Humana launches new consumer-driven plan
Humana Inc. has launched a new, consumer-driven health insurance plan designed to contain rising health care costs for small businesses and their employees.
One element of the plan works similar to a cafeteria plan, except that employees will receive money back at the end of the year that they contribute to the fund but don’t use.
"This is an extremely unique concept," said David Stark, partner for Waukesha-based Diversified Insurance Services Inc. Stark said he does not know of any other health insurance company with a similar product.
The Humana plan, called Premium Manager Plus, is currently available to Wisconsin businesses with 50 or fewer employees. Similar plans are also available in Illinois and Arizona.
Participating employers select two health insurance plans for their employees, a traditional preferred provider organization (PPO) plan and a high-deductible reimbursement fund plan.
Employees then choose if they want to be covered by one or the other. Those who prefer paying higher out-of-paycheck premiums and lower deductibles likely would choose the traditional PPO plan.
Employees who would rather pay lower premiums and are willing to pay higher deductibles would likely choose the reimbursement fund plan.
"It’s going to be a lot lower than what you’re currently paying (for health insurance premiums)," said Gary Davis, small group director of sales for Humana.
Employees who choose the high-deductible reimbursement fund plan also will contribute toward their own reimbursement fund. However, if they do not spend that money, they can get it back at the end of the year.
The employer sets the amount for the reimbursement fund, either $500, $1,000 or $1,500, or double those amounts for a family. The employer chooses the percentage of that amount it wants to contribute to the fund, either 25%, 50%, 75% or 100%. The employee pays for the rest of the fund.
The employer’s contribution to the fund is on a pre-tax basis and is only made if the employee needs it. The employee’s contribution is from post-tax payroll deductions throughout the year, in addition to health insurance premiums.
Employees can use the fund to pay for their deductibles, up to the maximum amount set by the employer.
The employee’s contribution to the fund is used first, then the employer’s contribution is used.
At the end of the year, any money in the fund contributed by the employee that has not been used is returned to the employee.
The plan provides an incentive to employees to spend less on their health care, which helps hold down the rate of increase in health insurance costs for their employers, said Larry Rambo, chief executive officer of Humana’s Michigan and Wisconsin markets.
"It really gets the employees engaged in how they choose their health care," Rambo said. "They care about the cost of their health care when they’re purchasing it. That makes them a better consumer."
Unlike the consumer-driven approach to health care, the traditional health insurance model does not give employees any incentive to restrain the costs of their own health care, Rambo said.
"It’s changing the concept that my employer has given me a credit card with unlimited benefits," Rambo said. "Now, my health care choices are going to determine how much it costs me. That change in mindset becomes very significant. Based on the choice you make it can cost you more or it can cost you less."
The trend toward consumer-driven health insurance plans is growing, as employers look for creative alternatives to slow down the increase in health care costs.
Employers offering Premium Manager Plus to their employees will benefit more if they teach their employees how to live healthier lifestyles, and therefore avoid excessive and expensive visits to the doctor, said Riley Enright, assistant vice president of large accounts for Waukesha-based R&R Insurance Services.
"I think (Premium Manager Plus) itself is a good idea," Enright said. "I think this idea with a wellness program is a better idea."
Humana has used consumer-driven health insurance programs for its own employees and has kept its annual health insurance cost increases to less than 5%, Rambo said. Offering consumer-driven health insurance products for large companies has helped those firms keep health insurance cost increases to an average of 5%, he said.
Premium Manager Plus also provides flexibility for both employers and employees by allowing employees to choose the type of health insurance plan that is right for their needs and allowing employers to craft the plan to fit with their financial resources.
"Small employers can tailor plan features and contribution levels to meet specific needs and budget goals while offering employees significant value in a health plan," said Tod Zacharias, vice president of Humana’s small group business. "At the same time, Premium Manager Plus lets consumers choose a level of coverage that’s right for them."
Nov. 14, 2003 Small Business Times, Milwaukee
