Few people would buy a car without first researching its safety features, crash ratings, gas mileage and overall customer feedback. Yet most people have no qualms getting an MRI or having outpatient surgery wherever their doctor suggests-no questions asked.
But that is changing as insurers, employers and even some providers are working to make patients into consumers that shop for health care services based on their quality and cost. With an increasing number of people having plans with deductibles of $1,000 or more-what NH's top four insurers call the new normal-people are slowly realizing they can help control health care costs. And insurers aren't stopping there. New plans provide incentives for consumers to identify and visit lower-cost providers.
Exactly what will happen is up for debate. What is certain is this: Cost is increasingly a part of the discussion between patients and providers, and that will transform the delivery of health care. But how?
Jim Scammon, executive vice president of Granite Group Benefits in Manchester, says 50 to 75 percent of his 300 corporate clients, ranging from two to 2,000 employees, offer a high-deductible health care plan that provides free preventative care, but all other services come under the deductible and can be paid for using a Health Savings Account (HSA) or Health Reimbursement Account (HRA). At Landmark Benefits in Hampstead, President Tom Harte says 75 percent of his 400 clients, mostly with 25 to 250 employees, choose an HMO with a high deductible. Meanwhile, CIGNA executives say HMO-type plans with high deductibles don't work, while MVP lauds them.
The uncertainty you are hearing from brokers and others is because while there is a lot of energy and focus on costs, there is still no silver bullet on how to solve it, says Steve Norton, executive director of the NH Center for Public Policy Studies. We are still in the period of experimentation and questioning. One major factor under discussion is the federal Affordable Care Act and how Accountable Care Organizations, which are meant to reward high-quality, cost-effective care, will evolve.
The Cost of Care
Sharon Beaty, CEO of Mid-State Health Center in Plymouth, spreads a six-page computer printout in front of her. It's the health insurance coverage information for a Mid-State patient with a PPO plan. Mid-State is an independent primary care provider. It's, We're going to cover this, we're not going to cover that, we'll cover this to this percent and that to another percent', Beaty says. Can you see if they have coverage easily? Yes. Can you tell what is covered? No.
This, says Beaty, is the current state of health insurance. Whether it's a straight high- deductible plan, an HMO or PPO with a high deductible, or a Point-of-Service (POS) plan with co-insurance, every plan is different. Being a health care consumer, she says, is important, but without price transparency, it will be hard for her front desk employees to convey prices, and for patients to understand their plans.
The aim of all those plans is price control, and the reason is this: Between March 1999 and March 2009, the average cost for private employers nationwide to provide health insurance has doubled from $1.03 per hour worked to $2 per hour worked, or an increase from 5.4 percent to 7.3 percent of total compensation, according to the U.S. Bureau of Labor Statistics. New Hampshire has historically had some of the highest health insurance premiums in the nation.
Employers who move to a high-deductible plan can see premium decreases of 15 to 25 percent, says Scammon, referring to plans where everything except preventative care (which is free) is covered by a deductible generally starting at $1,000. He says employers' concerns range from whether employees will get preventative care to whether having such a plan makes an employer less competitive.
Depending on the industry, we see most employers at least considering if not offering a high-deductible health plan, so it's generally not a real competitive issue, Scammon says. Most employers, he says, partially fund a health savings or reimbursement account. The advantage of the reimbursement account is employees only get the money if they incur expenses.
Brokers and insurers agree that some kind of high deductible, whether it's through an HMO, PPO or true high-deductible plans (known as a consumer-driven plan), is the norm, encompassing 50 to 70 percent of the marketplace.
The reason is they work, says Will Giaconia, vice president of consumerism products at CIGNA, of consumer-driven plans. More importantly than the cost piece, people on these plans are improving their health. They are more compliant with their doctors' prescriptions, but at the same time they are using generics.
CIGNA reports its data shows consumer-driven plans resulted in 15 percent lower spending in the first year compared to traditional HMO and PPO plans. Between 2009 and 2010, the number of businesses and individuals choosing consumer-driven plans increased 25 percent, and an additional 29 percent in 2010 through the first quarter of 2011.
