Patient Choice offers cost options to self-insured employers

Some large Boulder County companies are investigating a new program that promises to help self-insured employers slow rising premium costs by contracting directly with hospitals and doctors for care. But analysts say it may be years before Patient Choice Healthcare Inc. has a meaningful impact.

Patient Choice became available to Colorado employers Jan. 1. So far, no Boulder County companies have signed up, though brokers say they are receiving inquiries. A handful of the area’s largest employers, including the Boulder Valley School District and the city of Boulder, attended an introductory meeting in December.

?It’s going to take the creation of a critical mass of customers before they can have a real effect,? said Jim Hertel, publisher of Colorado Managed Care Newsletter. ?I would imagine that it will take a few years of success in a limited number of employers and the ability to demonstrate effectiveness before they could become a major factor in the marketplace. But if the idea proves to be successful, I would anticipate it would grow quickly.?

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Patti Olson, vice president of The McMahon Co., a Boulder employee benefit and insurance consultant, said her firm has one client who has asked for hard numbers on the program.

?We are just in the process of finding out ourselves what it is about,? she said.

The program now is available only to self-insured employers, but Patient Choice is looking for an insurer partner that would allow smaller businesses to participate.

Developed in Minnesota by a coalition of large employers known as Buyers Health Care Action Group, Patient Choice is a defined-contribution-style plan. Under a pure defined-contribution plan, employers typically pay a set amount toward an employee’s health insurance. The worker then can buy her own insurance for that amount, or can add her own money to increase benefits.

Under Patient Choice, physicians, hospitals and other providers form ?care systems? that agree to charge certain fees for their services. Patient Choice evaluates the fee bids and places the care system into one of four fee tiers. Companies participating in Patient Choice typically agree to pay a certain amount to cover care in a mid-level tier. Employees can accept that amount or contribute more if their doctors are in a higher tier. This differs from most managed-care programs in which employers typically use an average of costs and to determine contributions.

Jennifer Daily, Patient Choice’s director of sales and marketing in Colorado, said employers trying to retool their health coverage typically have two choices — increase the costs to employees or reduce the level of coverage. ?Under our model, we can offer a way out.

?The immediate advantage to employers is that they can offer their employees lower contributions, if the employee is willing, or desires, to go to a lower-cost care system,? Dailey said.

Boulder Valley Independent Practice Association, which has about 300 doctors and care providers, has already been accepted to Patient Choice. Avista Medical Associates and Longmont Clinic have submitted bids, said Dailey said.

The incentive for physicians to participate in the program is that they set the fees, and they make the decisions about what kind of care their patients should get. The program is not capitated so physicians are not paid unless they actually see patients.

?What our model does is introduce a new type of free-market dynamic into the health-care delivery system, where the care systems are competing for membership with cost, service, quality and location. Consumers are going to make decisions based on what is important to them,? Dailey said.

But it may take some convincing to get employers to sign up.

Olson said the idea of a defined-contribution plan is often appealing to employers, but the administrative issues sometimes confound them.

?You don’t just have an employee fill out a medical insurance form and they say ?yes’ or ?no.’ They have to be selecting one of four levels, and then, if I understand it correctly, you can put different people in your family in different levels,? Olson said. ?Somebody has to be compiling that information and passing it on and keeping track of it. It’s not as simple as having one list of everyone on the medical plan.?

Still, health-care delivery seems to be moving decisively down the path to defined contribution systems, both analysts and brokers said.

?We’ve discussed the concept of defined contribution, but not necessarily the full impact of (the Patient Choice) program and what it means,? Olson said. ?What you’re basically doing is giving the employees choice and at the same time, passing on costs that are representative of the choices they’re making.

?Employees are going to gradually be moved into the area of being a true consumer, where you understand the cost,? Olson said. ?It’s not an easy transition, but it’s going to keep happening.?