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Posted
on Mon, Sep. 01, 2003
New
health plan rounds into shape
Coverage
rewards wellness
By Sherry Slater
The Journal Gazette
Young
drivers with good grades get discounts on their car insurance.
And homeowners with smoke detectors save money on their property
premiums.
So Doug Short wanted to know: Why shouldn't workers with healthy
lifestyles pay less for health insurance? And why can't employers
cut their health plan costs by encouraging more employees
to shape up?
The president
of BeniComp Inc., a Fort Wayne-based health plan administrator,
has applied for a provisional patent on the concept, which
he and his patent attorney say is unique in the U.S. health
insurance industry.
Although
offering a wellness plan is nothing new, Short's strategy
comes with a twist: Employees who prove they meet certain
criteria receive a financial reward - credit toward their
deductibles.
And by
keeping the discounts contained in the health insurance program,
the payments are not subject to income taxes, unlike the bonuses
some companies give workers who meet wellness standards, Short
said.
BeniComp,
which is collaborating with Parkview Health, will roll out
BeniComp Advantage to local employers at a seminar Oct. 9
and plans to offer the product to companies nationwide next
year.
BeniComp,
founded 23 years ago, works as a health insurance broker with
about 400 employers across the country.
The company,
which processes claims and performs other paperwork functions,
is the exclusive national administrator for two insurance
companies: Security Financial and Government Personnel Mutual's
Champus military dependents program.
"What
we are trying to do is create an alliance with the employer
to give them a way to (offer incentives to) employees to choose
a healthier lifestyle," Short said.
Leigh
Smith, co-director of employee benefits for Hylant Group of
Fort Wayne, is a BeniComp competitor who learned basic details
of the wellness supplemental plan from The Journal Gazette.
"The
concept is very consistent with a lot of the current thinking
in regard to the control of health costs," he said. "It's
an idea with some merit."
But without
more details, Smith isn't sure how unique BeniComp's product
is.
"I
think in a lot of ways," he said, "it's just one
of the plan design choices that we are exploring with employers
right now."
Tom Markle,
a Fort Wayne-based Barrett & McNagny partner, said he
routinely fields calls from northeast Indiana employers who
want to know the legal implications of canceling their employee
health insurance benefits.
Five years
ago, he got maybe two such calls a year. Two years ago, it
was about once a week.
"Now,
it's something like every other day," said Markle, who
confines his legal practice to employee benefits.
Why? In
a word: cost.
Health
insurance costs have been increasing about 15 percent or more
a year for the past few years, nearly crippling some employers
during a recessionary time that has dealt many companies stagnant
sales growth.
"Employers
I work with are doing drastic things to their health plans,"
said Markle, whose client list includes BeniComp.
Some companies
have chosen to lower lifetime benefit limits, exclude more
conditions from coverage and/or increase employee contributions,
he said. Those options merely shift costs from the employer
to the employee, however.
"Cost-shifting
has not changed our appetite for health care. It just changes
who's paying," Short said.
The only
way to reduce costs, Markle said, is to reduce claims.
About
70 percent of illness is lifestyle-related and can be prevented,
according to Mayo Clinic Health Management Resources, which
promotes "self-care, risk assessment, disease management,
behavior change and prevention of illness."
The return
on investment reported by some major U.S. companies who have
adopted wellness plans has reached 5 to 1 or more, Mayo said.
The Rochester, Minn.-based Mayo Clinic employs about 2,000
doctors who treat patients, teach and do research.
Parkview
Health has offered its employees a wellness program for about
10 years, spokeswoman Karen Belcher said. The local group
consulted with BeniComp on the wellness aspects of the supplemental
insurance product.
Parkview's
program rewards employees with cash bonuses for meeting various
wellness criteria that include getting mammograms and flu
shots, practicing yoga and using smoke detectors. Those payments
- which range from $50 to $250 - are considered income and
are taxable, Belcher said.
Employers
who enroll in BeniComp Advantage can call on Parkview to provide
its employees education programs that will address strategies
for meeting the four wellness discounts being offered under
the plan.
Limits
to wellness
Traditional
wellness programs provide employees with information about
healthy lifestyles and encourage them to make changes, but
the programs often don't offer any financial reward for making
those changes, Short said.
BeniComp
Advantage, which can be added to an employer's self-financed
health plan, can rocket deductible rates from $500 to $2,500
per worker, for example.
Then,
employees can qualify for any or all of four discount categories
by demonstrating appropriate body mass index, healthy blood
pressure levels, regular exercise and non-smoking lifestyles.
Each category met would translate to a $500 discount, bringing
workers who meet all four categories back to the original
$500 deductible, Short said.
Initially
the discounts would apply only to the employee, but they eventually
could be expanded to include spouses.
Body mass
index is determined using height, weight and muscle density.
Blood pressure is checked with a blood pressure cuff. Employees
would have to submit to such tests to receive the corresponding
deductible discounts.
