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Consumer-Driven PPO an Alternative to High-Deductible Plans
Great-West Healthcare Plan Reduces Use of Medical Services by Over 9%, Delivers Savings to Employers
GREENWOOD VILLAGE, Colo., July 14, 2005 — Many insurance brokers and employers are placing their bets on the promise of high-deductible group health plans, but the smart money may be on a more evolutionary approach that already is providing major savings for companies.
A new study of Great-West Healthcare Consumer Advantagesm customers by the Minneapolis-based consulting firm Reden & Anders Ltd. shows that the plan reduced the use of medical services more than 9 percent from January to November 2004, versus expected utilization under Great-West Healthcare’s PPO. Utilization decreased 6.2 percent under Great-West Healthcare Consumer Advantage, while it would have risen 3.3 percent under the PPO during that time. The utilization rates for Great-West Healthcare’s PPO are typical of those for PPOs industry-wide.
The reduction in the number of members’ office visits and other health care services under Great-West Healthcare Consumer Advantage translates into cost savings for employers that offer the plan. Actual savings vary based on the kinds of medical services that members use.
“There’s now a plan that’s simpler to understand and implement than a health reimbursement account (HRA) or health savings account (HSA), but delivers comparable cost savings,” said Cindy Donohoe, vice president of marketing and product development at Great-West Healthcare. “Verification by an outside actuarial firm independently confirms that with Great-West Healthcare Consumer Advantage, high-deductible plans are no longer the only choice for employers looking to consumer-driven health care for help in controlling benefit costs.”
The study was conducted with employers who previously offered a Great-West Healthcare PPO to employees and then replaced it with Great-West Healthcare Consumer Advantage. The Reden & Anders study analyzed six categories of medical services -- office visits, inpatient hospital, inpatient physician, outpatient surgical, outpatient physician and prescription drugs. Donohoe said Great-West Healthcare plans a longer-term analysis with the more than 600 employers now using the health plan.
Reden & Anders is a national actuarial, clinical and management consulting firm specializing in financial and business decision support for the health care industry.
Results included a 9.6 percent decrease in office visits and 11.3 percent drop in outpatient physician services. Prescription drug utilization also registered smaller increases than those expected under previous PPO plans. The analysis concluded that strong majorities of employer groups experienced utilization reductions in at least half of the six categories through Great-West Healthcare Consumer Advantage.
“Sixty-four percent of the groups had reductions in at least four service areas, and 87 percent of the groups had reductions in at least three service areas,” said James Drennan, a principal of Reden & Anders and author of the report.
Great-West Healthcare Consumer Advantage and other consumer-driven models are benefit plans that engage members in health care decisions and purchases. The premise of these plans is that consumers, with their own money at stake, and information and tools with which to make informed decisions, will be more discriminating about ordering tests and making trips to the doctor. This level of engagement is absent from traditional managed care plans, where the employer pays just about everything for medical services, except small copayments.
“One big difference between Great-West Healthcare Consumer Advantage and other consumer-driven plans is in enrollment,” Donohoe said. “Thirty-seven percent of workers choose our plan over a PPO, whereas studies by Hewitt Associates and Mercer Human Resource Consulting suggest that only 3 to 16 percent select competitors’ consumer-driven plans. Enrollment is important because, bottom line, employers save only if employees enroll.”
“It appears that the Great-West Healthcare Consumer Advantage approach to increasing cost sharing could be more member-friendly than a traditional HRA and HSA consumer-directed approach,” concurred Reden & Anders’ Drennan.
HRAs and HSAs also differ in that members sometimes rush to use medical services before switching from a traditional PPO to one of these consumer-driven plans. According to Drennan, studies have shown spikes in PPO plan use during the three months prior to HRA and HSA launches.
“We did not see that in this product,” said Drennan. “Members do not seem to perceive a radical difference with the Great-West Healthcare Consumer Advantage plan from a traditional PPO.”
Great-West Healthcare Consumer Advantage is unique, said Donohoe. When Great-West Healthcare launched this product in January 2004, it introduced a more evolutionary alternative to HRAs and HSAs – a new category of consumer-driven health care.
“Although we offer a full suite of consumer-driven plans, including an HSA and HRA, not all companies feel ready for the dramatic change of a high-deductible health plan,” Donohoe said. “Our consumer-driven PPO gives them an alternative way to control costs with a plan design that’s more familiar-looking and comparatively simple.”
Great-West Healthcare Consumer Advantage takes a three-tiered approach to benefits coverage (see graphic). Unlike HRAs and HSAs, the plan engages members only in Tier III, with scheduled or discretionary services, when members have time to make informed choices.
With Tier III services, members typically have a variety of options. For instance, rather than elect knee surgery, a member might want to try physical therapy first. In such cases, the member can consider alternatives, investigate costs and quality, and plan ahead for treatment. It makes sense, said Donohoe, to engage plan members in Tier III rather than across the continuum of health care, as do high-deductible HRAs and HSAs.
Tier I – preventive care and office visits – is covered at 100 percent after copays. And Tier II services for when members need care most – hospitalizations, emergencies and hospice, for example – are covered at a high level and combined with support from Great-West Healthcare’s medical management program, which helps chronically ill members who account for significant claims costs.
Great-West Healthcare Consumer Advantagesm
About Great-West Healthcare
Great-West Healthcare, a division of Great-West Life & Annuity Insurance Company, is a national employee benefits provider with expertise in self-funding and health care management solutions. Nationally, the division operates a health care network that includes more than 4,200 hospitals and 530,000 providers and provides health care coverage to approximately 2 million people. Visit www.greatwesthealthcare.com for more information.
Great-West Life & Annuity Insurance Company, headquartered in metro-Denver, serves its customers through a full range of health care plans, life and disability insurance, annuities, and retirement savings products and services. It is an indirect, wholly owned subsidiary of Great-West Lifeco Inc. and a member of the Power Financial Corporation group of companies. Great-West Life & Annuity Insurance Company is not licensed to do business in New York. Products are sold in New York by its subsidiary First Great-West Life & Annuity Insurance Company, White Plains, N.Y.
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