Giaconia says CIGNA makes those plans easier to understand by creating online tools patients can use to determine the cost of a doctor's visit. Related online tools can be used by doctors and patients together to assess treatment costs, and to automatically pay the bill from the patient's health savings account or health reimbursement account. You can't expect people to be consumers if they can't understand what they've bought and what they paid for, he says.
Other insurers also want patients to be engaged, but they are going about it in a different way. At MVP Health Care, more than half of its business involves EPOs with deductibles of $1,500 to $2,500. By incentivizing preventative care-either keeping people healthy or catching problems early-it hopes to reduce costs. Patients who fill out risk assessment forms and get annual physicals are rewarded by MVP with $300 to $600 that can reduce the deductible. Of the 200,000 total people eligible for the plan among all its members, 66 percent are participating. While that program costs MVP $1 million plus each year, Dave Henderson, MVP's chief marketing officer, says it's worth every cent.
We're getting people who are diabetic who would have ended up in the emergency room. We have people with cardiac problems, Henderson says. Ten of those cases would have cost a million dollars. It might not have been next year, but in four years it would have hit.
Yet for all the talk about consumerism and engaging patients to reduce costs, other providers say it's not working. Beaty says about 70 percent of Mid-State's insured clients have some kind of high deductible and they don't understand what is covered and in many cases are deferring preventative and other needed care. Before, when it was all covered and there was no deductible, they just came in, she says. Now we see them waiting until it's much worse. Then, she says, they may need more expensive emergency room care.
James Squires, president of the Endowment for Health, says consumerism isn't working. I think the very word consumerism is a misnomer, Squires says. It asks us to believe the health care system is a free market and it's not. A free market, at least as I understand it, requires that there be transparency about prices, the price is generally known before you buy it and if you can't afford it, you don't get it. That's not what our health care system is about.
There's another problem being created by high-deductible plans as well, says Rick Elwell, chief financial officer of Elliot Health System. What we're finding, quite frankly, it's almost the same as patients who have no insurance, at least for the deductible portion, he says. That requires hospital staff to act like an adjunct human resources department calling patients and describing their benefits and why they owe money. Elwell says the hospital can't charge up front because it doesn't know each patient's deductible, how much has been met and exactly what is and isn't covered. He says the misunderstanding even extends to hospital employees on high-deductible plans.
To combat this, Harte of Landmark Benefits says providers will offer bigger discounts to HMO plans than high-deductible consumer-driven plans. [Hospitals and physicians] are concerned that for employees on high-deductible health plans, the chance of bad debt will increase, Harte says.
Stacking the Deck
While high-deductible plans are encouraging employees to take more control of their health care costs, insurers are also forcing the hands of providers.
Take the very public debate late last year and early this year between Anthem Blue Cross and Blue Shield, the state's largest insurer, and Exeter Health Resources over reimbursement rates for different services. Anthem didn't back down, and Exeter was forced to reduce its rates for Anthem customers, costing the hospital about $10 million. Our goal was just to bring their costs in line with their hospital peers, says Bob Noonan, vice president of provider engagement and contracting with Anthem. Prices are out on various Web sites. We were getting a lot of dialogue with employers as to why is there such a wide variation in cost?
According to NHHealthcost.org, Exeter Health Resources comes out more expensive on many procedures by hundreds to thousands of dollars, and lower on others. We do have a higher cost scenario. The Seacoast, because it is a desirable area, has a higher cost of housing and the same goes for wages, says Glenn Klink, vice president of managed care and government affairs for Exeter Health Resources. He says low Medicaid reimbursement rates, a problem statewide, adds to the cost of services.
NHHealthcost.org, created by the NH Insurance Department, allows people to search by location, provider, procedure and plan type. For instance, the cost to remove a lesion for a Harvard Pilgrim customer with an HMO and a $1,000 deductible ranges from $218 to $910 depending on the hospital. For patients, that's money in their pocket.
And insurers want them to know that. Anthem introduced a site of service options for its plans that incentivizes patients to go to a lower-cost facility. Choosing a lower-cost facility significantly reduces a person's deductible or copay. When it was first introduced, one in three small group clients chose that option; it is now closer to half.
