Self-directed medical coverage plans encourage management of expenses, reductionof controllable risks

Press Enterprise (Riverside, CA)

When Kristin Saxelby faced big medical expenses five years ago, a health-maintenance organization covered them.

She needed surgery to straighten her kneecaps, and traditional managed care “really came in handy,” the Riverside resident said.
   
Yet last year, Saxelby had no qualms about giving up her HMO coverage in favor of a radically different type of policy. She chose a Lumenos plan offered by Northrop-Grumman’s Missile-Defense Division in San Bernardino, where she is a human-resources manager.

Lumenos is part of an insurance trend that’s gaining steam coast to  coast: consumer-driven, or self-directed, health coverage.

The concept combines an employer-subsidized savings account with a low-premium, high-deductible catastrophic-insurance policy. The aim is to empower workers with more freedom to choose benefits and  services while requiring them to assume greater financial risk.

“This plan allows me to pick any provider I want, while my HMO gave me much more limited choices,” said Saxelby, 26. “Lumenos also gives me an opportunity to manage my own medical expenses. Now, when I get a prescription, I’ll ask how much it costs. Before, I didn’t even bother.”

Consumer-driven plans emerged about three years ago out of corporate and public discontent with managed care, especially its system of gatekeepers and restrictions on who can and can’t be treated. Millions of Americans are angry, anxious and frustrated about double-digit price increases year after year – at the same  time they’re complaining about impersonal, abbreviated care from overworked doctors and nurses.

Many reform advocates also pushed for a kind of insurance that would compel people to take charge of managing their health. Self-directed policies fill this need, their supporters say.

But critics contend that the plans benefit only the young and healthy, leaving out people who have the highest medical bills: seniors and those with chronic illnesses. They also note that a
one-night hospital stay can wipe out the typical employer-subsidized account, forcing patients to pay a high deductible before catastrophic insurance kicks in.

Backers and detractors do agree on a key issue: Self-directed coverage puts the average Joe and Sally in the driver’s seat as they navigate health-care options. Doctors, business executives and patient advocates all stress that consumers can do a lot to control costs and maintain quality of care.

“(People) put more time into deciding how to buy a car than their own medical care,” said Mike Robinson, Southern California’s head of national accounts for Aetna, a health-insurance provider that  offers consumer-driven plans. “You can give people written material  and Internet tools. But until they have a financial stake in the  game, it doesn’t come home to them.”

STRESSING EMPOWERMENT

Consumer-driven plans basically establish personal health accounts  into which employers annually contribute pretax dollars – typically $1,000 to $2,000 – for employees to use on
routine medical expenses and medications.

If patients exceed the amount set aside by their company, they must pay a deductible – anywhere from $ 500 to $ 4,000 a year.

Full insurance kicks in after the deductible is exhausted. In general, if enrollees don’t use all of their company-subsidized account, they can roll over the balance to the next year.

Workers are urged to check out prices, doctors and clinics thoroughly; choose generic drugs over their brand-name counterparts; and generally be more astute health-care consumers.  They’re also encouraged to pick their own doctors and clinics, manage their regular medical expenses and make lifestyle changes to reduce controllable risk factors.

Patients can choose from networks of physicians that equal or surpass those of preferred provider organizations, or PPOs, a type of managed care.

By stripping bureaucracy from the process, the reasoning goes, premiums will be lower and satisfaction higher. What’s more, industry pioneer Lumenos and similar plans – including those from Humana, Blue Cross and Blue Shield – motivate people to seek medical care only when it’s truly needed.

Self-directed coverage has been picked up by a wide range of employers, from Wells Fargo Bank to Raytheon Inc. to various colleges in California.

Companies favor the plans’ premise that healthier employees will visit the doctor less often, creating financial savings for everyone.

“I spent maybe half my savings account of $ 1,000 last year,” Saxelby said. “Now I have $ 1,500 to spend this year. I’ve never had my tonsils out, so the money will go toward that.”

In Riverside, Iverson Dental Laboratories has picked up consumer-driven coverage. Last October, Iverson began offering PacifiCare’s SignatureFreedom Plan.

“Each enrollee receives $ 1,000 a year to pay for low-cost colds, flu, dental and vision visits,” said co-owner Patty Iverson. “We have a relatively young, healthy staff of 14. That’s usually more than enough for them.”

Iverson secretary Kristin Bailey, 20, has used her self-directed account twice for doctor visits and medications.

“It’s easy, with really no questions asked. I like it,” Bailey said. “I don’t get sick too often.”

Her previous PPO policy, paid for by her parents, wasn’t tapped when she had an ovarian problem requiring gynecological care.

“My mom paid cash at Loma Linda (University Medical Center) because that seemed to give me more quality doctors to choose from. Now I can go to any doctor,” Bailey said. “I signed up for the PacifiCare plan just so my parents won’t have to pay cash for routine stuff any more.”

