All talk and no action. Is that what's happening to consumer-driven health plans? The supply is certainly there, but the demand
may be in question. Specialized consumer-driven healthcare companies are coming out of the woodwork, while large insurers
are putting their stamp on innovative alternatives to traditional HMOs and PPOs. However, only about 10% of employees are
opting for the offerings.
J.D. Kleinke, president of HSN, a consulting firm in Denver, says defined contribution is a work in progress. "No one knows
what the concept means; that's the biggest obstacle," he says. It also would explain why these new flexible options are referred
to as defined contribution plans, consumer-driven health plans, or self-directed health plans. "Essentially, employers hand
over money and say, 'Do what you want with it.' The only unifying element among these plans is more control by the consumer.
"The concept of defined contribution will collapse in its own wake," he continues, "because of its unfeasibility and inoperability.
It's really just a high deductible with a front-end flexible spending account backed by insurance."
Getting in the game
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Clive Riddle, president of MCOL, a health management and managed care resource headquartered in Modesto, Calif., agrees with
Kleinke that consumer-driven plans still have a long way to go. "Employers are offering multiple plans but without a defined
contribution element. The cafeteria plan still shields employees from the real cost of healthcare," he says. To have a successful
model, he recommends a sufficient defined contribution allowance so that employees don't view the program as a benefit takeaway;
an extensive menu of choices so that employees are really in the game; and sufficient information tools to assist employees
in choosing and using benefit options.
But healthcare experts certainly are not all in agreement. Victoria Liberti, an assistant vice president at Conning Research
in Hartford, Conn., anticipates that defined contribution models will appeal more to small and mid-sized employers and that
over the next three to five years, will come into their own, following the path of 401k plans.
That may just happen if a recent study of large companies, conducted jointly by Watson Wyatt, a human capital consulting firm,
and the Washington Business Group on Health, is a good predictor of trends. The survey indicates that 43% of respondents expect
to increase the level of "consumerism" in their health plans in the coming year, compared with 19% who already have systems
in place. But when it comes to increasing employee choice in selecting benefits, only 19% are offering more options, while
14% plan to do so in the next year.
What is apt to move consumer-driven health plans closer to the front burner is the recent guideline issued the Treasury Department
and IRS that eliminates the "use it or lose it" rule. The new ruling enables employees to rollover remaining funds in their
employer-funded accounts from year to year on a tax-free basis.
"The clarification will catapult awareness of consumer-driven plans and help to engage consumers who otherwise looked at the
plans as only a means to control costs," says Marc Backon, chief marketing officer for Destiny Health, a licensed health insurance
company based in Bethesda, Md., and Oak Brook, Ill.
Insurers and consumer-driven healthcare companies agree that the new plan model guarantees more consumer choice and participation
in healthcare decision-making, echoing back to the days of indemnity insurance. Whether it will help employers keep premiums
stable is questionable, although many consumer-driven health companies readily make that claim.
The Massachusetts Business Roundtable blames the rising cost of healthcare on insulating employees from the true cost of care.
A roundtable white paper says employees feel entitled to healthcare and make costly choices without considering the repercussions.
"As employees make value-based purchasing decisions, premiums will become more stable and predictable," says Lindsay Resnick,
chief marketing officer for HealthMarket, based in Norwalk, Conn.
"The industry has to find a way to create more price transparency so that consumers can better understand the true costs of
healthcare," says Richard Skayhan, director of communications for Health Net Northwest. "Employers are asking for creative
ways to decrease costs; they want to offer healthcare benefits without cutting into other expenses."
The new "U Select plan," developed by Vivius in Minneapolis and offered to Health Net's Spokane marketplace of 50+ employee-companies,
allows workers to establish their own co-payments and choose providers based on cost. In negotiating rates, Dr. Lee Newcomer,
chief medical officer and executive vice president for Vivius, expects U Select to cut premiums by 10% depending on the employee-selected
co-payments for physicians, hospitals and outpatient surgery.
When senior management at Budget Group Inc. in Daytona Beach, Fla., mandated that the vehicle rental company keep healthcare
costs flat, Carl Lanning, the company's manager of benefits planning, contacted Definity Health. "We had already passed premium
increases onto our employees," he says. At Budget, Lanning says, the more executives make, the more they pay for their healthcare.
Syskoplan Consulting offered an indemnity plan but with costs rising, the 25-employee software company in Waltham, Mass.,
needed an alternative. It selected CareGain and by raising deductibles, is able to fund the account while still offering dividends
to its employees. Susan Richards, the firm's comptroller, anticipates that the new plan will save the company more than 12%
a year.
