It was open enrollment day in 2001, and Kirby Hospital was spending too much money on healthcare, says Chief Executive Officer Steven D. Tenhouse of the Monticello, IL-based 16-staffed-bed hospital, the smallest in the state.
Under its prior HMO plan, the hospital had seen annual premium percentage increases in the high teens leading up to 2001, which Tenhouse says were unsustainable. With a small group of insured employees, says Tenhouse, “If you have a couple of bad claims years it plays havoc with your premiums.” Asked how it feels to be on the other side of the healthcare cost equation, Tenhouse laughs. “Those ironies aren’t lost on us—believe me. We get to see both sides of it.”
So by December 2002, Tenhouse made the decision to switch to a then-novel consumer-directed offering by Chicago-based Destiny Health. The decision, while unpopular at the time, has grown on his employees as they’ve come to see that the program doesn’t necessarily put more cost on them—just more responsibility.
“They had never had to worry about watching their claims and what they did regarding their healthcare,” he says. “The CDP shifts some of that burden to them, so the beginning was rocky.”
Tenhouse says blanket criticism of consumer-directed plans as bad for patients is unwarranted and unfair. That finding is echoed by Tom Lerche, healthcare practice leader at Aon Consulting, which recently released a study that evaluates the effectiveness of such plans at holding down employer costs while improving employee health. He generally views such plans favorably—unlike some studies that have come to less positive conclusions, such as a much-publicized Commonwealth Fund claim that CDPs and high-deductible health plans result in lower consumer satisfaction and lead to avoidance of necessary care as patients look to rein in their out-of-pocket costs.
Lerche says those findings may be attributed to such studies lumping in high-deductible health plans, which he claims are very different than CDPs. “Benefits should be generally equivalent to the existing plan the employer had, not a stripped-down version,” he says. “Limited-benefit plans masquerading as CDPs are imposters.”
Generally, with true consumer-directed care, there’s no evidence there’s a negative impact on preventive care, he says, arguing that CDPs’ small relative number of enrollees—between 10 and 12 percent of the total insured population—means data can be misleading.
Tenhouse says Kirby’s plan has a “huge wellness benefit built in.” The plan has a chronic illness benefit for which the employee pays only a small copay. Further, employees get “vitality scores” for undergoing annual physicals and other preventive care, quitting smoking and other healthy behavior. Employees’ health is classified as bronze, silver, gold and platinum, and they get points they can redeem for prizes based on their score.
Where does the boss fall on the scale?
“I am silver. I need to do all the wellness checks,” says Tenhouse. “Honestly, it’s something I wouldn’t think about doing normally, but I am doing it to set a good example and because I could easily get bumped up to gold level.”—Philip Betbeze