New insurance plans turn patients into shoppers

By Julie Appleby, USA TODAY

Given $2,000 to cover groceries for a year, most consumers would shop around for the best prices — and skip the caviar. Now, some employers want to bring that same way of thinking to health care.

An array of new types of insurance policies are hitting the market, all aimed at getting patients to act more like shoppers. Dubbed "consumer-driven health plans," most require workers to pay more out of their own pockets — sometimes thousands a year — for health care.

Cheryl Brock, a benefits analyst at Humana, is among the first wave of workers to face the new plans. She signed up for one of the policies, but not before taking out a calculator to help decide among six health plans offered by her employer. No longer were the choices simply PPO vs. HMO. For the first time, Brock had to decide how much to gamble that she'd stay healthy.

The 33-year-old crunched the numbers, then chose a plan that dropped her monthly premium by 75% — to just over $10. The trade-off? If she falls ill, she may have to pay up to $2,000 of her own money toward medical care.

"I think it's well worth the risk," says Brock of Louisville.

This may be a watershed year for such plans, with formerly skeptical employers now expressing interest because of rapidly rising health care costs, a slow economy and a buyer's market in employment. The new plans could prove to be the first big shift away from managed care — and may eventually dominate the market as HMOs did in the 1990s.

Under Brock's plan, her employer covers her first $500 worth of medical care. After that, she's on her own until she's spent $2,000. Then insurance coverage kicks in again to pay 100% of her medical costs. Brock says she doubts she'll spend more than $500. Or, if she does, the amount will still be less than the $390 she'll save over the year in monthly premiums. Brock says the plan will make her a more prudent consumer.

"Depending on what the doctor wanted to test me for and why, I would determine whether I wanted to do that," says Brock. "It's my responsibility to evaluate the cost of care."

For the first time, some big insurance companies — Aetna, Humana and some Blue Cross plans — are rolling out plans to compete with those already on the market, such as Destiny, Definity Health and Lumenos.

While the total number of enrollees remains low, probably fewer than 350,000, more employers are signing on, including Medtronic, Novartis, Ciba Vision, Raytheon, the Budget Group and the University of Minnesota. A survey by benefits firm William M. Mercer found that 19% of all employers — and 29% of those with more than 20,000 workers — said they were likely to offer such insurance.

Winners and losers

Proponents say the plans will spur a free market in health care, where patients will ask doctors about costs, shop around for quality, haggle over prices — and moderate their use of medical services.

"People think a doctor's office visit costs less than a haircut, which is frightening," says Ryan Levin of Destiny Health in Oak Brook, Ill., which is marketing one of the new plans. "Because they think it's so cheap, they're less concerned about whether to utilize care or not."

Critics fear the new plans shift costs to workers, punish the sick by making them pay more and discourage patients from seeking needed care or preventive medicine, such as cancer screenings.

"There are winners and losers with these plans," says Gail Shearer of Consumers Union, publisher of Consumer Reports magazine. "The losers are those who are sicker and have higher expenses."

Plans offered by the insurers vary. Many link high-deductible insurance coverage with special health spending accounts used by workers to cover those deductibles and other medical costs. Amounts put into the funds by employers vary, but may fall short of a year's worth of medical care. The worker makes up the difference.

The spending account concept attacks a legacy of managed care: patients who are used to paying only small co-payments of $10 to $20 for office visits or drugs.

When patients have to pay more, they reduce their use of medical care, according to a study in the November issue of the American Journal of Public Health. Office visits dropped by about half for both minor and serious symptoms. The article also found that patients did not report a decline in health as a result, but cautioned that more study is needed.

True costs of health care

Employers won't necessarily see savings right away, unless they choose to fund the workers' accounts with less than they currently pay to provide more traditional health insurance coverage. Long term, employers say, they may save money if workers spend less overall on health care services.

As an incentive to workers, many of the savings plans allow prudent shoppers — and those lucky enough not to fall ill — to roll over what's left from the fund each year toward the next year's health costs.

