New Health Plans Expose The Insured To More Risk

One health plan from the well-known insurer promises lower premiums but warns that consumers might need to file their own claims and negotiate over charges from hospitals and doctors. Another eliminates annual deductibles but requires policyholders to pay extra if they need certain surgeries and operations.

Both are among the latest efforts in a seemingly endless quest by employers, consumers and insurers for that ultimate goal: less expensive coverage.

Premiums are 15 to 30 % lower than conventional offerings, but the plans place a larger burden on consumers to be savvy shoppers. Despite those concerns, the offerings tap into a typical underlying frustration.

“Traditional health plans haven't been in a position to stem expensive increases, so people are tearing on the model and trying something different,” said Jeff Levin-Scherz, health management practice leader for benefit consultants Willis Towers Watson.

New kinds of insurance coverage are sprouting up as employers face rising healthcare costs and people who buy their very own coverage without an Affordable Care Act subsidy find it difficult to pay premiums. That has led many people to test out new ways to pay their medical expenses, such as short-term policies or alternatives like Christian sharing ministries, which aren't insurance whatsoever, but rather cooperatives where members pay one another's bills.

Now some insurers – such as Blue Cross Blue Shield of North Carolina along with a Minnesota startup called Bind Benefits, which is partnering with UnitedHealth Group – are picking out their own novel offerings.

Insurers say the two new kinds of plans meet the ACA's rules, although they interpret those rules in new ways. For instance, the new policies avoid the federal law's rule limiting consumers' annual in-network limit on out-of-pocket costs: one with no network and the other by calling additional charges premiums, which don't count toward the out-of-pocket maximum.

But each plan could leave patients with huge costs inside a system where it is extremely difficult for someone to be a smart shopper – partly, because they have little negotiating power against big hospital systems and partly because illness is usually urgent and unpredicted.

If the plans prompt doctors and hospitals to lower prices, “then that's worth taking a closer look,” said Sabrina Corlette, a study professor at Georgetown University's Health Policy Institute. “But if it's simply another flavor of shifting more risk to employees, I don't think in the long term that's going to bend the cost curve.”

Balancing Freedom, Control And Responsibility

The New york Blue Cross Blue Shield “My Choice” policies try to alter the way doctors and hospitals are paid by limiting reimbursement for services to 40 percent above what Medicare would pay. The plan doesn't have network of doctors and hospitals.

This approach “puts you in control to determine a doctor you want,” the insurer says on its website. The plan is available to individuals who buy their own insurance and small businesses with someone to 50 employees, aiming particularly at people who cannot afford ACA plans, said Austin Vevurka, a spokesman for that insurer. The coverage is not sold on the ACA's insurance marketplace, but can be purchased off-exchange from brokers.

With that freedom, however, consumers also have the responsibility to look around for providers who'll accept that amount. Those who don't shop, or can't since it is an urgent situation, may get “balance-billed” by providers unsatisfied using the flat amount the program pays.

“There's a motivation to comparison shop, to locate a provider who accepts the advantage,” said Vevurka.

The price of balance bills could range widely, but tend to be 1000s of dollars when it comes to hospital care. Consumer exposure to balance bills isn't capped through the ACA for out-of-network care.

“There are lots of people for whom a plan such as this would present financial risk,” said Levin-Scherz.

In theory, though, paying 40 percent above Medicare rates could help drive down costs over time if enough providers accept those payments. That's because hospitals currently get about double Medicare rates through their negotiations with insurers.

“It's a bold move,” said Mark Hall, director from the Health Law and Policy Program at Wake Forest University in North Carolina. Still, he explained, it's “not an optimal way” because patients generally don't wish to negotiate with their doctor on prices.

“But this is an innovative way to put matters into the hands of patients as consumers,” said Hall. “Let them deal directly with providers who insist on charging more than 140 percent of Medicare.”

Blue Cross spokesman Vevurka said My Choice has telephone advisers to help patients find providers and provide tips on how to negotiate a balance bill. He would not disclose enrollment numbers for My Choice, which launched Jan. 1, nor would he say the number of providers have indicated they will accept the payments.

Still, the idea – based on what's sometimes called “reference pricing” or “Medicare plus” – is gaining attention.

North Carolina's state treasurer, for example, wishes to put state workers into this type of pricing plan by the coming year, offering to pay 177 percent of Medicare. The plan has ignited a firestorm from hospitals.

Montana recently got its hospitals to agree to this type of arrange for state workers, paying 234 percent of Medicare on average.

Partly because of concerns about balance billing, employers aren't rushing to buy into Medicare-plus pricing just yet, said Jeff Long, a health care actuary at Lockton Companies, a benefit consultancy.

Wider adoption, however, could spell its end.

Hospitals might accept participate in a few such programs, but “if there's more take-up on this, I see hospitals possibly starting to fight back,” Long said.

What About The Bind?

Minnesota startup Bind Benefits eliminates annual deductibles in the “on-demand” plans sold to employers who are opting to self-insure their workers' health costs. Rather than deductibles, patients pay flat-dollar copayments for any core set of medical services, from visits to the doctor to prescription drugs.

In some methods, it's simpler: no need to spend with the deductible before coverage kicks in or wonder what 20 % from the price of a doctor visit or surgery could be.

But not everything is included.

Patients who discover during the year they need any of about 30 common procedures outlined in the plan, including several types of back surgery, knee arthroscopy or coronary artery bypass, must “add in” coverage, disseminate over time in deductions using their paychecks.

“People are utilized to that idea, to buy what they need,” said Bind's CEO, Tony Miller. “When I want more, I purchase more.”

According to a company spokeswoman, the add-in price varies by market, procedure and provider. Less than 7 percent of members should need add-in services in any given year, Bind estimates.

On the lower end, the cost for tonsillectomy and adenoidectomy ranges from $900 to $3,000, while lumbar spine fusion could vary from $5,000 to $10,000.

To set those additional premiums, Bind analyzes how much doctors and facilities are paid, with some quality measures from several sources, including UnitedHealth. The add-in premiums paid by patients then vary based on whether or not they choose lower-cost providers or even more expensive ones.

The ACA's out-of-pocket maximums – $7,900 for an individual or $15,800 for a family – don't include premium costs.

The Cumberland School District in Wisconsin switched from a traditional plan, so it purchased from an insurer for about $1.7 million this past year, to Bind. Six months in, Superintendent Barry Rose said, it's working well.

Right off the bat, he said, the district saved about $200,000. More savings could come over the entire year if workers choose lower-cost options for the “add-in” services.

“They may become better consumers simply because they can easily see exactly what they're spending money on care,” Rose said.

Levin-Scherz at Willis Towers said the concept behind Bind is intriguing but raises some issues for employers.

What happens, he asked, if your worker has an add-in surgery, owes thousands of dollars, then changes jobs before you spend money all of the premiums for your add-in coverage? “Will the employee be sent a bill after leaving?” he explained.