Alternative Health Plans — Consultants Have Their Doubts

Employee benefit consultants who advise employers on the most cost-effective options for companies contracting with health insurers have seen both the advantages and disadvantages of alternative health plans.

Sean Creighton, M.S., a managing director in the policy practice for Avalere Health, a healthcare consulting firm in Washington, D.C., gave the alternative plans a mixed review. “Some of the innovation we’re seeing from alternative health plans is good, such as the idea of no deductibles and no copays for primary care and other services,” he says, adding that eliminating or lowering such costs would mean more employees would have ready access to care than with high-deductible coverage. “Providing insurance coverage without a lot of out-of-pocket costs is tremendously beneficial,” he says. But, Creighton wonders, if alternative health plans can deliver lower costs and high-quality care for employers and their workers, why don’t the nation’s largest health insurers do so as well? “So my question is, where do the savings come from,” he asks.

Related: Is There an Alternative to the High-Deductible Health Plan? Glad You Asked.

The premium income that alternative health plans collect would need to cover all claims from employees and their family members, plus administrative and other costs and a profit margin, says Creighton. Using lower-cost physicians who provide better-quality care could produce sufficient savings to keep premiums low enough to attract members to these plans, he explains. However, from what Creighton has seen of alternative health plans, he says he’s not convinced they could succeed for long.

Drew Hodgson, the national practice leader for healthcare delivery at Willis Towers Watson, a benefits consulting firm in Arlington, Virginia, also sees value in the innovations that alternative plans have introduced. “Typically, I fully support disruption when it’s happening in health insurance,” says Hodgson. The problem for consultants and employers is trying to determine which plans will be effective over time, he adds.

“There’s a ton of different players just coming into the market now that are claiming to improve quality, reduce cost and be the silver bullet that’s needed,” he says. “As consultants, we are busy trying to cut through the marketing hype to figure out what’s truly effective and what isn’t in the marketplace today.”

Hodgson sees Centivo, an alternative health plan administrator in Buffalo, New York, as akin to a traditional health plan but one that contracts with large health systems to serve its employer clients. For example, Centivo has contracted with the Atlantic Health System, a nonprofit organization in Morristown, New Jersey, that has 4,800 physicians working in more than 400 sites of care, including seven hospitals in New Jersey, he says. Atlantic Health System is centered around primary care physicians who coordinate care and make referrals to specialists when needed, Hodgson explains. “This model is effective because it improves quality and it reduces costs,” he says, adding that it could be disadvantageous for some employers because many employees don’t want to be limited to getting all their care from a single health system.

Coupe Health (from Blue Cross and Blue Shield of Minnesota) and Surest (UnitedHealthcare) offer tiered networks of providers, Hodgson notes. “They create a network of providers on three different tiers,” he says. “If you go to a tier-one provider, you’ll pay less. If you go to a tier-three provider, you pay more. Personally, I don’t think such plans are effective because people don’t shop for care on price.”

Hodgson was not as familiar with Gravie’s alternative plan, Comfort, as he was with the other alternative health plans so he reserved comment on it.