The Convergence of Rising healthcare costs, increased cost sharing and demand by consumers for more participation in healthcare decisions is producing a variety of innovative health insurance solutions. Some of the new benefit designs focus on consumer engagement and incentives for healthy behaviors, while others are hybrids, filling a gap between traditional managed care and consumer-directed health plans (CDHP). In some cases, new plan designs are wrapping a healthy lifestyle component into a high-deductible structure.

Enrollment in CDHPs remains low but is growing, according to surveys by the Employee Benefit Research Institute and the Commonwealth Fund. Overall, 7.5 million adults ages 21 to 64 with private insurance, or about 7% of that market, were either in a consumer-driven or a high-deductible health plan in 2007.

"It's just too big of a jump to go from an HMO with copayments and no cost-sharing to a plan with high deductibles and cost sharing," says Kelly Smith, director of small group sales for CDPHP, an Albany, N.Y.-based insurer. The plan has offered transitional PPO and Exclusive Provider Organization (EPO) plans since early 2007.

CDPHP's transitional plans include office visit copayments as low as $20; annual deductibles as low as $250; 100% coverage once the coinsurance maximum is reached; and no-cost preventive services, such as routine physicals, associated lab tests, screenings and allergy injections. These transitional products are the top seller in CDPHP's small group market in terms of new business for 2008.

HealthNow in Buffalo, N.Y., is offering Aqua, which product developer Kathy Messer says is designed for those who want to lead a healthy lifestyle and play a part in their healthcare decisions. She says the model was tested in focus groups first, and feedback indicated a desire for more than just medical benefits.

Introduced last year, Aqua provides $500 (single) and $1,000 allowances (family) used as first-dollar coverage for any covered medical expense in or out of network. Once the allowance is depleted, members pay a deductible, and once it is met, the cost share is 20% for in-network medical care. Complementing the Aqua allowance is a health and wellness card ($250 and $500 respectively for singles and families), which can be used for massage, chiropractic care, acupuncture, a fitness club membership and other activity-based programs.

Thus far, 3% of HealthNow's members are enrolled. Messer says enrollment is higher than expected in a state whose residents are predominantly in traditional managed care and whose small businesses have premiums that are community-rated.

Like HealthNow, MVP Health Care, in Schenectady, N.Y., did some market research of its own to design TriVantage EPO, which offers three benefit options. David Henderson, executive vice president of MVP, says that the EPO has 10,000 members so far and is designed to meet members' needs throughout their lives.

TriVantage's options target three different constituencies—singles, families and empty nesters—with products called Active Lifestyle, Family Focus and Healthy Alternatives, respectively. All built on an EPO with minimal copayments for routine office visits and preventive care, each option differs in its approach based on its target market.

For example, Active Lifestyle is fitness-oriented and offers a $300 cash reimbursement for a fitness center membership, while Family Focus provides $300 for children's swim lessons, sports team memberships and drivers' education, and Healthy Alternatives offers alternative medicine components.

Gus Martin, product innovation for TriVantage, says there is a trend toward building brand loyalty and customization.

"Not only do our strategies fit different segments of the population, but we also appeal to employers who can decrease costs and engage their employees," he says.

A wellness suite is rolled into each option and includes: access to online tools and information via WebMD; Work Well, Live Well, which brings online tools and education to the workplace; Healthy Discount coupons for goods and services; and Personal Care Advocacy with a registered nurse assigned to each member.

Marion Schremp, CEO of Atlanta-based Multiple Benefit Services, an employee benefit consulting firm, emphasizes the importance of creating optimal benefits for specific buckets of insureds based on their lifestyle preferences. She feels that a CDHP is ideal for those in their 50s, while singles making less money may not be as comfortable with a high deductible. As many as 65% of people spend less than $700 a year on healthcare expenses, she says, but plans with first-dollar coverage and a high deductibles are only catching on now.