Fledgling HealthSpan plans own demise as 82-year-old Medical Mutual of Ohio acquires portion of insurance business

March 02--HealthSpan, the Ohio insurer that replaced Northeast Ohio's segment of Kaiser Permanente, is too financially sick to save.

The 3-year-old health insurer has decided to pull its own plug.

On Tuesday, Medical Mutual of Ohio announced a deal to acquire nearly half of Health-Span's customers.

Under the deal, 46,000 employees of parent company Mercy Health who are insured with HealthSpan will automatically switch to Medical Mutual.

HealthSpan will encourage about 60,000 other customers enrolled in group and individual health insurance plans to sign up with Medical Mutual when HealthSpan is no more.

Financial details of the deal, secretly in the works for months, were not disclosed.

HealthSpan will continue insuring its members enrolled through employer-sponsored plans through their contract renewal dates or Aug. 31, whichever comes first. After that time, customers will have to decide whether to go with Medical Mutual or find another insurer.

Individual members' HealthSpan insurance will continue through Dec. 31.

The deal ultimately kills all that remains of HealthSpan, formed in 2013 when Catholic Health Partners ­­-- now Mercy Health -- acquired the financially troubled Ohio Kaiser Permanente insurance business and affiliated physician practice.

At the time, Kaiser Permanente of Ohio was posting millions in losses, including a $59.6 million deficit in 2012.

HealthSpan appears to have done a little better -- it reported losing about $13.2 million for the first half of 2015, according to paperwork filed with state insurance regulators.

But spokesman Chuck Heald said it wasn't enough.

"We were and continue to be a small insurance company in a heavily competitive market," Heald said. "We didn't get the numbers to be viable in that marketplace."

HealthSpan members have been reeling since December when the insurer upended its business model, rooted in the old Kaiser Ohio HMO plan. Patients received primary care and most other medical services from Kaiser doctors at Kaiser facilities, with the exception of hospital care.

HealthSpan announced at the time is was dissolving its medical group, Health­Span Physicians, and closing all 11 of its health facilities across the area and two medical centers in Cuyahoga County March 31.

That means many HealthSpan customers will need to find new doctors covered by their insurance and many more will be receiving care in new locations.

In the weeks since the announcement, Heald said more than half of HealthSpan's physicians have signed on to practices within HealthSpan's network. HealthSpan customers can either follow those doctors or find new ones among HealthSpan's partners, which include Summa Physicians Inc., the MetroHealth System and Mercy Health in Lorain County.

Some of HealthSpan's facilities set to close, meanwhile, will also find new life.

Summa Health System intends to reopen HealthSpan facilities at Chapel Hill and Fairlawn.

And MetroHealth System will do the same with HealthSpan's facilities in Cleveland Heights, Parma, Bedford and Rocky River. The fate of the remaining buildings remains unclear.

Medical Mutual, the oldest and largest health insurance company based in Ohio, said it hopes to hold on to HealthSpan's 105,000 members to build on its base of about 1.4 million customers.

"Medical Mutual has plans with comparable coverage based on rates, benefits and provider network, which, depending on the plan, is likely to include the same physicians offered by the HealthSpan network," said Jared Chaney, the insurer's chief communications officer.

"We think we will be a great fit for them," Chaney said.

For now -- other than finding out if they can still use their same HealthSpan physician or finding a new doctor in network -- there's nothing for HealthSpan customers to do.

Over the coming months, Medical Mutual will reach out to HealthSpan's customers about replacing their coverage.

Most of the 300 workers inside HealthSpan's insurance operation -- people in claims, call centers, sales and marketing -- will be needed through year's end, Heald said.

A smaller HealthSpan contingency will remain in 2017 to man the HealthSpan website, settle claims and other housekeeping, he said.

HealthSpan aims to cease all business by Jan. 1, 2017.

Amanda Garrett can be reached at 330-996-3725 or [email protected].

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