Harvard Pilgrim is about to launch a tiered network product that covers services based on cost and quality. Tier one facilities- which are cheaper-will have lower out-of-pocket costs. My hope is as some of the providers in tier three lose volume and realize the free market is actually working, they will reduce their pricing to compete with others, says Vin Capozzi, senior vice president of sales and customer service at Harvard Pilgrim.
Norton of the NH Center for Public Policy Studies has his doubts. If you've got a $1,000 deductible plan, you're going to shop around only if you think you're going to spend $1,000. So the deductibles have to be much higher to impact people's decisions.
True, says Capozzi, but the tiered plan makes consumerism worthwhile, as patient costs vary based on facility costs. Insurers say these cost structures are crucial when the procedure exceeds the patient's deductible.
Forcing price cuts may save money up front, but hospital executives say it will cost everyone down the road. Access to certain services, like the emergency [room] and intensive care, [is] expensive and the prices are built based on the cross subsidies the hospital receives from simple services like imaging and lab services that have few overhead costs, says Henry D. Lipman, executive vice president and chief financial officer for LRG-Healthcare, based in Laconia. If the overhead of the hospital is less supported, you will see higher prices. There is a balance that is going to work its way through and I don't think we've achieved it yet, he says.
In 2009, private health care payments by NH residents were $800 million, well above expenses and more than offsetting the losses in Medicaid, Medicare and uncompensated care, according to the NH Center for Public Policy Studies. Put another way, insurance premiums were up to 25 percent higher than they would be if there was no cost shifting or money put toward operating margins.
But forcing patients to lower-cost labs and surgery centers will only make that worse, says Lipman. While some hospitals had positive operating margins in recent years, LRG-Healthcare had a $2.3 million operating loss last year. That situation would be made worse by losing business from imaging, lab work and other services. In other words, more cost shifting. It's a vicious cycle that unfortunately is feeding on itself, Lipman says.
Norton says there is truth to what Lipman says. Will this ultimately result in increases in health care costs? To answer that you have to ask why hospitals cost shift. It is because they have market advantage and can negotiate with insurers, he says. Absent market changes, there is some concern [shifting patients to lower-cost facilities] will result in cost shifting The Exeter/Anthem conversation is what I think will be the first of many such public negotiations about rates between insurers and providers.
Privately, these conversations have been going on for years. Beaty says Mid-State has received substantial quality bonuses for keeping patients healthy and preventing more expenses down the road. Certainly the prices are negotiable, Beaty says. They say if you're good [and keeping people healthy] they want you more than if you're bad.
One thing hospitals have been doing in recent years to cut costs and better serve patients is build free-standing medical facilities to provide lab and imaging services. Southern NH Medical Center has several, including Merrimack Medical Center in Merrimack. The site is more efficient for us to operate than our hospital in Nashua and that efficiency strengthens our overall health system, says Scott Westover, vice president for strategic management at Southern NH Medical Center. Our goal in doing this is also to have the facilities integrated with the hospital. Westover says one challenge with using outside labs or imaging centers is that information is not always sent to primary care providers, forcing redundancy of services.
Incentivizing Health
A recent ad in the Tri-Town Times, a free weekly paper in Chester, Hampstead and Sandown, advertised the Derry Imaging Center as being one-third cheaper than area hospitals. The Web site for the Bedford Ambulatory Surgical Center has the tag line: High quality care at a lower cost.
There is no doubt Americans are consumers when it comes to clothes and TVs, but do these ads and marketing for health care reach them? Insurers are taking no chances. In addition to negotiating with providers and incentivizing patients to use those facilities, they are hiring companies whose sole job is helping patients find and use lower-cost facilities.
CIGNA was one of the first to go down this path, acquiring Choicelinx in Hooksett in 2005. The company provides online enrollment programs for CIGNA customers that compute a cost-benefit analysis based on individual family situations. Through this system, people can estimate out-of-pocket expenses for different plans based on the ages, health and medications of family members.