"The simple notion we're trying to get across is that when the consumer fills a basket and goes to the checkout, they watch the cash register and have a sense of the true financial cost of health care services," says Ron Williams, an executive vice president at Aetna.

Dennis Snyder, owner of the five-employee Goes Incentives Awards in Elmhurst, Ill., switched in July to an insurance plan offered by Destiny Health because he said he got better customer service than from his former big-name insurer.

Under the Destiny plan, he puts $50 a month toward each employee's savings plan — and the employee can add his or her own money. That savings fund is used to cover all routine care, such as office visits, lab work and most prescription drugs. The costs of hospitalization, drugs for chronic illnesses and other major medical services are paid for by Destiny for a monthly premium similar to traditional insurance plans.

Under the new plan, employees are paying less at Snyder's firm for the plan's deductible and about the same amount in monthly premiums. Snyder says he likes the idea that employees will see how much routine office visits cost.

"It's important that people take the whole health issue into their own hands," Snyder says. "They've got to be educated about the true cost."

Some skeptics fear that patients may put off needed care to save money. A few of the plans address the concern: Destiny, for example, gives credits toward air miles or vacations for meeting preventive care guidelines, while Definity Health covers all preventive medical care at 100%, so workers don't have to deduct funds from their spending accounts.

Others say the plans could attract all of the healthiest workers, leaving the sick to try to find low-deductible plans.

"I get concerned when people promote these in the name of consumer choice," says Consumers Union's Shearer. "If the market plays out the way economists would predict, in the long run there could be less choice, with nothing but these high-deductible policies."

Hard to estimate expenses

For now, one of the challenges facing employees considering whether to sign up for a plan is estimating potential medical expenses, including drug costs, office visit payments and lab work. For example, many patients think all doctor's office visits cost about $15 to $20. But according to analysts at Milliman & Robertson, the average billed amount for a physical exam with lab work runs $175. A chest X-ray costs $50. A mammogram to screen for breast cancer averages $170. Actual amounts may be less, because many doctors and medical clinics have negotiated discounts with insurers.

Still, at undiscounted rates, patients could blow through their first $500 in medical care with an annual exam and lab work, a mammogram, a second office visit for strep throat, with the accompanying antibiotic — and a couple of months' worth of a prescription allergy drug.

Information about doctor's charges — and the quality of a doctor or hospital's medical care — has long been closely guarded by hospitals and doctors.

But already, some insurers offering the new plans say they will put office charges and other information about doctors on Web sites to help customers make choices. Short of that kind of information, patients will simply have to ask their doctors, "How much?"

"They're going to get sticker shock, not from the cost of the insurance plan, but for services," says Jodi Martin, director of corporate benefits for Ciba Vision in North America.

At Ciba, employees are given "credits" toward their health care each year. Out of the dollars given, the workers choose which plan they want from several offerings. Some plans cost less than the credits given, others cost more.

This year, Ciba is offering an additional choice, the Lumenos health fund. Under the plan, Ciba employees who sign up for family coverage will get $5,800 in a Lumenos fund to cover doctor's visits, drug costs, hospitalizations and other medical care. If that money runs out, the employee would spend his or her own money up to an additional $3,200 before insurance that covers 100% of medical costs kicks in.

About 4% of Ciba's 3,000 employees signed up for the plan, Martin says.

"I think it will raise awareness about costs," she says. The new types of policies grew out of opposition to managed care, where insurers, rather than patients, attempted to restrict spending. Consumer-aimed financial incentives hit the market several years ago, when many employers adopted plans that require patients to pay more for expensive brand-name drugs than for generics.

The trend is likely to continue, analysts say, as employers look for ways to control rapidly rising premiums. Some have given up on managed care as the answer. Still, the new policies raise debate over whether shopping for health care is like picking out clothes or a new car.

"Certainly, health care isn't like a typical consumer good," says economist Paul Ginsburg of the Center for Studying Health System Change, a non-profit think tank in Washington.

"Consumers are not going to enjoy these choices the way they enjoy choosing which car to buy," Ginsburg says. "These will be wrenching choices: I think Dr. Jones is best, but Dr. Smith costs less."