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AIS's Health Business Daily
Featured Story Oct. 9, 2009
The ‘Next Big Thing’ in Health Insurance Plan Design Offers Rich Benefits to Chronically Ill Members Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor, A startup health insurer aiming to incentivize behavior change for both healthy and chronically ill members will begin marketing its products to small employers in Fresno, Calif., this fall.
Unlike traditional health plans, SeeChange Health’s value-based benefit model seeks out both the chronically ill and the “overlooked healthy (i.e., those at risk for developing a chronic condition) and offers them richer benefits in exchange for compliance in managing the condition. Martin Watson, CEO of the San Francisco-based insurer, says the concept is “the next logical iteration” in plan design. He left UnitedHealth Group’s product-development division in March to help launch the company, which has received $40 million in venture capital (VC) financing. He previously served as vice president, international at Aetna Inc.
The SeeChange concept is the first significant health insurance innovation since the early part of the decade, when account-based consumer-directed health (CDH) plans emerged, says Lisa Suennen, managing member at Psilos Group, the California-based VC firm behind SeeChange. Psilos also provided significant funding to Definity Health, a CDH company that was acquired by UnitedHealth Group in late 2004 for $300 million
“We’ve been studying the [health insurance] market since then. And what seems to be emerging as the next big thing is the concept of value-based health plans,” she says.
Three Steps to Richer Benefits
SeeChange’s six plan design options are built on a PPO chassis and begin with relatively high deductibles. One plan, for example, has a $2,000 annual deductible for single coverage and covers 80% of eligible claims once the deductible is met. Annual premiums, Watson says, will likely be a little less expensive than more traditional PPO products available in the small-group market. But enrollees can boost their level of coverage (e.g., to a $1,000 deductible and 90% coverage) by going through an annual wellness visit with a doctor, submitting to a blood test and completing a health questionnaire as part of registering a personal health record (PHR). If an enrollee is identified as having (or at risk for developing) one of five chronic conditions, the enrollee will receive a treatment program. Enrollees who comply with the program will not pay any out-of-pocket costs for eligible charges related to that condition, according to SeeChange.
“We would much rather you understand that you have a chronic condition and take care of it in the earlier stages before it progresses,” Watson tells HPW. Annual claims costs for an enrollee in the early stages of Type 2 diabetes, for example, tend to be less than $600. And early treatment can help prevent the enrollee from progressing to the next stage, which could cost more than $7,000 in claims a year. According to Watson, it typically takes between five and seven years for someone to progress from stage-1 diabetes to “full-blown” stage-4 diabetes. And diabetes is one of the few chronic conditions that can be prevented if identified in the early stages. “If you have elevated glucose levels, if your cholesterol is high and it looks like you are pre-diabetic, we’ll give you richer benefits to prevent you from even getting into stage 1,” he adds.
Insurers, Watson asserts, often have intentionally complicated plan designs combined with poor customer service, which gives enrollees an incentive not to seek care. “We think that is a ridiculous model. Most everyone is going to get a chronic condition at some point, and we know what the cost differential is between a stage-1 diabetic and a stage-3 or stage-4 diabetic,” he explains.
Because SeeChange is such a new company, industry observers contacted by HPW were unwilling to praise or criticize the new concept. SeeChange offers “an intriguing model and we look forward to seeing how it performs,” says Patrick Johnston, president and CEO of the California Association of Health Plans. Henry Loubet, senior vice president and chief strategy officer at Keenan, a California-based health care consulting brokerage firm, says the health insurance industry is in need of innovative plan designs that encourage enrollees to seek appropriate levels of care. “I admire innovation in an industry that is sometimes short on innovation,” he says. Loubet is a former UnitedHealth Group executive.
SeeChange Pairs PHR With Tight Networks
Behind SeeChange is Health Insight, an information technology firm that combines an advanced PHR with a reporting tool that scours claims data and other information to assess each enrollee’s health status. Psilos acquired that company, formerly known as HNA/Triveris, in March 2008. Watson says Health Insight’s PHR architecture is being marketed to health plans as a turnkey engine for value-based product offerings and already is being used by United.
SeeChange combines that technology with narrow provider networks. As a member of United’s product-development group, Watson analyzed health care trends and explored the concept of using narrow networks to treat members. An insurance model that relies on narrow networks would be difficult for national health plans to replicate because they tend to use their vast provider networks to attract multistate employers and to compete against other national insurers, Watson explains.
SeeChange initially will contract with large individual practice associations (IPAs) in the area and says it will offer its product only in markets where there is a “density” of physician groups. In Fresno, SeeChange has signed up Community Medical Centers as its hospital partner and Santé Community Physicians for its physician network. Watson has identified Los Angeles and San Francisco as the company’s next markets. The company says it initially intends to target small employers (fewer than 50 employees) and will likely make its product available to the individual market in mid-2010. Watson predicts SeeChange will have as many as 200,000 members by 2013.
“Some people look at [health] insurers as the evil empire…but this is an example of a health insurer doing well by doing good,” says Suennen. “You are giving people something that helps them manage or improve their condition, and they receive the financial benefit of that.” |
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