With rising medical costs and employers and consumers rebelling against skyrocketing premiums, health insurers are scrambling to roll out a new breed of health coverage-the consumer-directed health plan (CDHP).
"Insurance companies are being driven to CDHPs by employers," says Lauri Ingram, healthcare analyst, META Group (Stamford, CT). "Employers see their costs rising and they want to go to a fixed price from a budgeting perspective."
Currently, most employers offer employees health coverage and then deduct a specific amount per paycheck. With a CDHP, an employer informs employees that it will cover a certain amount of premium, for instance $6,000 a year, and the responsibility is on the individual employees to determine how much or how little health coverage they want. "In theory, the consumer will self-regulate their coverage, as they will have more control of their choices," Ingram says.
One Size Doesn't Fit All
According to David Teckman, executive vice president and CEO at Vivius (Minneapolis), a self-directed care technology and services provider, "Why should health insurance be different than auto insurance?" For instance, with auto coverage, if you have one car that you only drive on weekends, the premium will be lower than the car you use to commute. "If you only go to the doctor once a year, why should your premiums be as high as a person that goes to the doctor every two weeks?" Teckman asks. "One size does not fit all for health insurance."
But in order for CDHPs to succeed, completely new policy systems and enhanced consumer information technology is needed, say industry experts. For instance, new policy management systems are needed because consumers can tailor their own personalized health coverage, down to co-payment, prescription and deductible limits. And in order to make a consumer's selection of his or her coverages user friendly-a key factor in a CDHP's long-term success-insurance companies are going to have to offer easy-to-understand, virtually self-service applications, most likely over the Internet.
"The scariest part of CDHPs is that employers and insurance companies will have to educate the consumer about all aspects of health coverage," META Group's Ingram says. "Just think about how much trouble employees currently have understanding their coverage options, and they only have two, or maybe three, choices."
For carriers, the scary part of CDHPs is not allowing customers to make their own decisions-it is getting their systems ready to handle those decisions. "Most insurance company administration systems can not handle the granularity that CDHPs require," says Joel Ackerman, CIO at Vivius (Minneapolis), a self-directed care model technology and services provider.
Personalization Is Vital
"Membership eligibility systems need to be revamped," to accommodate CDHPs, adds META Group's Ingram. "Insurers are going to have to position network access down to the individual level. Most systems are currently designed for the group level or the primary insured level."
Lacking the internal technology flexibility to launch CDHPs, many insurance companies are turning to third-party providers to help get the products to market while they work on their own front- and back-end systems. Jacksonville-based Blue Cross Blue Shield of Florida (BCBS-FL, six million members) recently launched BlueOptions, a program that offers consumers a wide range of choices in care and services. To help members supervise their health coverage, the carrier is working with Health Dialog, a Boston-based provider of collaborative care health coaching services. BCBS-FL BlueOptions members can contact health coaches 24/7, who will advise them on health issues and health-related decisions.
"A huge part of making a CDHP work is providing the right information to members," says Jason Carmichael, IT architect, BCBS-FL. "We have already provided over-the-Internet access to claims information, decision-support tools that help them tailor products, and many other functions. For the CDHP, we are continuing to add more functionality and increase information on providers, and we are developing Web-based tools that will help consumers understand cost differences" for certain coverages. BCBS-FL also ties in flexible spending accounts (FSA) and the relatively new HRA (Health Reimbursement Account). With an HRA, members can grow their balances from year to year, while with an FSA, the balance has to be used each year.
If CDHPs succeed, health coverage will become more of a financial instrument to add to a person's overall financial portfolio, META's Ingram maintains. "If people are allowed to put away money year after year for health coverage, there is the potential to create a trillion dollar market," she says. "There could be a trillion dollar opportunity for financial services if this takes off."
To handle the increasingly financial nature of health insurance, BCBS-FL is also looking at medical card (debit card) and smart card technology so members can get immediate access to funds in an FSA or HRA, according to Carmichael. "We are waiting to see what happens with smart-card technology," he says. "Ideally, the final solution would integrate the financial transaction with the claims transaction, both from the technology and the business process perspective."
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio