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: Assurity 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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