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They’re called defined
contribution health plans and they are the latest evolution in the health
insurance industry. These plans, which take cues from the 401(k) industry,
promise to significantly change health care and its place in the
employer/employee relationship.
Clive Riddle, president, of MCOL,
a company providing health management and managed care services to medical
professionals, explains that defined contribution health plans come in many
shapes and forms.
“Defined care is an umbrella
term for these plans. They are also known as consumer-driven health plans or
self-directed health plans. It’s a concept that has been discussed among
benefit consultants, analysts, and policy makers for five years or more, but
it’s only in the past two years that actual products have emerged,” he
states.
“They are somewhat embryonic;
they’re not in all states,” he continues. “There are pilot programs in
early introductory stages in such states as Minnesota and Oregon.”
No firm standard yet exists for
these plans. Individual insurance companies are beginning to formulate their own
versions, and new, independent health care management companies are also
entering the field.
Riddle explained to Coding
and Reimbursement for Urology the difference among the currently existing
models.
“These plans are not like HMOs,
which all work within certain parameters. The first type of defined contribution
health plan is known as a voucher program. This type gets the most press, but
they are wrought with the most problems and perhaps the least successful. An
employer gives its employees a set amount of money—a voucher if you will—and
the employee would be on their own to find and purchase their [own] benefits.
This arrangement is good for the employer because it’s a fixed cost and they
bear no responsibility, it’s all turned over to the employee. The employee
picks any insurance company they want,” he states.
“The downside,” says Riddle,
“is that it is difficult for employees to buy benefits in the individual
insurance market. Individuals might get turned down because of health status,
unlike group plans through an employer. It’s also expensive. I predict that
the voucher model won’t become that prevalent.”
The second type of plan is known
as a self-directed plan with an insurance wrap policy. “These plans have a
high deductible,” Mr. Riddle states. “They are arranged through an employer.
Part of it is a traditional insurance plan that pays for catastrophic care. But
there is a large deductible that must be met first, often $1,000 or $2,000. Even
if the employer agrees to fund some of this deductible up front, this
arrangement is still cheaper for them than a typical HMO. A defined contribution
company may be retained to set up and to help administer the plan and the
deductible. The employees are given tools to get information and find discounts.
I think these types of plans have a purpose, fill a niche, if you will.”
The third type of defined
contribution plan models itself after 401(k) plans. Employers give employees a
defined contribution amount toward health care. The plan is administered by an
outside source, and employees pick from numerous options on how to use the money
allotted to them for health care, similar to retirement plans where employees
choose how to invest their money. “For these types of plans to work well,
employees must accept the responsibility. They have been empowered to make the
decisions, but they must become educated in order to bear the responsibility,”
says Riddle.
He continues, “Employees may be
given up to 10 or 12 health plans to choose from. The employer doesn’t have to
be responsible for the difference in the cost between any of these plans,
because the employee chooses how to spend this defined contribution amount. They
choose how their money is spread among their medical, dental, or vision needs.
Employers like these plans because the employee can’t complain—it is their
choice.”
While HMOs revolutionized health
care, Riddle does not see a revolution in the future with defined contribution
health plans, just useful incremental changes. “Managed care not is going
away. Employees will still be choosing HMOs from the list of choices offered by
their employer. I think these plans will change people’s behavior. Defined
contribution plans have been described as consumer driven. You’ll even see
references in the media to the ‘consumerism’ of health care. Patients are
being made to take responsibility for the economics of their health care.”
Mr. Riddle foresees the quality
of health care improving. “If this model follows the higher end of the
spectrum, I anticipate positive change. I’m concerned, however, about the risk
that some employers will use these plans as simply a way to cut and shift costs
without giving employees any true choice. If that’s all that’s done with
this movement, then it will be step backward for health care.”
Changes in health care with this
much potential momentum will certainly affect providers. As patients are being
empowered, where will that leave providers?
“As patients increasingly view
themselves as consumers, they will continue to make more and more demands on
providers. This might be problematic for providers. If patients are more
responsible financially for their health care, they will behave differently.
They will shop around, maybe not for the best care, but sometimes for the
cheapest care,” states Riddle.
Most providers will not
experience huge administrative changes, according to Riddle. Employees will
still be choosing from health plans already in place. The only difference is how
the employer is funding the plans and this does not affect providers.
Self directed plans may present a
different kind of burden on a physician. The physician will not be dealing with
an HMO (there will be no care management requirements) but dealing directly with
patients. Patients may seek some level of discount for the physician’s
services.
Riddle does not anticipate the
need for new laws to regulate these plans. He believes the laws currently in
place will sufficiently regulate the industry. However, he does express concern
over the insurance wrap plans with the high deductibles. “Currently, there are
no regulations to address what happens during that time before the deductible is
met. Some regulations may develop to govern this area, but this will probably
depend on how popular they get.”
“This movement is grabbing
hold, but it is unclear which model will lead the way,” Riddle states.
Not only are firmly established
insurance companies entering the world of defined contribution health plans, new
third party management companies are quickly forming and entering the fray.
Regence Blue Shield of Idaho and
Regence BlueCross BlueShield of Utah and Internet-based MyHealthBank benefit
service have jointly launched “self-directed health benefit options”
programs in Idaho, Oregon and Utah.
Urology practices should be aware of the new set of demands that will be placed on them with the advent of this new era in health care. Rick Rutherford, CMPE manager - Division of Practice Management at the American Urological Association, Inc. states, “Defined contribution health care plans will increase market share in much the same fashion that managed care plans have. The evolution will begin in large markets dominated by large employers, and eventually grow in smaller markets. If defined contribution health care benefits become an option for major employers in a specific health care community, urology practices will need to upgrade IT systems and invest in technology-based solutions to keep track of the various contractual variables. In addition, emphasis on customer relations will be doubly important to keep patients coming back.”
Copyright 2002 St. Anthony/Medicode. Coding and Reimbursement for Urology is a monthly newsletter that provides expert advice on accurate coding, as well as timely coverage and analysis of regulatory decisions. For more information, call 800-765-6588 or visit us on line at www.ingenixonline.com.
Reprinted with Permission.
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