Humana, Priority Offering New Options

February 22, 2005
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GRAND RAPIDS — Employers weighing the move to a consumer-driven health plan have new options to consider, with Priority Health and Humana Inc. rolling out new products that are designed to generate cost savings over the long term.

After a one-year pilot with five companies, West Michigan market leader Priority Health has begun quoting its HealthbyChoice plan within its entire 31-county service territory, as well as a trio of medical spending accounts that includes a health savings account.

Humana has introduced to the Michigan market SmartExpress, a trio of high-deductible, preferred-provider organization plans for employee groups of two to 299 that includes an optional pre-paid personal savings account.

The new product offerings from both companies follow the consumer-driven model that seeks to get subscribers more engaged in health-care decisions and to better maintain their health. The plans are designed to help employers better predict and control the escalating cost of providing employee health coverage.

After a year in 2004 where employers were increasingly inquiring and learning about consumer-driven models and HSAs, executives from Priority Health and Humana believe 2005 is the year that their interest translates into buying decisions.

“They don’t see any end in sight with the current products, so they feel they have to make a choice,” said Dave Bilardello, director of group underwriting for Grand Rapids-based Priority Health.

The pent-up demand for the new benefit model was seen immediately when the 440,000-member Priority Health began quoting HealthbyChoice in late January for an effective date of March 1.

In one day, the company was flooded with requests for quotes from 65 separate employers in the Grand Rapids area, Bilardello said.

While the high-deductible, consumer-driven plans are generally less expensive than existing products, the true benefit stems from providing a mechanism for employers to forge long-term strategies to control the cost of employee health coverage in the future, executives say.

The savings comes from getting people to become better consumers of health care and to take better care of themselves as they take on a greater financial burden for their coverage. The belief is that those factors will ultimately affect the medical claims trend that’s been a major driver of  increases in health premiums.

“It’s all about mitigating trends, and the only way we’re going to do it is engage the consumer and get them to choose and use health care differently,” said Denise Christy, president for Humana in Michigan. “You have to think about what the cumulative effect is over the year and it starts to become real money.”

Humana cites its experience with SmartSuite, a consumer-driven product for large employers that was introduced in 2001 and has 250,000 subscribers. SmartSuite has had an annual average premium increase of 5.6 percent, about half the inflation rate for health coverage.

Humana began quoting the similarly structured SmartExpress in Michigan on Feb. 1 for an effective date of April 1.

The introduction of the new options from Priority Health and Humana adds significantly to the competition in the market, particularly for smaller employers, said Jennifer Johnson, a benefits consultant with Universal Insurance Services Inc. in Grand Rapids that represents several health plans.

Consumer-driven plans provide employers “huge opportunities to do some creative things to manage their costs long term,” Johnson said.

“It allows all of the vendors to step it up and take it to another level. It’s exhilarating to have the products to take out and say, ‘Now let’s really come up with a plan to save you costs and that works for you and your culture, and, ‘What are your employees really going to embrace?’”

SmartExpress offers a PPO with co-payments and two PPOs with deductibles. Each plan offers a personal care account (PCA) that employers can contribute into and that employees can use to pay their deductible or out-of-pocket medical expenses until their health plan kicks in.

The advantage of the PCA is that it fixes the amount an employer contributes annually based on what they can afford, Christy said.

Priority Health’s consumer-driven lineup with HealthbyChoice includes the HealthSavings accounts and new health reimbursement and flexible spending accounts. The accounts are administered by Mellon Financial Corp.

HealthbyChoice enables employers to provide financial incentives to employees to maintain their health. In the pilot conducted in 2004, for instance, CalvinCollege paid $200 to each participating employee who completed an online health risk assessment, set personal wellness goals. complied with health-care guidelines such as getting an annual physical, and actively managed health conditions such as diabetes, asthma or cardiovascular disease.

Getting employees to participate in health prevention and wellness is a critical element of consumer-driven plans and for controlling costs in the years ahead, said Amy Chambers, Priority Health’s legal counsel for sales and consumer-engaged health care.

“This is definitely part of a broader scenario,” Chambers said. “You’re getting members into the equation like you’ve never had them before.”

Of the five companies that piloted HealthbyChoice last year, participation rates varied from 41 percent to 99 percent. Between 41 percent and 89 percent of workers met their first commitment when they completed the health risk assessment.    

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