Spokane Journal of Business

Health insurer to launch defined-contribution plan

Spokane will be test market for product that lets insureds select doctors, benefit levels

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Spokane this spring will become the first market nationally in which a new, defined-contribution health-insurance plan called USelect is to be offered.

The insurance product was developed and is to be launched here by a Minneapolis company, Vivius Inc., through a joint venture with the plans underwriter, a unit of Health Net Inc., of Woodland Hills, Calif. A Spokane company, Spokane Health LLC, has assembled the network of doctors and hospitals that will provide care here under the plan. Spokane Health LLC, which is owned by 140 Spokane-area physicians, also will administer the plan here. Spokane Health expects to enroll 10,000 people in USelect in its first 12 months of operation, says Ken Bryan, the companys CEO.

In a defined-contribution plan, typically an employer contributes a certain amount of money each month toward health coverage for each employee or for an employee and his or her dependents. The employee chooses different levels of coverage, depending on how much additional money he or she wants to pay for coverage.

Such plans, which recently have become available in many markets, including Spokane, could become more widespread because they provide greater cost control for employers and more incentive for patients to watch their health-care expenditures, health-care policy studies say.

The Washington state Office of the Insurance Commissioner currently is reviewing USelects plan, a necessary step before a new insurance product can be introduced in this state, says Bryan.

The Spokane limited-liability company expects to launch the plan in June, he says.

It would be the second defined-contribution plan offered in the Spokane market; Regence Northwest Health also offers a defined-contribution plan here, Bryan says.

The USelect plan will differ from standard insurance coverage in several ways, Bryan says.

Employees will choose a primary-care provider from the plans roster of such doctors, and each of those primary-care doctors will be part of a network of physicians, which will include specialists to whom they will refer the employee, if necessary.

The employee, however, will have the option of swapping one or more specialists on the list for other doctors of his or her choosing, although such changes could result in a cost increase or decrease for the coverage, Bryan says. Employees also can choose from among levels of co-pays and deductibles.

After an employee makes those selections, computer software designed by Vivius will calculate a total price for the package.

The employers contribution then will be deducted from that figure to give the employee the additional amount he or she will have to pay each month. Depending on the level of benefits employees select, some could end up paying more under USelect than under a traditional insurance plan, but others could pay less, Bryan says. For employers, USelect offers cost predictability more than cost savings, at least in the short term, he says.

Unlike some defined-contribution plans, which allot a chunk of money to each employee to spend on health careand make the employee responsible for all costs above that amountUSelect is normal insurance, Bryan says. Its a traditional point-of-service plan. From that standpoint, its more of a hybrid product, he says.

USelect will pay a percentage of the charges for hospital stays and diagnostic testsbut wont pay all of such bills, which gives employees incentives to spend on health-care wisely, Bryan says. As with many other insurance plans, members can seek care outside of the provider network they have chosen, although theyll have to pay more to do so.

When a person seeks care in network, it looks like a traditional benefits plan. The only difference is the network is your network, meaning its the one the employee has selected, Bryan says.

Another key difference between USelect and many other insurance plans is that doctors and other health-care providers set their own reimbursement rates, he says. Allowing them to do so creates a more traditional, competitive marketplace, Bryan contends. One doctor, for example, might charge higher rates and compete for patients on the quality of his or her work, while another might want to be perceived as the volume doc in town and hold down charges, he says. Price is one piece of information employees can use when assembling their networks, he says.

So far, USelect has signed up about 500 to 600 health-care providers here for its network, he says.

Spokane Health LLC was launched in December 2000 and since has been assembling the provider network.

It has two employees in addition to Bryan, who previously worked here for both Empire Health Services and what used to be Medical Service Corp.

Bryan says he began looking for a new insurance product to bring to Spokane after several insurers left the market in the late 1990s. He specifically sought a defined-contribution plan because he believed such plans were going to be the future of health care, he says. Thats how were going to get health-care inflation under control.

He found Vivius on the Internet and began looking at launching here what he calls its personalized health-care system. Spokane is the first of four markets in which Vivius plans to introduce its product in coming months, Bryan says.

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