But exercising
and non-smoking credits, Short said, likely would be awarded
on an honor system.
He acknowledged
that healthy employees who incur less than $500 in medical
costs in a year wouldn't realize any savings with the addition
of the wellness incentive program.
And some
of the health care program's costs are being shifted to unhealthy
employees who don't qualify for any of the discounts, which
could cause resentment.
Diana
Hilmer, a BeniComp consultant, said any incentive plan will
inspire resentment in some people.
"We're
not naive," she said. "We don't think everyone is
going to say, 'Hallelujah, you're going to help me change.'
"
But, she
added, the company believes most people will qualify for at
least one incentive.
"So
they'll see it's not as bad as they thought it would be,"
she said.
Smith,
of Hylant Group, said worries about employee morale aren't
a good reason to avoid launching a wellness program such as
BeniComp's.
"The
reality is that doing nothing is also going to damage employee
morale," he said, citing potential cost shifts to employees
and benefits limitation as alternative ways of reducing employer
health plan costs.
Hilmer
emphasized that the potential savings to employers come because
the need for employee health care drops - not because workers
are banned from having certain procedures.
The best
fit for the wellness incentive program designed by BeniComp
is with a self-financed health plan that has excess loss insurance
coverage through a reinsurer, Hilmer said. The reinsurance
company would give a discount to employers who would use the
product.
Only fully
insured products - such as the supplemental BeniComp Advantage
- can offer incentives that discriminate, said Markle, the
employee benefits attorney.
The Health
Insurance Portability and Accountability Act of 1996, known
as HIPAA, prohibits employers from rebating employees based
on their health condition, their genetic makeup or their claims
history, he said.
But HIPAA's
preamble offers "a very narrow exception" that allows
BeniComp's new product, Markle said.
The insurance
offering is allowed only as an add-on for health plans that
have an insurance underwriter (about half of local employers
self-finance their health insurance plans). The supplemental
insurance policy must exist solely to rebate deductibles or
co-payments, based on health status, Markle said.
"Doug
(Short) is very, very much convinced that there's a niche
in the market" for the BeniComp Advantage product, he
said. "Time will tell."
Creating
a coalition
James
Miller, is regional marketing director for St. Louis-based
Perico, a managing general underwriter for three national
insurance companies. Perico sells excess loss policies that
pay self-financed health plan sponsors in cases of unusually
large claims and is one of the underwriters giving credit
to employers for the BeniComp wellness program.
"We're
excited about this program. We're 110 percent behind it,"
Miller said during an Aug. 7 morning meeting at BeniComp's
north side office. "It's a real win-win situation to
give incentives for lifestyle choices."
Miller
said he isn't aware of another health insurance program that
uses lifestyle as a cost-cutting tool.
Creating
incentives for wellness is a long-term investment, however.
If an employee kicks the smoking habit today, he might avert
a heart attack he would have had in 10 years.
For that
reason, BeniComp is targeting employers with fairly static
workforces, including schools and churches. But, Short said,
even employers with high turnover can benefit because they
could reduce turnover that could otherwise be caused by raising
rates.
The Rev.
Al Wingfield, vice president of business affairs for Concordia
Theological Seminary in Fort Wayne, oversees benefits for
about 135 employees there. The school, which fully covers
its workers' health insurance costs, has seen the expense
double to $1.2 million over the past two years, he said.
Wingfield,
who attended the BeniComp meeting with Perico's Miller, is
an enthusiastic advocate of wellness and sees BeniComp Advantage
as a possible way to address exploding costs. Under the program,
he said, employees are motivated both by a desire to become
healthier and a desire to save money.
Allen
Miracle, an agent with Allen Insurance Agency in Wabash, said
many employers believe their only option for saving health
plan costs is to shop around for a different insurance provider.
"But
what I've found after many years in this business is that
it costs what it costs," he said during the meeting at
BeniComp. "If you save a little here, you pay it there."
Protecting
the idea
Michael
McNeil, a patent attorney with Bloomington firm Liell &
McNeil Attorneys PC, has filed two provisional patent applications
for BeniComp Advantage and soon will file a regular utility
patent application.
McNeil
said it wouldn't be in his client's best interests for him
to reveal the filing date, serial number or contents of the
applications.
But by
filing the provisional application, BeniComp has staked its
claim to the concept. The utility application, after it's
made, can ripen into a patent if patent office officials determine
the idea to be "useful, novel and not obvious,"
McNeil said.
That process
can take from six months to two years, depending on the office's
workload, he said. The cost for the application and attorney's
fees ranges from about $5,000 to $10,000, McNeil said.
If one
of BeniComp's competitors believes the idea won't win patent
approval, the company could begin selling an identical product.
If the patent is granted, BeniComp would have a monopoly on
the idea for 20 years and competitors would have to cease
selling the insurance or be prepared to face BeniComp in court,
McNeil said.
If BeniComp
doesn't secure the patent, the attorney said, its idea is
available to anyone.
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