Blues To Roll Out A Deductible HMO

September 28, 2004
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Responding to the demands of the marketplace, Blue Care Network plans to begin selling a deductible HMO product next month for January 2005 enrollment.

Costing less than the current HMO product, the deductible plan is designed for businesses struggling to cope with the escalating cost of employee health coverage. Kevin Seitz, president and CEO of Blue Care Network, said he anticipates the deductible HMO plan will meet with strong interest from small businesses.

In an era of rising health premiums, Seitz calls a deductible HMO product a “natural” for small employers trying to contain health insurance costs.

“They need benefit options,” Seitz said. “It’s not going to be for everyone that’s interested in it but it is going to be a healthy market.”

Deductible HMOs were allowed in Michigan beginning more than two years ago under legislative action in Lansing

HMOs previously could only write health plans that use co-pays.

The change in the law enabled HMOs to formulate health plans that use co-pays or deductibles, or both, with the goal of bringing a less expensive HMO product to the market for employers trying to cope with rising premiums and still wanting a managed-care component to their health plan.

In introducing a deductible HMO, Blue Care Network is following the lead of Priority Health, which brought a deductible plan to the market in early 2003 and found significant success.

Some 100,000 of Priority’s Health’s 356,000 HMO subscribers are now enrolled in a lower-cost deductible product.

A Priority Health HMO with a $500 deductible with co-pays and a like benefit design cost employers about 8 percent less this year than the standard HMO product. According to Priority Health, a $1,000 deductible HMO with co-pays and a like benefit design cost about 16 percent less.

Blue Care Network spokeswoman Helen Stojic said the firm will offer three new HMOs with varying deductibles.

Products coming to the market include a plan with a $250 deductible for individuals and $500 for families, a $500 single deductible and $1,000 family deductible plan, and a $1,000/$2,000 plan.

Stojic couldn’t say how much less the deductible plans may cost below standard HMOs, although, “It will be aggressively priced. So you can expect some savings compared to our competitors and our other products.”

Blue Care Network’s rolling out of a deductible HMO product is part of a broader strategy to better fashion benefit designs to employers’ needs. At the same time, Blue Care Network has sought to step up customer and claims services and become more competitive on pricing in an effort to win back business, Seitz said.

The HMO’s subscriber base has steadily fallen over the years. Blue Care Network’s membership has gone from more than 572,000 at the end of 2001 to 464,509 as of June 30, 2004, according to the HMO’s latest quarterly reports filed with state regulators.

In West Michigan, Blue Care Network’s subscriber base has decreased by half in recent years, from about 100,000 to 50,000 today, Seitz said.

The loss has come as Priority Health — which had 206,000 subscribers less than four years ago — grew rapidly.

After undertaking major upgrades to its information technology system that accommodates the formulation of new benefit designs, and improving financial performance that allows for more competitive pricing, Blue Care Network plans to try to recapture lost market share, Seitz said.

In West Michigan, where two HMOs — Care Choices and PHP — have left the market in recent years, Blue Care Network is “absolutely committed” to the market and regaining market share, Seitz said.

“We’re coming back after it,” he said. “We’re now in a position where we’re worth another look.”   

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