First spokesperson Pat Guerry said the letters Florida Blue sent were “routine”  because regulations require insurers to notify customers 30 days before a hospital leaves an insurance network. The notifications are “normal during this process,” Guerry said.

“We are working toward a renewal agreement and it is our hope and desire to reach a resolution,” Guerry said in the statement.

More:Health First restructuring: What we know (and what we don't)

Health First declined to comment on Florida Blue's contention that Health First is demanding overly high reimbursement rates. 

These disputes between insurers and hospitals are common, Bai said – and they often mean something positive for consumers.

"We must understand that if we don't allow our insurance providers to bargain, providers will have no incentive to lower their prices," she said, noting that the notifications sent out by Florida Blue were likely a bargaining tactic. 

Florida Blue and Health First will likely reach a compromise that leads to lower reimbursements, she said, and those savings will be passed on to consumers in the form of lower premiums.

More:Judge says Health First uses 'scorched earth' tactics to control local medical market

But a successful negotiation will depend on a few factors. If a health provider continues to demand higher prices than the insurer is willing to pay, "there's always a tipping point," Bai said. "It's not over until it's over."

The relative strength of each corporation will determine who has the most leverage in the negotiation, she said. Both Health First and Florida Blue hold quite a bit of power in the Brevard market; Florida Blue is a major insurer but Health First operates four of the seven hospitals in Brevard and controls a major physicians network.

More:Health First 'wellness villages' follow broader industry trends — will they catch on?

Florida Blue’s internal memo includes talking points for staff to use to respond to questions from customers. When speaking to customers, Florida Blue staff members are directed to stress that Florida Blue still hopes to reach an agreement with Health First.

If the companies don’t reach a new contract agreement, Florida Blue will work with Health First to ease transitions to new healthcare providers to customers in active treatment, including people undergoing chemotherapy, physical therapy and pregnancy care, according to the notification Florida Blue sent its customers.

Bailey Gallion is the business and development reporter for FLORIDA TODAY. Contact Gallion at bgallion@floridatoday.com or 321-242-3786.