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Company Tweaks Defined-Contribution Formula

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HealthMarket Inc., Norwalk, Conn., is one of the companies in the defined-contribution health plan market that is serious about persuading consumers to bargain with their doctors.

When a plan encourages plan members to bargain, “some of the patients are very aggressive negotiators,” says Dr. Hassan Rifaat, HealthMarkets vice president of sales.

HealthMarket, like most of its competitors, offers programs that combine catastrophic health insurance with employer-funded health reimbursement accounts. The cash in the HRAs is supposed to cover the cost of workers ordinary medical expenses.

Many defined-contribution programs give workers complete control over HRA cash.

HealthMarket is following a different strategy.

HealthMarket rents provider networks organized by Private Healthcare Systems Inc., Waltham, Mass., then determines what each of the network providers in a given market actually charges for selected services.

HealthMarket comes up with a “maximum allowable charge,” or MAC, set so that 70% of the providers in a market charge less than the MAC.

When patients are seeking routine, non-emergency care, “the rule is that MAC always matters,” Rifaat says.

Patients who see doctors who charge more than the MAC must either pay the difference themselves or bargain with the doctors.

The system gives workers an incentive to spend HRA cash carefully, Rifaat says.

Although HealthMarket has an innovative approach to program design, its taking a traditional approach to distribution.

“We sell only through agents,” Rifaat reports. “We dont sell direct.”

– Allison Bell

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.