Humana Banking On Consumers

July 2, 2004
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Humana Inc. is looking to grow market share in Michigan on the back of a new style of health plan that’s designed to help employers contain the runaway costs of employee health coverage.

Introduced in Michigan just recently, SmartSuite is a consumer-driven product the Louisville, Ky.-based Humana began rolling out across its 18-state market three years ago. SmartSuite consists of an array of health plans that allow employers to better fashion employee health benefits, while bringing to bear methods that get employees more involved in their health-care decisions and the resulting cost implications.

“What we offer to consumers and employers is choice,” said Denise Christy, president of Humana’s Michigan operations. “An employer has options that work for them.”

Humana presently has about 225,000 people at 225 employer groups enrolled in SmartSuite plans nationally.

The insurer hopes to use SmartSuite as the backbone to double its Michigan enrollment — now at more than 50,000 — within two years, Christy said. In pushing SmartSuite, Humana is seeking to gain business from employers frustrated with the double-digit annual increases in health premiums the last four to five years.

Christy, who was named Michigan president for Humana last fall, called the introduction of SmartSuite “another sign” of the insurer’s commitment to compete for market share and expand its presence in the state.

“It’s our signature product and it’s what we are coming out with,” she said. “We see a movement in this marketplace.”

Humana had 47,400 people in Michigan enrolled in its preferred-provider organization (PPO) health plan as of Dec. 31, 2003, according to the company’s annual report filed with the U.S. Securities and Exchange Commission. That has since grown to more than 50,000 people.

At the end of 2003, Michigan represented about 1.6 percent of the nearly 7 million enrollees Humana has in 18 states and Puerto Rico.

Early data from employers across the country that are enrolled in SmartSuite indicate participants have experienced smaller annualized premium increases, most in the mid-single digits. Among the 5,000 employees within Humana’s own work force who are enrolled in SmartSuite, the medical inflation trend has fallen from 19 percent to 4.9 percent, according to the company.

The cost savings stem from the consumer-driven nature of the health plan that seeks to better manage the risk pool by using disease management programs, technology, consumer education and high deductibles for some plans to contain utilization rates and costs.

“This is not just about plan design. You have to put plan design, clinical strategies and technology all together in order to have a meaningful impact on (medical) inflation year to year,” Christy said.

Consumer-driven health plans — which come in widely varying models — are an emerging trend that many believe hold promise in getting a handle on the escalating cost of health coverage. The whole idea is to make enrollees act more like consumers and understand the cost implications of the lifestyle and health-care decisions they make.

Grand Rapids-based Priority Health has been piloting a consumer-driven model in West Michigan this year and expects to roll out a plan in 2005 that provides financial incentives for people to take better care of their health.

Despite their promise, consumer-driven plans have been slow to catch on with consumers and employers, which are apparently trying other tactics first to mitigate rising health-care costs.

“They’re reluctant to take on something relatively new. Nobody wants to be first,” said Greg Rhodes, senior vice president and manager of the Grand Rapids and Detroit offices for global human resources consulting firm Aon Consulting.

A research report issued in May by the health-care think tank Center for Studying Health System Change stated that employers, despite large cost increases in recent years, are opting for modest changes in the health plans that involve switching to higher deductibles, co-pays and employee premium contributions, rather than making dramatic benefit overhauls.

Despite the slow emergence, many believe consumer-driven health care will eventually take off as new plans are brought to market and as employers see the benefits and opt to make major changes in their health benefits in the face of continued double-digit premium increases.

One way to begin affecting those sizable increases is to put a greater emphasis on consumerism and get employees more involved in the process, Rhodes said.

“It’s giving them a stake in the game,” he said. “It’s clearly putting some responsibility on the employer or the patient to better manage their health-care delivery because they’re given an understanding of where these dollars are coming from.”

Growing awareness among employees and employers will also bring increased interest in consumer-driven plans, Rhodes said.

Aon Consulting reported in May that employers could expect first-year savings of up to 8 percent by implementing an “effective” consumer-driven plan. The actual savings depends on financial incentives offered and changes in how employers consume health care, said Bill Sharon, senior vice president for the Chicago-based Aon Consulting.

As Aon Consulting was telling employers to expect an average 14.1 percent increase in their HMO and POS premiums for 2004, the company predicted that consumer-driven plans will become more attractive in the coming years.

“Early returns on the impact of consumer-driven plans have been positive. Significant reductions in unnecessary care have been charted,” Sharon said. “Once the actuaries begin to see these results continue year over year, we predict that this will be reflected in trend rates and future trend lines will drop lower than other plan models.”

As a carrot to induce employers to sign up for SmartSuite, Humana is offering companies with more than 500 workers to cap premium increases for second-year renewals at 9.9 percent. The cap will provide employers switching to SmartSuite a chance to better plan the health-care costs in the subsequent year.

“It makes it all predictable for the employer,” said Mark Mathis, manager of corporate communications for Humana.           

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