Choicelinx works with companies employing between 250 and 5,000 people, many with CIGNA insurance. In the last couple of years, companies have gone from offering high-deductible plans among other options to having them be the sole option, or offering different high-deductible plans, says Tracy Turner, vice president of product and marketing at Choicelinx.
Since then, the industry has blossomed. What was once a conversation between a patient and his or her doctor now involves the insurer, provider, benefits brokers, the Internet, and companies paid to help patients identify quality, low-cost providers.
Scammon of Granite Group Benefits says his company builds Web sites for employers and employees explaining what plans cover, what they don't, and pricing information. It also holds face-to-face meetings with employees to explain plan options.
Once employees choose a plan, many providers then partner with companies who help patients locate-and yes, even make appointments with-quality low-cost providers. People who use these services often receive incentive payments of up to $100.
Anthem clients have access to a program called Compass Smart Shopper. Used mainly by self-insured employee groups, people who choose to call the 800 number are directed to the lowest-cost providers in Anthem's network. Not only is the research done for them, but if a patient has scheduled an appointment and wants to reschedule, Compass health advisors will do that for them. While Noonan admits $100 may not motivate everyone to change an appointment, that is only part of the benefit. There are other cost savings associated with choosing in-network lower-cost providers. There are few plans these days that don't have deductibles, co-insurance or all of the above, says Bob Benedetto, director of small-group sales for Anthem, of
the incentive.
Harvard Pilgrim recently signed on with Tandem Care, a Manchester company founded two years ago. Tandem is staffed by nurses, says Co-President Eve Oyer, and works with about a dozen self-funded groups. Using raw claims data from insurers, just as NHHealthcost.org does, staff quickly identify the best options and will call to make or reschedule appointments. Oyer says most employers offer incentives to use the service. This is a solution that insurers and employers like because it's a carrot rather than a stick, Oyer says. You can reduce health insurance costs without cost-shifting onto the employee. Employees love it because they feel empowered. They can finally do something about controlling costs.
Freedom of Choice
There is no doubt that high deductibles save employers money now, the question is what does it mean for overall health of the population and the cost of care down the road. Depending on who you ask, you get a different answer.
RiverWoods at Exeter has offered employees a high deductible health plan with a health savings account (HSA) they fund for the last two years, and that's the only option. The premiums are significantly cheaper for employees than their previous HMO options, and 50 percent of employees cover all their medical expenses using the company's contribution to the HSA.
Employees are less than impressed. Resistance doesn't quite capture it, says Dawn Barker, vice president of human resources at RiverWoods. I would say to you even to this day people just love their HMO. They love that they don't have to think about health care.
The company has held premiums flat for three years, but, Barker says, this plan is not for faint-of-heart employers. It requires education and support from human resources. Last year, the company started offering $50 rewards for people who had an annual physical as people seemingly didn't understand that preventative care was covered in full. Barker says, It helped some.
At FUJIFILM Dimatix in Lebanon, the company's 225 NH employees can still choose an HMO, but it costs more. Instead of the company paying 90 percent of the premium, it pays only 70 percent of the premium for the HMO. Karen Hebert, head of human resources, says two thirds of employees chose the high-deductible plan, which has a $1,500 individual deductible and $3,000 family deductible.
If you would go to the emergency room [under the HMO], it was paid, but the cost was huge [to us] and people would have the sniffles and go there because there was no impact to them, Hebert says. We said we need to start educating employees about the cost of health care and the high deductible plan was a mechanism to do so. They say, My God, I didn't realize how much it costs to go to the doctor.' Employees give us feedback they like the plan because they feel it has saved them money and they understand the cost of health care better.
So which is more representative of the typical health care consumer? Will directing patients to high-deductible health plans and lower-cost providers help reduce costs? And will high-deductible health plans be a part of state health care exchanges for the uninsured, as has been discussed as part of federal health care reform? These are big questions swirling in a much larger debate about costs, the underlying drivers of costs and how to improve the health care system and the health of the nation.
In the end we need an educated consumer of health care and that's where we're heading, Scammon says. That leads to lower trends in health care costs. There's still a long way to go in that regard.
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