Health Insurers Develop New Plans

By THE ASSOCIATED PRESS

Filed at 2:25 p.m. ET

Val Nauth may be a rarity: He actually likes his health insurance plan.

Nauth, an operations manager at Medtronic Inc., a medical device manufacturer in Minneapolis, Minn., said the year-old plan already has saved him some $1,000 in premiums. And it allows him to see a specialist without a referral, something he couldn't do before.

``I chose the plan because it was much cheaper,'' he said. ``But I also like the flexibility. There is a sense of freedom.''

Nauth's insurer is Minneapolis-based Definity Health, one of a crop of new companies offering what are called consumer-driven or defined- contribution plans.

The plans were created to improve customer satisfaction and curb the rise in health care costs at the same time. The basic premise: Give people control over their health dollars, and the information they need to pick providers and treatments, and they will choose wisely.

Executives behind the plans say spending on health care should be like that on other goods and services, where consumers are accustomed to exploring options and seeking the best value.

With only a few of the plans on the market, and most of them introduced in the last year, it is too early to say if they will fulfill expectations. And some experts question the concept.

But employers, facing a third year of double-digit increases in premiums and employees unhappy with the restrictions of managed care, are eager for options.

``Employers are dissatisfied with the cost and employees are dissatisfied with the service,'' said Rich Ostuw, a senior consultant at consulting firm Towers Perrin. ``They both are willing to entertain nontraditional approaches.''

His company expects health insurance premiums will rise 14 percent in 2002.

Established health insurers such as Aetna Inc. and WellPoint Health Networks are offering the new plans. UnitedHealthcare is testing several markets.

But smaller firms are the driving force behind the concept, having emerged in much in the same way that managed care companies did in the 1980s.

The plans provide employees with a set amount in a fund to pay for health needs ranging from glasses to drugs to elective surgery. A single person might receive anywhere from $500 to $1,000 a year, a family double that. Leftover money can be carried over to future years.

Once the fund is exhausted, a deductible -- typically ranging from $500 to 2,500 for a single person and twice that for a family -- is applied to any additional medical expenses. And a more traditional system, where insurance covers a large percentage of an expense but not 100 percent, kicks in.

As in car insurance, employees often can opt for a higher deductible and pay a lower premium.

Preventive medicine, such as well baby care or mammograms, is usually fully covered and not deducted from the fund.

Some experts suspect the plans may attact younger, healthy employees happy to have some discretionary money for health care but not those who routinely spend more, including those with chronic conditions.

``These might actually cost employers money in the end,'' said Ed Kaplan, a vice president at the Segal Company, a benefits consulting firm.

Also, he noted, ``Employees are risk averse. They don't want to risk not going to the doctor, so I'm not sure how popular the plans will be.''

Nauth chose an option that costs just $19 a month for his family's coverage but has a $7,000 deductible. The company gives him a $2,000 fund. He said his family is basically healthy so the new plan was worth trying.

Concerns about cost didn't stop him from seeking a second opinion when a doctor recently told him a rash he had wasn't serious.

``I felt good visiting the dermatologist. It was worth the money,'' said Nauth. Even with the visit and some spending for drugs, he will carry $1,500 into his health fund next year.

Central to the plans' design is extensive Web-based information on doctors, hospitals, diseases and treatments, including costs. Definity gives clients a personal Web account which tracks their health spending and can be customized to relay information about a certain topic or disease. It also provides information about providers in a person's neighborhood.

Proponents say the defined benefit plans encourage patients to question doctors and other providers about costs such as diagnostic tests. Most traditional health plans shield individuals from the cost of medical care, providing no incentive.

``Our goal is to create a dialogue between consumers and doctors about consumption of health care,'' said David Sanders, president and chief executive of Portland, Ore.-based MyHealthBank, which was founded in April 2000. ``Let the consumer be the arbiter of the cost and value of health care.''

MyHealthBank sells its services to larger health plans instead of directly to employers. So far, four insurers have purchased its services and it covers 8,000 lives at 32 companies.

Definity Health, founded in 1998, began providing services this year. It has three clients and will add 14 more next year.

Ridgeview Medical Center in Minneapolis began offering a Definity plan last year. Robert Stevens, president of the 109-bed hospital, said he was surprised when 82 percent of the institution's 720 employees opted for it.

After nine months, Stevens said Definity costs are 30 percent lower than expected as employees select cheaper drugs and make fewer visits to the emergency room.

``It is too early to say if we'll save in the long run,'' said Stevens. ``But the early indications are good.''

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On the Net:

http://www.definityhealth.com

http://www.myhealthbank.com

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