As the cost of health care continues to rise, consumer-driven health insurance policies are becoming increasingly popular among employers.
According to a recent industry study by Mercer, almost half of the largest US corporations have started offering the option to their employees.But the study found that only 5% of employees are biting nationwide.
In New Hampshire, former State Health Commissioner Nick Vailas joined the trend two years ago when he founded Patriot Health Care.
The new insurance company would offer such plans.
But Vailas ran into barriers that he says prevent the consumer-driven market from taking off.
NHPR’s Dianne Finch reports.
Diner Ambi (plates, noise..)
The Red Arrow Diner in downtown Manchester is a very popular little restaurant.
It serves typical diner fare, from pancakes and sausage to meatloaf and mash potatoes,
But there’s often a line, and waitresses hustle to keep up with the crowds.
The diner’s owner, Carol Sheehan, sits on a 1950s-style chrome bar stool.
Sheehan says business is booming, but skyrocketing healthcare costs are cutting deep into her bottom line.
She even thought about dropping the employee health plan.
But she was torn.
Sheehan: “My employees are my biggest assets... They’re the ones that represent the diner. ..you know they see the waitresses when they walk in the cooks are the ones you know cooking their meals so yes I felt and still feel it’s important to be able to give’em you know certain benefits.”
So Sheehan’s broker suggested that she try a consumer-driven plan to save money.
SHEEHAN: “…you know she says oh my gosh there’s this new insurance plan coming out called Patriot Healthcare founded by somebody right here in New Hampshire and you know and it was different cuz it was a high deductible…and then the health savings account to go with it…you know that if you put money into that your deductable would be right there if you need to use it and so on and so forth.”
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Those plans typically have high deductibles and some form of tax-free health savings account.
Sheehan adds money to her employees’ savings accounts to help them with out of pocket medical expenses.
Not all employees like the plan.
The diner’s manager says he spends $3000 a year on medications – and he and his wife still have to spend another $2000 to meet their deductible.
But most of the other employees like it.
And Sheehan’s reduced her healthcare costs.
But trouble was brewing elsewhere.
Patriot Healthcare, the insurer, was running in the red.
Last year, the firm’s cash reserves fell below legal limits.
So the insurance commission took the company over and asked a larger insurer to take on Patriot’s 7,000 customers – including the diner.
Patriot’s owner, Nick Vailas, said there were many reasons behind his company’s failure.
First and foremost - he says that he should’ve raised more capital.
Vailas: “But at the same time I’m not sure I could’ve raised the money given the rate of medical loss that was occurring at the time so it was a tough situation even though it was growing and we had a plan to be profitable in a short time.”
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And Vailas isn’t alone.
Melinda Beeuwkes Buntin, who co-directs Rand Corporations Bing Center for Health Economics, says that many insurers offering consumer-driven plans have underestimated medical costs.
Buntin: “Some people getting into this area felt that these types of plans would be mostly attractive to healthier and younger people –and there’s some evidence that that’s the case. It’s not overwhelmingly so and so their costs for that reason might have been higher than expected.”
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Vailas was surprised by how many of his clients turned in claims for cancer treatments and other serious illnesses.
And there were other problems.
Consumer plans rely on a free market.
The idea is that when consumers are spending their own cash, they’ll look for better deals.
Prices would presumably drop when competition heats up.
But for that to work, consumers need access to price and quality information.
And the RAND Corporation’s Buntin says the employers they surveyed said their employees couldn’t get that information.
Buntin: “They said to us very strongly and clearly that the information tools that people need in order to assess the relative price and quality of different providers and make wise healthcare decisions were not available to their employees. They felt there was a long way to go towards providing information their employees needed particularly for physicians.”
Nick Vailas couldn’t agree more.
Vailas: “Can you imagine if all of a sudden there was an incentive in the healthcare system to be a lower cost provider - and there was greater transparency not only on cost but also on quality. Like if you knew institution you chose to have your care at had a great track record in regards to managing its infections - these are the things that need to be disclosed to people.”
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Vailas recognizes that perhaps some of his own mistakes led to the demise of Patriot Healthcare.
But he remains a Disciple of the movement – believing that it will gain momentum once consumers get the information they need from hospitals and doctors.
For NPR News, I’m Dianne Finch in Concord New Hampshire.
