Just 3 of the Fisher Group's 16 employees were on the company's Blue Cross/Blue Shield health insurance plan. “Nobody participated except the older people in the company because rates were so high,” says Eileen Cross, office manager at the Annandale, Va., design/build firm. Then Cross and the company's financial advisor discovered consumer-driven health plans (CDHPs). Since selecting a CDHP, every eligible full-time employee — from carpenters to management — has signed up, and the company's per-employee health insurance costs have nearly been halved.
The latest in health care management, CDHPs have a relatively high deductible —to encourage participants to be more aware of their medical expenses — combined with a healthcare reimbursement arrangement (HRA) used to cover the initial cost of medical care. Once participants exhaust their HRA funds, they must pay a deductible.
Cross contacted Josh Lavine, an independent insurance broker and president of My Financial Place in Silver Spring, Md., who suggested a Guardian Life Insurance CDHP called Destiny Health Plan. It fronts a $600 HRA, or “personal medical fund,” for each Fisher Group employee. Participants pay a premium, spread equally over their 26 pay periods. Costs range from $260 per month for an individual employee to $753 per month for a family; the company covers 50%. By comparison, under their old plan, employees paid from $467 to $1,075 per month, with the company covering 50%. The money that goes into the fund is collected each month as part of the premium.
Once the $600 HRA deductible has been used, the employee has 100% coverage. Preventive care, such as checkups, doesn't affect the savings account. Employees simply show their insurance card; there is no co-pay. Any unused portion of the $600 can be rolled over and used to pay next year's deductible.
Employees with pre-existing medical conditions can purchase a rider for a small fee, about 6% over the premium. There's a nationwide network of 400,000 doctors, and no referrals are needed for specialists.
CDHPs, which have been around since the 1990s, have faced some criticism; mainly because people wouldn't go to the doctor if they had to pay out of pocket. But a recent survey done by McKinsey & Company found that CDHP participants were getting their annual checkups and lab work. The survey did find that participants felt they weren't able to get the information needed to make cost comparisons. Both Cross and Lavine say they haven't found that to be an issue.
The main difference between the Destiny Health Plan and other similar choices, such as those offered by Aetna and Blue Cross, is that Destiny manages the HRA. The others have a third-party administrator. Also, Destiny has its “Vitality Program,” which rewards healthy behavior such as getting annual checkups or quitting smoking. Rewards can range from movie passes to frequent flier miles to inexpensive hotel stays.
While the cost of healthcare has traditionally been seen as a burden to be shared by all, many healthy people weren't taking advantage of employers' plans because of costs. That ended up raising costs overall. CDHPs “should reduce costs for everybody by keeping healthier people involved in the plan,” Lavine says. He adds that “if we can manage claims better than we have in the past, then we'll all be better off in the long run.”