Physicians’ insurance firm has 10-year history
Feasibility study determined need
The seed for Physicians Inc. and its health insurance product was planted in 1986 when members of the Harris County Medical Society in Houston formed a physician network, Gulf Coast Independent Practice Association, to monitor the evolution of managed care in the Houston area and to be in a position to contract with managed care.
In 1995, as managed care penetrated the Houston market, the network commissioned studies to determine whether a physician-owned insurance company could compete in the marketplace.
"Instead of designing a product and looking for the market, we asked the market what they really wanted," says Paul Handel, MD, outgoing president of the medical society and a driving force behind Physicians Inc.
Studies showed that, with the exception of some large self-insured companies and multistate and multinational firms, 90% of the Houston marketplace is small businesses, Handel says.
Their research showed that people want to be treated by doctors they know; to have easy access to their doctors; and to get the care they need without a tremendous amount of red tape, says Handel.
"My own practice is a small business, and I don’t have the luxury of having my employees out trying to find medical care or driving across town to find the cheapest imaging center. If an employee gets sick, I need for her to get in to see the doctor as quickly as possible, to have the diagnosis rendered as quickly as possible, and for her to be back to work as quickly as possible," Handel says.
In 1996, the medical society initiated a stock offering, which raised more than $4 million in initial funding for the insurance company. A capital campaign in the spring of 1998 raised an additional $3 million from physician investors, plus an investment by a physician-owned malpractice insurer. A second stock offering in the spring of 1998 raised an additional $1.5 million in capital.
The vast majority of stockholders are physicians. The company was set up so that only physicians can have a voting share of common stock, and there is only one vote per physician, making it impossible for one physician or group to dictate the progress of the company, says Christine Hollinder, marketing director.
The insurance company contracts only with physicians of Gulf Coast Independent Practice Association. However, the physicians are free to contract with other managed care companies, and most do.
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