Kaiser Permanente Responds to CDHP Trend by Offering First-Ever Non-HMO Products

Kaiser Permanente has taken the radical step of introducing a new suite of consumer-driven products called Custom Care. This is the first time, since its founding more than 60 years ago, that Kaiser Permenante is offering a health insurance plan that is not based on its staff-model HMO. For lab directors and pathologists, this is an important sign of the steadily-increasing importance of consumer-directed health plans (CDHPs) in the American healthcare marketplace.

Kaiser Permanente first launched the Custom Care products in its California region in May 2006. According to the press release from Kaiser, “This new suite of Consumer Directed Health Care products offers a range of benefit design and financial accounts options, along with online health information, decision support tools, incentive and discount programs, and access to Kaiser Permanente’s integrated delivery system. Kaiser Permanente Custom Care provides customers with additional options to actively manage their health care expenses and provides consumers with the tools to become more active participants in managing their health care services and costs.”

Based on response to the response of its test marketing of Custom Care insurance products, an emboldened Kaiser upped their stake in CDHPs by launching Custom Care HealthInvestor HSA. These plans became effective on January 1, 2007. HealthInvestor combines a Wells-Fargo-administered health savings account with a high-deductible health plan in which members pay a larger share of bills in exchange for lower premiums. Kaiser does not expect people to flock to this new plan model, but says that it is laying the ground work for the future of health care. “It’s a new business strategy for us, “said Kaiser spokeswoman Beverly Hayon in the August 14, 2006 issue of Modern Healthcare, “to be much more responsive to the marketplace in terms of what our employers need and what individual consumers are looking for.”

Laboratories should take note that, when an organization the size of Kaiser Permanente feels obligated to offer consumer-driven health care options after 60 years of offering only HMO products, other large insurers cannot be far behind. Consumers enrolled in consumer-driven healthcare plans are more likely to be highly involved in their health care and to only want the bare minimum of health care services. They are also likely to shop around to find a fair and reasonable price for such services.

Laboratories and pathology groups need to track the progress of the CDHP trend. Consumers covered under high-deductible policies and HSA plans are being educated to shop carefully for healthcare providers and to use both price and quality to guide their decisions. To be competitive and to serve the changing expectations of patients, laboratories and pathology groups will need to create services that are patient-friendly and deliver this care in a cost-effective fashion.

Consumers Not Funding Their HSA Accounts – A Financing Opportunity

In the age where we can finance everything from houses to cars to couches, it’s only logical that high-dollar items like health care services are not far behind. Interesting data has been published which indicates that growing numbers of consumers enrolled in high-deductible consumer-directed health plans (CDHPs) that include Health Savings Accounts (HSAs) may soon use financing to pay hospitals, physicians, and laboratories for their healthcare.

The San Francisco Business Times recently reported that, as of January, about 3.2 million Americans were enrolled in high-deductible plans. However, just 820,000 of these consumers (about 26%), had opened and funded their HSAs. Source of this information was “Inside Consumer-Directed Care,” a newsletter published by Atlantic Information Services.
This situation will have consequences for hospitals, physicians, and laboratories. It means that a significant portion of consumers currently enrolled in health plans with HSAs will not have sufficient funds in their health savings account to pay for health services. This is why some insurance companies are chartering their own banks. For example, UnitedHealth Group founded Exante, a bank organized specifically to handle HSA funds and provided other related financial services (see The Dark Report, December 26, 2005).

Why aren’t more consumers funding their HSAs? Experts tell Dark Daily that this is because many consumers don’t yet fully understand how their high-deductible health insurance plan works in tandem with their HSA. These experts expect three things to happen over time.

First, employers are likely to spend more resources on communication and education to help their employees better understand these high-deductible health plans. Second, insurance companies will be offering financing arrangements that allow the consumer to use his or her HSA to borrow the money needed to pay the medical bill. That debt will be paid off by monthly payroll deductions. Third, more companies are likely to provide employer-matched funding for their employee’s HSAs. This employer-match portion will be similar to the arrangements frequently used with 401-K plans and similar retirement programs.

In the short term, laboratories and pathology groups are not likely to see much impact from under-funded HSAs. Over time, it is believed that consumers will become more knowledgeable about their high-deductible health plans work. Consumers will also avail themselves of employer-match funding programs for their HSAs and will utilize credit health plan-sponsored credit plans to pay their medical bills.

Dark Daily observes that the adoption of HSAs in the United States is likely to continue, despite any implementation issues. That’s because HSAs have been used successfully for decades in countries such as Singapore and South Africa. Laboratories and pathology groups are advised to review their current collection processes to maximize success in getting payments directly from CDHP-insured patients.