Some Things Old, Some Things New: Health Plans Plot 2002 Business Strategies

By Tom Walsh

Responding to an ever-changing health care system where health plan, provider, and consumer interests never quite seem to balance, plans in Massachusetts and across the nation have already begun to modify old business strategies or introduce new ideas to the marketplace.

Some of the latest innovations seem a little like “back to the future,” with some benefits now carrying payment plans that mimic former indemnity insurance products. Plans are also staking their futures on the belief that e-commerce holds answers to today’s systemic problems.

Reduced to the simplest terms, the new environment for health plans is this: Plan members and their employers have reacted to years of managed care by demanding products that allow greater choice and flexibility. Physicians and hospitals are demanding relief after years of what they describe as increasingly inadequate reimbursement and stressful contractual relationships with plans.

Mission Impossible
Meanwhile, health plans still seek to control costs while addressing these concerns -- a proposition that seems nearly impossible to achieve.

“It’s a constant struggle to devise programs that appeal to consumers and providers and don’t just produce cost escalation,” said Harris A. Berman, M.D., CEO of Tufts Health Plan. “There is no single answer.”

“The equation doesn’t balance,” agreed Roberta Herman, M.D., Harvard Pilgrim HealthCare medical director. “Like many things, health care has these swings. At some point the pendulum will come back to where consumer demand, employer capabilities, and health plan interests align.”

Unlike years ago when managed care was thought by some to represent the big idea to solve the quality-cost riddle, today’s strategies suggest only incremental progress.

“There is not one silver bullet that will solve everything,” said Stephen Booma, executive vice president for sales, marketing, and service at Blue Cross Blue Shield of Massachusetts. “There is no one huge plan innovation that is the next true evolutionary change in managed care.”

Not a Win for Physicians
That doesn’t mean health plans have stopped trying to find answers. They haven’t.

And, despite predictions of another year of double-digit health insurance premium increases that in theory provide health plans with more resources to pay physicians, health system observers do not see much gain, if any, for doctors. “There may be more office visits, more surgeries, and more things happening with covered populations,” said Manuel Lowenhaupt, M.D., a consultant with Deloitte & Touche. He said there may be more money available for physicians, but they will have to work harder to get it.

Former state legislator John McDonough, now an assistant professor at Brandeis University’s Heller School, also sees “some relaxation of the stringent controls we saw in the second half of the ’90s.” However, he said, decreases in Medicare and Medicaid funding for physicians may wipe out any gains. McDonough said greater use of patient co-pays for office visits will require doctors to button up that part of their office operations or risk never collecting that income after patients visit.

The Strategic Lineup
Many in health care agree that health plan agendas today focus on protecting the bottom line and preserving rather than growing market share. The days of invading new territory and taking losses to add members appear gone.

The following are some of the latest health plan business strategies:

• Cost Shifting
  Flexibility and choice have a price tag. As managed care premiums began their latest ascent a few years ago -- in part as a response to member demand for more freedom -- employers first reacted slowly. But when the new series of increases became burdensome, business appealed for solutions. The most obvious was for health plans to offer employers more choices on behalf of their employees, with many workers now paying more for the same or richer benefits.

  Tufts’ Dr. Berman believes consumers want such choices. But he said such programs must be coupled with heightened consumer awareness of how choice works and why. “We need to have choices that have the consumer share in some of the cost in a manner that makes them sensitive to the cost,” Berman said. “Many products just look to shift costs from employers to employees. That’s doomed. It will relieve employers but it will not control costs.” The goal of “defined contribution” programs with increased co-pays and deductibles, Berman said, is to give patients the same incentive to control cost as health plans and employers.

• Three-Tier Medical Benefits Arrive
  Tufts has a new plan, “Choice Co-Pay,” that fits this description. A few employers have already bought in. “It will be very interesting to see how it works,” Berman said. At Blue Cross, Booma said, it’s called “Tri-Blue” and it contains three different “price points.” He said Tri-Blue “is in its early stages.”

  Berman said the Tufts plan may make patients think about whether to have medical procedures done at lower-cost community hospitals or larger, more costly teaching hospitals. That thinking has set off warning bells of opposition with some -- including the MMS -- concerned that dollars will drive important health decisions.

  The talk of co-pays and deductibles begins to sound like the old indemnity days. “There will be more choice that looks to be more like indemnity,” Booma said.

• Pharmacy Costs Still Targeted
  Soaring pharmacy costs have plagued plans for years with no end in sight. One thing seems certain -- three-tier benefit programs and tough stances on generic alternatives will be increasingly commonplace.



• E-Commerce a Panacea?
  The state’s health plans are betting on information technology.

  Harvard Pilgrim’s “HPHConnect” has been favorably reviewed by at least one technology trade publication. E-medicine seems to be where wired physician practices may reap financial benefits. “What you get rid of is much of the busywork,” Dr. Herman said.

E-commerce promises benefits in both medical management and in streamlined office procedures -- with technology capable of tracking patient utilization and suggesting alternative care plans that are more efficient and lead to better care. On the administrative side, Tufts’ Dr. Berman maintained that the day is not far off when technology will work for physician practices the way it now works for credit card and ATM users.