Category: Health plans

Giving consumer-directed health care a bad name

published date
January 16th, 2007 by

Consumer-directed health care has the potential to hold down costs and improve quality by delivering price signals more directly to patients. The theory is that when patients consider the cost implications of their medical care choices, they will shop more intelligently, just as they do for groceries and gas. In the end, that should benefit employers by holding down premiums.

There are plenty of practical challenges to achieving these benefits, but the overall idea is worth a try. Unfortunately, according to a new report from it appears that many employers are using the shift to high-deductible plans as an opportunity to take their cost savings up front, at the expense of their employees and the whole concept of consumer-directed care.

A typical consumer-directed health plan includes a high-deductible PPO plan coupled with a Health Savings Account (HSA). The HSA allows consumers to use pre-tax money to pay for health care. If the employer funds the HSA it’s a good deal for the employee. But it seems the tendency is to fund the high-deductible PPO (which is much cheaper than comprehensive coverage) and pocket most or all of the savings.

According to Tom Cochrane, VP of Partner Relations at Vimo, “Unfortunately, the Vimo report shows that fewer than one out of every three consumers eligible to open an HSA has done so –a shocking statistic because the accounts are such clear winners for consumers… HSAs can even be used to save for retirement.” In addition, the report indicates that the typical HSA balance is only enough to cover about half the deductible. [I spoke to Tom just to make sure Vimo wasn’t inadvertently overstating the case by excluding employer-financed Health Reimbursement Arrangements (HRAs) from the equation. He assured me Vimo wasn’t making that mistake.]

So it’s pretty much bad news all around. Employers are using “consumer-directed health plan” as a euphemism for “benefit reduction.” To make things worse, employees whose employers aren’t funding their HSAs also haven’t been setting up their own accounts. That means they’re missing out on a major tax benefit in addition to getting a pay cut. I’ve mentioned this phenomenon before, but it’s the first time I’ve seen decent statistics.

Don’t be surprised if all this leads to a backlash against the consumer-driven movement.

Vimo is in the business of providing comparison shopping information in health care. They want to be the equivalent of Lending Tree for health care, so are hoping to see the consumer directed movement flourish.

It will be a shame if consumer directed care doesn’t get a fair shot.

Small Business Health Plans

published date
December 21st, 2006 by

Jay Ragley of the National Federation of Independent Businesses makes a good case for Small Business Health Plans and other measures –such as a relaxation in mandated benefits– that would make it easier for smaller companies to provide health insurance.

You can read his editorial in South Carolina’s Greenville News.

A glimpse into the future of medical cost management

published date
November 1st, 2006 by

A glimpse into the future of medical cost management

Payers are starting to get serious about controlling drug costs. As described in yesterday’s Wall Street Journal, payers are using the widespread availability of generics to their advantage. Tactics include:

  • Forcing patients to switch to a generic drug within a class, e.g., from on-patent statin Lipitor to off-patent simvastatin. Or favoring drugs within a class that are soon to become generic, e.g., Ambien
  • Ending coverage for branded drugs that are similar to generic (or better yet, OTC) drugs they replaced, e.g., favoring Prilosec over Nexium as United has done
  • Allowing patients to pay the difference between covered and uncovered drugs, but not counting the difference paid toward the plan’s deductible, as South Carolina is doing for its state employees
  • Offering generics-only plans, as Medco has recently done

I expect these moves to have quite a dramatic impact. I think that in at least some areas of the country we will see some of these same principles echoed on the medical cost side. (The discussions about “efficiency”” already hint at this direction.) We may see:

  • Plans that cover only community hospitals and health centers
  • Coverage for nurse practitioners and physician assistants for routine care
  • Tighter restrictions on what procedures are performed and what medical devices are used
  • Requirements to go overseas for surgical procedures where feasible

Platinum parachute

published date
October 17th, 2006 by

Platinum parachute

From the Wall Street Journal’s morning report:

William McGuire walks away from the UnitedHealth Group under the cloud of having benefited from manipulation of stock-option dating, and with the stigma of being one of the most senior executives in corporate America to be felled by the backdating boardroom epidemic. But… he might not be leaving empty handed. Dr. McGuire could step down as chief executive with about $1.1 billion of stock options, retirement payouts and other benefits… And some experts say that despite the pressure that is forcing him out, his contract with UnitedHealth gives him a strong negotiating hand. Dr. McGuire has already earned some $530 million at UnitedHealth, much of it related to the company’s soaring stock price in the years after he took charge in 1991.

At least he won’t have to worry about rising co-pays and deductibles in his golden years!

The curious case of dental insurance

published date
October 6th, 2006 by

The curious case of dental insurance

It’s always struck me as strange that dental insurance is separate from health insurance. The teeth and gums (as far as I can tell) are an integral part of the body. Dentists are called “Doctor,” they do well visits and procedures, make referrals, and for all intents and purposes seem to be part of the health care system.

Yet dental insurance isn’t so widely available. My group is too small to qualify even in mandate-happy, insurance-promoting Massachusetts. My dentist is great, but I still have to pay “charges” rather than let my payer handle fee negotiations.

My prediction is that things will change. An op-ed piece by a dental insurance executive in today’s Boston Globe (The silent epidemic in our mouths) points out:

Oral infection in children is a harbinger of future dental disease, and chronic oral infections are associated with an array of problems later in life, including heart and lung disease, diabetes, stroke, and premature births.

As we become more aware of the link between dental health and overall health, expect the dental profession to be more fully integrated into the medical system and for dental insurance to become just a component of comprehensive health insurance.