4 Tests For Sorting The Real Consumer-Driven Plans From The Wannabes

Consumer-driven health plans are growing in popularity all over the United States, providing employers and enrollees with a less restrictive, more affordable alternative to managed care.

Many health insurance companies now are offering CDHP products, and for good reason: Nearly a third of employers plan to introduce them in the not-too-distant future. Within a few years of their appearance in the market, CDHPs already cover more than 1 million Americans.

Employers like CDHPs because they help reduce health insurance premiums by getting employees to take an interest in the cost of care. This employee involvement often is perceived as a vital necessity during these times of 15% per year increases and with almost half of smaller businesses experiencing increases of over 30%.

The CDHP model still is evolving, with models displaying varying levels of consumer involvement. But the best plans ultimately do 2 things well: provide incentives for members to factor cost into their health care decisions, and empower them with doctor quality and cost information they need to make savvy decisions.

So what distinguishes a true CDHP plan from a “wannabe”say, a run-of-the-mill high-deductible plan paired with a spending account?

Here are 4 questions that can help you recognize the real thing.

1. Does the plan provide “price transparency”?

“Price transparency” is the cornerstone of the CDHP model, helping enrollees shop for the best health care in the same way that they would shop for any other item of importance.

A truly consumer-driven plan will encourage members to visit its Web site. Members should be able to use the site to search for the prices that doctors and hospitals charge for various services. This information should be made available telephonically as well, to aid those without computer access.

Ideally, the provider cost displays should make it easy for an enrollee quickly to gain a general impression of a doctors relative cost and then for the enrollee to dig deeper into the costs for a given type of service, such as a routine visit or a visit for a particular problem.

The site might even offer information about the cost of specific procedures. Its difficult to administer the delivery of all this information, especially when the CDHP provider has older, legacy IT systems. But, because price transparency and a consumer-friendly display are fundamental to any CDHP, even some of the traditional carriersoften laggards in technologyare either building a new IT infrastructure or buying systems (or companies) designed to meet this crucial need.

2. Do members get personal health care spending accounts?

The second key feature of the CDHP model is a personal spending account for each member.

Insurers know consumers are bound to make smart health care choices if they feel a sense of ownership over the money spent, and so CDHP plans set up spending accounts and ask enrollees to manage them as they would their own bank account. These accounts come in many configurations, some designed by the carriers and some designed by legislation.

The best CDHP plans operate on the premise that consumers must “know before they go,” and that they should be free to select the services they want by making the sort of value purchases that come naturally to consumers in every other marketplace. A spending account fosters a value-driven purchase by creating an incentive to spend wisely.

Personal health accounts are also a test for the effectiveness of a plans price transparency system. By entrusting consumers with their own funds, CDHPs actually are holding enrollees accountable for controlling costs.

The more effective an insurers price transparency tools are, the more likely members will be able to stay under spending caps and the better able employers will be to rein in health costs. My company, for example, has found that more than 80% of account users have money left over at the end of the year.

Some CDHPs use a funding mechanism that lets unused funds roll over to the next year, in effect rewarding enrollees for thoughtful spending. If an account balance reaches zero during a plan year, services are usually still covered, though members would be subject to plan deductibles and coinsurance requirements, just as they would be if they had traditional coverage.

3. Does the CDHP plan give access to provider quality and outcomes information?

In the CDHP world, information is the critical ingredient. CDHP plan members stand to benefit greatly from access to quality metrics on physicians and hospitals, including success rates for surgical procedures, before making what might be a life-altering health care decision. A well-designed system will even contain patient feedback on physicians and hospitals.

Companies that specialize in CDHP plans operate Internet portals that are virtual treasure troves of information. They provide access to in-depth health libraries, enabling members to research symptoms, conditions, treatments and therapies and then compare these norms to those for local doctors. They also help members determine which physicians have the best outcomes for particular diseases, see which hospitals the physicians admit to and study survival rates at these hospitals.

This quality information is important because, without it, a patient has only cost (and street address) to go by. A value shopper always takes cost and quality into consideration.

Quality data will, over time, become indispensable to health care consumers and set true CDHPs apart from the “wannabes.”

4. How well does the plan help members understand how to use services?

One criticism sometimes brought against CDHPs is that they can be harder to understand than traditional health plans.

Its a fair point, if for no other reason than CDHPs are usually new to the enrollees. Therefore, in addition to providing great provider cost and quality data, it is important to simplify the entire process for consumers and provide the personal touch so often lacking in the insurance industry.

Web sites are no substitute for personal contact. So while traditional plans take a hands-off approach by simply mailing new-member kits to enrollees, or merely pointing them to the Web site, a true CDHP plan attempts to better educate its new members.

At my company, new ID cards come with a red “activation sticker” on the frontlike on a new credit card. When the enrollee calls to activate the card, a customer service representative takes 5 minutes to explain the plans unique features, provide information about physicians in the enrollees neighborhood and, ultimately, help the enrollee understand how to seek cost-effective, quality careand why that is in the enrollees best interests.

Many CDHP plans have a network of registered nurses on call 24 hours a day, 7 days a week to consult with members on medications, concerns about upcoming procedures or any other health question members might have. When combined with incentives for managing the cost of care, this service helps members know what type of doctor to visit and how urgent the issue is. It also provides peace of mind to many a jittery parent!

Like a building that rests on a solid foundation, a true CDHP must stand on each of these 4 cornerstones. To omit any of these critical components is to risk a plan unable to keep renewal rates in check. Either it will fail to offer consumers adequate tools to make wise financial decisions, or it will miss holding them accountable for their spending decisions.

With a true consumer-driven health plan, consumers will learn to see health care in a new light, giving rise to a whole new set of questions. “Do I need a referral?” will become “Who is the best doctor for my overall needs?” And “What is my co-payment?” will change to “What is the total cost of this visit?”

Glen Moller is vice president and chief marketing officer of HealthMarket Inc., Norwalk, Conn. He can be reached at gmoller@healthmarket.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 12, 2004. Copyright 2004 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.