The American Association of Health Plans estimates that more than a million people have selected consumer-driven policies. A recent survey showed that 13 percent of employers said they were likely to  offer the coverage during 2004, and another 27 percent said “they intend to do so sometime in the next five years,” said association spokeswoman Susan Pisano.

A survey published in the journal Health Affairs found that consumer-driven plans might make up half of the nation’s total health-insurance market by 2007.

NO ‘MAGIC BULLET’

Insurers big and small recognize the potential growth. Aside from the details, their plans feature similar characteristics.

For example, Lumenos aids enrollees in making health-care choices with a 24-hour Nurse Advice Line, online tools for tracking medical  expenses and an assortment of publications
that provide tips for  improving health. A directory compares doctors’ prices and  discounts.

Lumenos also features personal health coaches, who provide one-on-one assistance in managing serious conditions such as diabetes, asthma and heart disease.

Another pioneer of consumer-driven plans, Definity Health, offers medical and drug-pricing information, a medical library on the Internet, quality ratings for hospitals and a tool for
comparing  “best practice” standards with actual care received.

Surveys indicate that patients like self-directed coverage, said Douglas Kronenberg, chief strategy officer for Lumenos.

“We have satisfaction ratings of 95 percent,” he added. “It seems to be working just fine.”

Yet many health-industry observers insist the jury is still out on the ultimate effect of consumer-driven plans.

Critics of these policies say that even the moderately ill would have larger financial liability than if they relied on HMO or PPO coverage. Detractors also fear that consumers are being asked to research medical issues that might be better explained by physicians. And there’s the basic requirement of using a computer to access a lot of educational materials.

“The underlying principle is a good one, but many see these plans as a way for employers and insurers to shift more responsibility to  employees,” said Pat Schoeni, executive director of the nonprofit National Coalition on Health Care in Washington, D.C.

Managed care – which includes HMOs – will continue to exist, albeit in modified form, said Gary Claxton, vice president of the Henry J. Kaiser Family Foundation in Washington, D.C. It
focuses now on more intensive treatment of serious illnesses while relying on consumer-driven strategies for younger, healthier people and for routine care of the elderly, Claxton said.

Even if lifestyle attitudes change on “the front end” – when people are healthy – most medical spending still goes to the very sick, Claxton explained.

“If someone is diagnosed with a serious illness, things happen quickly,” he said. “How much can you expect a sick person to intervene and seek a less costly alternative?”

Most people don’t know what medical treatments they need, said Rene Moret, president of NAMM, an Ontario-based firm that manages independent physicians associations.

“Usually if a doctor says this is what you need, more than likely you’re going to do it,” Morett said. “So if you’re looking for a silver bullet, consumer-driven in itself is not it. But we’re moving in the right direction.”

Research shows that people facing higher out-of-pocket costs such as stiff deductibles tend to skip needed – as well as unneeded - care, said Jennifer Edwards, deputy director of the
Task Force on the Future of Health Care Insurance of the Commonwealth Fund in New York City.

In addition, those “health coaches” staffing a consumer-driven insurer’s phone lines might worry about being sued if they give out bad advice, said Louise Kamikawa, a health-policy adviser for the California Department of Insurance.

“So they may not give specifics over the phone,” Kamikawa said. “If it sounds serious, they may tell you to go to an emergency room.”

In response to such criticism, insurers have started to make consumer-driven coverage more inclusive. More plans now distinguish between controllable factors, such as routine care, and uncontrollable ones, such as surgery and cancer treatment.

These revised policies provide comprehensive coverage not only for hospitalization but also medication for chronic conditions. The employer-subsidized personal health account is reserved for discretionary and less costly services.

Overall, critics and supporters agree with the main mission of self-directed plans: empowering citizens to manage their health-care costs and needs.

“Every new program must be field tested to see how it works,” said Dr. Steven E. Larson, chief executive officer of Riverside Medical Clinic. “But this seems promising and (the clinic) will help reduce  costs to consumers who use these plans.”
 *   *   * *
California Medical Association – Sacramento, (916) 444-5532 or http://www.cmanet.org. Represents more than 34,000 physicians and promotes the science and art of medicine.
* California Department of Managed Health Care – Sacramento, (888) 466-2219 or http://www.hmohelp.ca.gov. Helps consumers resolve problems with HMOs and tries to ensure a solvent, stable health-care system.
* Families USA – Washington, D.C., (202) 628-3030 or http://www.familiesusa.org. Nonprofit group seeking high-quality, affordable health care for all Americans.
* The Foundation for Taxpayer & Consumer Rights – Santa Monica, (310) 392-0522 or http://www.consumerwatchdog.org. Nonprofit organization focusing on education and advocacy.
* National Library of Medicine – Bethesda, Md., (888) 346-3656 or http://www.nlm.nih.gov. Comprehensive listing of Web sites and resources on health services and health-care technology.
* Office of the Patient Advocate – Sacramento office at (866) 466-8900 or (916) 324-6407, Los Angeles office at (213) 897-0579 or http://www.opa.ca.gov. State agency publishes HMO “report cards.”
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Compiled by staff writer Mike Schwartz