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Letting
consumers have a say
Some companies trying consumer-driven strategies to
drive down costs
Related
link:
Directory of Managed Health
Care Providers in Virginia
by
Marjolijn Bijlefeld
Virginia
Business
September 2003
Two
years ago, Stacy K. Viles began telling client companies
in Hampton Roads about a new way to hold down health
care costs. Instead of making the buying decisions,
she told them, give your workers the money and let them
decide how to use it. They’ll spend it carefully,
and the competition among health care providers for
those employee-directed dollars will drive costs down.
The
response from employers to this new “consumer-driven”
strategy — a far cry from the traditional, top-down
controls wrought by HMOs — was a collective no
thanks. “People weren’t interested,”
says Viles, vice president of sales for Sentara Health
Management in Virginia Beach. “They said, ‘Those
ideas might work in the big city, but not here.’”
Recent
double-digit increases in health care costs for employers,
though, are beginning to change some minds around the
country and in Virginia, too. In 2001 costs to employers
rose an average of 11.2 percent, according to Mercer
Human Resources Consulting. Last year saw a 14.7 percent
rise — suggesting that the managed-care approach
has wrung out all the savings it can. Now several of
the state’s big insurers, including Sentara, Anthem
Blue Cross and Blue Shield and Southern Healthcare are
now offering consumer-driven plans or adding elements
of consumerism to existing plans.
In
general, consumer-driven plans combine a high annual
deductible — say $3,000 for a family — with
an employer-funded annual allowance of perhaps $1,000
that workers use to pay their medical expenses. Employers
control their costs, in theory, because they pay lower
premiums for the high-deductible plan. And because workers
make spending decisions with the allowance, they’re
more thrifty and yet can still tailor coverage to their
needs.
If
their health costs exceed the allowance, the health
plan’s coverage takes over — once the deductible
is met. If workers don’t spend all their allowance
they can roll it over to the next year. Some employers
also offer a preventive care account to encourage employees
to get regular screenings and health exams.
Consumer-driven
plans are a largely untested concept. There are perhaps
half a million subscribers nationwide according to one
estimate, less than 1 percent of insured employees.
Nobody has a count on how many Virginians are under
consumer-driven plans, but it’s likely a small
percentage too. “Overall, Virginia is about a year
and a half to two years behind the curve,” says
Barb Bailey of Mercer Human Resource Consulting’s
Richmond office. “Historically, we’ve been
behind in embracing the whole HMO managed-care concepts,
(and) we’ve been behind in sharing the costs with
employees,” she says.
That
number will grow, though, now that major health plans
like Anthem are offering consumer-driven plans, says
Mac McCarthy, also with Mercer. “Virginia employers
typically tend to be loyal to their local carriers,
most of whom haven’t gotten (consumer-driven health
plans) on the street yet. So some of the employers say
they would just as soon wait until their local carrier
gets involved,” he says.
Virginia is home to one of the nationwide leaders in
consumer plans. Alexandria-based Lumenos began enrolling
people in employer-funded health savings accounts in
2001. Among its big clients: Zale Corp., NCI Information
System and Baylor Health Care System.
Proponents
say the financial advantages of consumer-driven strategies
are real. Charlottesville-based Southern Health says
a large Virginia-based client switched from a no-deductible
HMO plan to a $300 deductible plan and had only a 6.5
increase over the previous year’s costs instead
of the 14.4 percent hike that would have resulted from
staying with its traditional managed care plan. Other
companies share similar stories. Sentara says a client
that switched to the company’s new consumer-styled
coverage saw no increase at all over current rates —
remarkable considering the 15 percent industry wide
increase in more traditional health care plan costs
this year. Neither firm would identify their client
companies.
When
explaining the concept to companies, Sentara’s
Viles uses an analogy many parents understand. “When
you go on vacation and don’t give your children
any money, they’ll constantly ask you to buy them
something. But if you give them their own money to spend,
they’ll often end up saving some of it and they’ll
use it more wisely.”
Selling the concept also requires hard evidence, such
as side-by-side comparisons of a company’s recent
per-employee spending with a consumer-driven approach.
For example, says Viles, if 80 percent of the employees
spent less than $500 through the company’s traditional
plan, then a high-deductible plan with an employer-funded
health allowance could make sense.
Still,
there’s a lot of uncertainty among human resources
professionals. According to a survey done in March for
the New York-based American Management Association International,
more than a third of HR professionals said they were
unfamiliar with consumer-driven health plans. Nearly
two-thirds didn’t know if the approach was right
for their company.
What
do employees think? It’s more complicated for them
as well. It is easier for workers to estimate their
health care costs under a system of fixed premiums and
copayments. Still, Viles says her firm sees a growing
acceptance. One large Virginia employer began offering
a consumer-driven option and about 10 percent of its
employees signed on. “That’s what we had estimated
in terms of enrollment rate,” she says. “Nationally,
what we’re seeing is that the second year is more
than double the adoption rate of the first year.”
Proponents
of consumer-driven plans say employees have lost touch
with the actual costs of health care. If they control
the dollars — even though the money comes from
the employer-funded account — they’re more
likely to seek care from a practitioner who charges
less, such as a family practitioner or internist rather
than a specialist. They’re more likely to ask whether
a generic drug will work for them. They’ll want
justification for the higher-priced MRI rather than
the X-ray, the theory goes. In fact, that’s why
some insurers are adding tiered copays to their fully
insured HMO plans. If a patient must pay $15 more for
a visit to a specialist’s office, he or she might
go to the primary care doctor instead, says Viles.
Of
course, the transition can be a challenge. Human resources
personnel have to learn the system and then explain
it to workers, who may have enjoyed the relative simplicity
of low copays of traditional managed care. “The
employer and their human resources people have to be
behind the products,” says Terri Flagg, Anthem’s
vice president/product management. And companies have
to be careful that they lay out the risk. Once an employee
has spent all the money in the health account, that
employee is responsible for the difference until the
high deductible insurance kicks in. “The fear is
that you get people enrolled and they don’t understand
them,” says Flagg.
Employees
also need ongoing access to information to help them
make health-related decisions. Most insurance companies
now offer some online tools, either their own or in
conjunction with a well-known medical provider, such
as the Mayo Clinic. Anthem Blue Cross and Blue Shield,
for example, rolled out two new online support tools
in April — one to help patients select the hospital
that best meets their criteria for a certain procedure
and one to help patients wend their way through treatment
options. They’re both intuitive, customizable online
programs that provide consumer-friendly add-ons such
as a checklist of questions to ask your provider.
A
question that critics of consumer-driven plans raise
is the possibility that healthy employees will see the
most savings, but leave employees who need to stay in
traditional insurance pools to face higher premiums.
That’s possible. But carriers who offer consumer
plans, especially those who typically offer several
package options to an employer, say they’re still
spreading the risk. “We blend the range of options
together for rating and experience,” says Brian
Corbey, Southern Health.
Mercer’s
McCarthy says employees with chronic health conditions
are enrolling in consumer-driven plans. “The theory
is that those people understand their condition, know
it’s long term and are hungry for information and
knowledge about it. These people are better able than
most to predict their health care expenditures.”
Predicting
costs takes time, says Flagg. “You have to look
at the savings and impact over a three-year period,”
she says. In some cases, employers could end up paying
more for some people. So consumer-driven plans might
not work for everyone. But if health care costs continue
to rise at double-digit rates, industry watchers expect
the acceptance rate to soar. And people like Sentara’s
Viles will probably find her audiences more engrossed
than skeptical.
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