Insurers To Introduce New Fixed Account Health Plans That Could Raise Expenses for the Sickest
[Dec 05, 2001]

      Several of the nation's largest health insurers are planning to introduce a new type of health plan featuring fixed accounts that are expected to result in lower costs for individuals and families with low medical bills but could lead to substantially increased costs for people with higher medical expenses, the New York Times reports. Responding to employers' concerns about rising health costs, Aetna, Humana, Cigna, UnitedHealth and Wellpoint Health Networks will roll out the new plans within the next 12 months; some have already tested the product on their own employees or other companies. Under the plans -- defined by Cigna as a "health savings account product" -- a family "typically" will pay an annual premium of between $1,000 and $1,400, "slightly lower than the cost of traditional managed care." Beneficiaries will receive an annual "allowance" of $2,000 to $3,000, to be spent as they wish on medical expenses, including prescription drugs. Families that do not spend the full allowance in a given year can roll over unspent money for future expenses. But families that exceed the allowance will have to cover the full cost of all further expenses until another cap -- sometimes up to $5,000 or more -- is reached. At that point, the employer resumes paying for medical expenses. The plans retain some features of managed care, such as that deductibles will likely be lower if beneficiaries use doctors and hospitals within the plans' networks.

Risky Management?
The difference between what some people with high medical expenses would pay under the new plans compared with traditional managed care plans is "striking," the Times reports. For instance, a family of three with $5,000 in medical bills and chronic conditions that require several prescription drugs could pay $5,634 per year under the new plans, compared with $3,420 under a traditional managed care plan. The effect could be most felt in the purchase of prescription drugs, because the full cost of medications, including brand-name drugs, will count against employees' yearly allowance. The new health account plans "move away" from the traditional insurance practice of spreading risk among all consumers, and instead "effectively penaliz[e] people with higher medical costs and rewar[d] those with lower costs," the Times reports. "The effect will be to shift more of the costs into the pockets of the sick people," Uwe Reinhardt, a Princeton University economist, said, adding, "The insurance industry has decided that if you are sick, you ought to eat the costs. It's a very dubious social policy." Deborah Chollet, an economist and health insurance specialist at Mathematica, added that the new plans could serve as a "barrier to needed care" and effectively leave some individuals without coverage in the period after the initial allowance is spent. "This is taking coverage away from people," she said.

Favored by Employers
But many insurance executives say the new plans have received favorable responses for employers seeking to cut down on health care costs by shifting expenses to the sickest employees. "As health care costs go up, it becomes a choice between hitting the users of the system or hitting everybody," Kenneth Sperling, a consultant at Hewitt Associates, said. Employers say that the new plans, which will feature online information to help consumers make medical decisions, will also help reduce costs by giving employees an incentive to seek out less costly health care options, such as using generic drugs or "avoid[ing] a test or treatment that their doctors says is unnecessary." In any case, the new plans are likely to become widespread over the next few years, and some employers could stop offering managed care plans altogether, the Times reports. Ronald Williams, executive vice president for Aetna, which is offering its new plan to 38,000 employees next year and will extend it to "large national customers" in 2003, said, "We view this as a product, not as an experiment" (Freudenheim, New York Times, 12/5).

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