Health insurance and car insurance- should it be the same?

Should health insurance be like car insurance?

Why some companies are rewarding healthy employees

By Jen Wieczner

Car insurance companies reward good behavior: Drivers with records free of 15-car pileups and tickets for doing 90 in a 55 pay cheaper premiums. Health insurers, on the other hand, offer people little incentive to stay out of harm’s (and doctor’s) way. But a growing number of health advocates say this is a mistake, and that the system would function better if bodies were treated more like Buicks.

With policymakers still ironing out the details of the nation’s health-reform plan, hospitals, corporations and consumers are all trying to figure out ways to save on medical costs. While employers and health insurers have tried to steer plan members to lower-cost care and healthier behaviors in order to save the companies money, employees often pay the same amount in premiums and copays no matter what. Since employees generally don’t see any financial benefit from choosing the cheaper option — for instance, urgent-care clinics over emergency rooms — experts say it’s no surprise consumers are unwilling to do their employers any favors.

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Some Fortune 500 companies and other employers — from JetBlue to IBM to equipment manufacturer Caterpillar — have begun to experiment with new health-care models that allow employees to keep some of the money they don’t spend on health care, or that reward or penalize them based on how well they manage their health.
Many of these plans more closely resemble auto insurance — with healthier employees effectively paying less than colleagues who are at greater risk for developing diseases related to smoking or obesity. For example, 38% of companies planned to charge higher premiums or deductibles in 2012 to employees who smoked, had high cholesterol levels, did not actively treat a chronic condition like diabetes or high blood pressure or failed on other health measures, according to Towers Watson — the same way people with speeding tickets pay higher auto insurance rates to compensate the plan for their greater risk of car damage.
And although healthier employees may not be paying lower premiums, per se, while their unhealthier colleagues get penalized, they may get to see some savings later on, as 80% of companies planned to financially reward employees for healthy behavior (such as participating in weight- or disease-management programs) in 2012, according to Towers Watson. Such incentives often take the form of deposits into an employee’s health savings account, say experts, or removal of the premium penalties if employees show they’ve quit smoking or lowered their blood pressure. Experts say the rewards are the equivalent of lower premiums for safe drivers: After IBM began offering employees rebates worth up to $300 a year for participating in exercise and nutrition programs, the company saved $190 million in health care costs between 2005 and 2007, says a spokeswoman. IBM employees spend up to 60% less on their overall health-care bills than industry norms, according to the National Business Coalition on Health.
This year, JetBlue launched an overhauled health plan designed to simultaneously reward healthy employees and save the company money— with crewmembers who participate in wellness programs ultimately paying less for their medical benefits. Employees can now earn up to $400 individually or $800 for a family by participating in certain health programs, and workers with some chronic conditions can snag an additional $250 individually or $500 per family if they enroll in a care-management program. In a letter to employees explaining the changes, CEO Dave Barger said the airline’s old health-care model was backward: “Our plans are not structured in ways that are making us healthier — physically or financially.”

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While reminding employees that they split JetBlue’s health-care bill with the airline, Barger linked the company’s success to employees’ “smart decisions,” writing, “I am convinced that solving for ‘health,’ where controllable and possible, presents the greatest chance of successfully arresting our rising health-care costs.” JetBlue did not respond to a request for comment.
Other companies are trying to solve their employees’ health problems by waiving copays for generic drugs, second opinions and preventive care, believing they will save in the longterm, since employees will be less likely to get sick. Some Cigna health plan members can now get free second opinions from the Cleveland Clinic. Companies like Dell, Caterpillar and Marriott have eliminated or reduced copays for certain medications and services, which has sometimes resulted in fewer employee health claims, according to a report by the National Business Coalition on Health. And an IT company that offered its workers free services at the on-site health clinic not only lowered its health costs but also saved its employees a combined $140,000, according to Change Healthcare. “Luring people into the good behavior by making it free is another way of sharing the savings on the frontend with employees,” says Dave Fortosis, a consultant in Aon Hewitt’s health and benefits practice. Dell, for one, knocks off up to $800 in annual premiums for employees who take a health survey and check in with a health counselor once a quarter over the phone, according to a company spokesman. Caterpillar and Marriott did not return requests for comment.
The basic “staywell” health plan concept isn’t new. Back in the 1980s and ‘90s, some employers tried awarding cash bonuses to employees who spent little or nothing on health care. Publishing company Forbes Media, for one, paid bonuses of $1,000 to employees who filed no health-care claims, and a smaller prize to those who had less than $500 in health expenses. Employees of the Mendocino County SchoolDistrict in California received up to $500 back if they racked up less than that in health claims.
But those types of bonuses fell by the wayside as employers realized it wasn’t the best idea to reward people for never going to the doctor. “By and large, that approach fell into disrepute because employees or their families were not getting the treatment they needed,” says Fortosis. “Employees and families were just denying themselves care they needed so they could get a little cash.”
Indeed, those plans relied on a model that probably wouldn’t work for an auto insurer: After all, if you never take your car to a mechanic, there’s a greater likelihood it’ll have a major breakdown in the future. But employers have continued to tinker with and fine-tune the strategy.
Forbes’s bonus model was a precursor for its current consumer-driven health plan, featuring health savings accounts that the company was not allowed to offer at the time because of government regulations. These plans, which allow employees to personally save what they don’t spend on health care, are the wave of the future, some experts say. “You own it. So you pay attention. And that’s the whole premise behind consumer-driven healthcare,” says Margy Loftus, Forbes Media’s senior vice president for human resources.
Such consumer-driven plans as health savings accounts and health-reimbursement accounts allow employees to get their savings back, says Tony Holmes, senior health care consultant for Mercer, a firm specializing in human resources. Companies like Caterpillar and Dell have sweetened the pot further, offering incentives worth up to $900 for enrolling in an HRA, according to the National Business Coalition on Health Report, since the firms directly benefit when members use their health plan frugally, rather than forgo care entirely. “It makes a lot more sense to have your programs do that every time someone makes a decision, rather than sending them a check,” Holmes says. Caterpillar and Dell did not respond to requests for comment.
Some health-care experts feel that these new models perpetuate the old 1990s problem by discouraging some workers from caring for their health. But even employers with traditional health plans, which provide broader coverage at set monthly premium rates, have tried to encourage their staff to be thriftier with them. “We’ve seen their executive leadership tie what their company spends on healthcare to the company’s ability to invest in new facilities and bonuses,” says Douglas Ghertner, CEO of Change Healthcare, which makes health-care cost comparison tools for health-plan members. The logic: “Going to the lower-cost provider may benefit our company as a whole and consequently benefit you as an employee, because we’ll have more money to pay in bonuses because we’re paying less in healthcare,” Ghertner says. Pinnacle Financial Partners in Nashville, Tenn., for one, has been educating employees about finding lower-cost health providers and prescriptions because all employees are also owners of the firm, “So they have a vested interest in helping reduce expenses for themselves and for the firm overall,” says Stacy Gammons, a Pinnacle human resources specialist. See Is consumer-directed coverage a healthy choice?
The new health-care models, say experts, so far fall short of allowing employees to share directly in the cash they save the company. But that may soon change, says Ghertner, as employers have begun to discuss paying employees a percentage of what they save the company on healthcare — for example, 20% of the cost difference between a $4,000 CT scan at a hospital and the same scan for $1,000 at an outpatient facility, or a potential $600 back to the employee. “I think you will start to see employers over time explore it,” Ghertner says.