Health Plans Being Tested Locally

March 26, 2004
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GRAND RAPIDS — In piloting a new style of health plan, Priority Health wants to learn how providing financial incentives for people to take better care of themselves translates into controlling the runaway cost of employee health coverage.

The Grand Rapids-based managed-care company is piloting Health by Choice for one year within its own employee ranks and at three employers: Steelcase Inc., Hope College and a Traverse City automotive dealership.

Geared toward large group subscribers, Health by Choice represents Priority Health’s entry into consumer-driven health care, an emerging plan design that seeks to get consumers more engaged in their care with incentives, better education and new coverage options.

“We need to start rewarding people for common sense health behavior,” Priority Health President and CEO Kim Horn said during a recent seminar in Grand Rapids on health savings accounts.

Participants in Health by Choice are required to complete an online assessment that gauges their health risks, have a physical exam if they have not had one within the last two years, set personal wellness goals (lose weight, walk more, quite smoking, etc.), comply with preventive health guidelines and, if needed, become involved in disease-management programs for conditions such as diabetes, asthma, cardiovascular disease and depression.

“Health by Choice is an effort we are making to encourage wellness and prevention as well as personal accountability for maintaining individual health,” Horn said. “As health-care costs continue to increase, it has become clear that it is time to partner with those persons who can most influence health status — the individual.”

Priority Health has more than 430,000 members enrolled in varying health plans offered in a 31-county service territory that stretches from south of Grand Rapids to Traverse City.

In exchange for enrolling in Health by Choice, employers automatically receive a 1 percent reduction on their premium. Participating employees can receive lower co-pays as well as coupons for discounts on products and services that help them get and stay healthy — memberships to health clubs or the purchase of running shoes, for example.

Financial incentives also are available for physicians who adjust their practices to provide greater emphasis on preventive medicine and disease management and encourage their patients “to do the right thing,” said Rob Pocock, Priority Health’s associate vice president for corporate communications and marketing.

Employers are encouraged to fashion their plan in order to pass down further incentives to employees based on “what works in their corporate culture,” Pocock said. Hope College, for example, will rebate 15 percent of a participating employee’s premium if they meet all of the participation criteria, he said.

“We’re hoping they will build on it and take it forward,” Pocock said of the employers’ role in passing on employee incentives.

The goal behind consumer-driven plans like Health by Choice is to lower utilization rates that are a key driver in the rising costs of health coverage. By keeping people healthy or enabling them to better manage their condition, Priority Health can begin to affect utilization rates, in turn affecting medical costs that are reflected in annual premium increases for employers.

Premium increases have run in the double digits in recent years, leading to a greater burden of the cost for health coverage getting shifted onto employees through higher premiums, deductibles and co-pays. They also have created an appetite among employers for new options for their employee health coverage that are designed to control costs.

Stemming growing medical payouts through utilization rates is one way to control overall costs and the resulting premium increase, said Dr. Frank Marre, associate vice president of clinical programs at Priority Health.

“Net year’s premium is this year’s cost,” Marre said. “By reducing this behavior we’re going to fundamentally shift the medical cost equation.”

Marre cites research data that shows 58 percent of diabetes cases are preventable through personal behavior. Diabetes patients, he said, cost three to four times more to provide health coverage than other patients.

And evidence is building about the growing and significant role personal behavior plays in driving up health-care costs.

A U.S. Centers for Disease Control report issued this month shows a dramatic increase in the obesity rate among the U.S. population, with 64 percent of all people now overweight or obese. The report found that inactivity and poor diet is now the second-leading cause of death in America, behind smoking.

The financial impact of obesity in direct and indirect medical costs and lost productivity was estimated at $117 billion annually.

Another research report, from the Rand Corp., estimates that obesity-related medical problems, including diabetes and heart disease, will account for 20 percent of medical expenditures by 2020 for people ages 50 to 69 — a 50 percent increase from 2000.

“Imagine if we can turn off that spigot,” Marre said. “Fundamentally, our habits are robbing us of the quality of our lives. We’re slowly committing suicide.”

Priority Health hopes to begin affecting those personal behaviors that lead to chronic health problems by better educating individuals about the financial and health consequences of their actions and offering financial rewards for better behavior.

Using data collected through the year-long pilot effort, Priority Health wants to craft best practices for Health by Choice “so we can continually improve and help other employers implement this program,” Pocock said.

“The pocketbook is what will start to drive individuals to start making better decisions about their health,” he said.

In bringing Health by Choice to the market, Priority Health is following a nationwide trend among health plans to unveil products that place a greater emphasis on consumer involvement and behavior. While Priority Health executives believe Health by Choice can become one of the tools toward controlling rising costs and will gain acceptance in the marketplace, there are doubts about how well consumers will embrace such consumer-driven plans that are now emerging.

In a recent issue brief, the Center for Studying Health System Change, a nonpartisan health care research group affiliated with the Robert Wood Johnson Foundation, stated that “it is unclear” right now whether consumers are ready for the new-style plans. The success of consumer-driven plans depends on consumers becoming “more conscious health-care users” and the ability of health plans to help them achieve that end.

For now, researchers wrote, “the appetite of consumers to take on new financial and care management responsibilities is unclear at present. Some of the ambiguity lies in the fact that plans have only recently developed many of these new product arrangements, so current sales and take-up rates are limited. Consumers, however, may need more incentives to move in the direction plans and employers are hopeful they will go.”

Yet a survey last summer by the Health Insurance Association of America shows that interest does exist in consumer-driven health plans and that it is growing. Forty-four percent of the respondents indicated they were “somewhat likely” to switch to a consumer-driven plan if it were offered.

Thirteen percent of the employers responding said they would likely offer a consumer-driven plan to their employees in 2004 and another 27 percent indicated they would do so within five years.

Those employers that have already switched said they have seen a growing awareness among their workers of health care costs and greater attention to the appropriateness and quality of care, according to the survey’s results.

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