Internet to bring health care to R.I.

You’ve been able to buy cars, toys, airline tickets and groceries over the Internet.

Soon, Rhode Island consumers will be able to go online to buy health insurance.

HealthMarket, a six-month-old Internet-based company headquartered in Norwalk, Conn. is taking the “self-directed” approach it began last year one step further by offering employers and individuals the tools to directly access, evaluate, purchase and finance health care insurance.

HealthMarket spokesperson Megan Guffy said last week that by April 1 the company will target markets in Florida, Texas, New York, California and the District of Columbia, and will make its full range of health insurance products available in 48 states, including Rhode Island, by year’s end.

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Capitalizing on what officials say is rampant dissatisfaction with the health care system similar to the wave that ushered in managed care, HealthMarket is one of several consumer-based health care companies or payers to emerge in the last six to nine months.

Each company offers its own types of products, some more geared to the defined contribution model where employers contribute allowances from which employees select health benefit options.

But according to HealthMarket founder and Chairman Stephen F. Wiggins, self-directed health care insurance is different in that it uses free market principles to form a middle ground “between the low premiums of a well-managed HMO and the freedom of traditional indemnity insurance plans.”

According to Wiggins, self-directed plans cost less than managed care because they eliminate administrative middlemen and provide greater predictability in health care spending.

And despite the current anti-dot-com climate, there are plenty of folks who believe him.

Wiggins, founder and former Chairman of Oxford Health Plans and member of the Clinton Health Care Commission that drafted the patient’s bill of rights, raised more than $57 million in his first round of financing from General Atlantic Partners, Whitney & Company, Chase Capital Partners, Acacia Venture Partners, and Navis Partners (formerly Fleet Equity).

That’s because people know, Guffy said, that he’s not some “dot commer from San Francisco.” Joining Wiggins at the HealthMarket helm as President and COO is John Danaher, M.D., former Executive Vice President of Healtheon/WebMD.

While few have believed the Internet would have much impact on the delivery of health care services, Wiggins said that combined with technological computer system advances and knowing what doesn’t work in managed care, “the Internet is being used to create a new paradigm of alternative health insurance products” that may eventually change “the face of health care as we know it.”

HealthMarket plans to offer three such products to groups of all sizes — including the self- and fully-insured — through affiliated insurance partners, each providing varying amounts of control over how funds are spent.

Besides traditional scheduled indemnity HealthMarket will feature “episode” allowance plans that Wiggins predicts will create a new market for packaged or bundled services — from hospitalization to surgery to anesthesia to post-op — the price of which consumers will know ahead of time.

These episodic arrangements will create, Wiggins said, “a new model in which physicians accept risk-adjusted payments” and agree to provide what amounts to warranties.

He said employers view episode-based payments as a first small step toward direct contracting with health service providers and noted that many hospitals, physician groups and specialty service providers are already trying to market directly to the patient, but the managed care financing system doesn’t reward this type of marketing.

Under HealthMarket, employers would be able to “pick the price point they would pay” and the company would then devise the best health insurance plan available at that price, Guffy said, in effect reducing what has become annual double-digit premium hikes to more manageable numbers such as 5 percent. She said these self-directed plans will be offered side by side with currently offered health plans such as Blue Cross Blue Shield of Rhode Island and United HealthCare of New England.

Wiggins said they expect initial customers of online health insurance will be early adopters seeking more control of spending and those who pay their own premiums. The company is also targeting “Internet-savvy employees” within large groups and “new economy” companies.

Wiggins said that as more health care providers start offering package pricing, more people will join, and any national economic slowdowns will also “accelerate the focus on health care cost and lead to changes in the way employers are managing health care benefits.”

The power of an HMO
HealthMarket’s other Web-enabled service is “The Exchange,” an online buying club launched in July that offers discounts on physician and hospital services, alternative medical providers, dentists and orthodontists, vision care providers and prescription drugs.

In Rhode Island, Guffy said, seven hospitals, 45 ancillary facilities, 159 primary care physicians’ offices and 682 specialist offices now participate in the Exchange, through Beech Street Corporation, a national preferred provider organization.

One of HealthMarket’s partners is Merck-Medco, which provides discounts on every prescription drug available in the United States, more than 38,000 drugs, both generic and brand name, available through a network of more than 43,000 partner pharmacies. According to HealthMarket officials, average savings on drugs through the company are 22 percent off retail and can be as high as 50 percent.

Exchange members have access to provider quality data, educational information, professional experience, sanctions (if any), office locations and fee information, so they can find a doctor and price that best meets their particular needs.

For example, Guffy said, an Exchange member could secure LASIK surgery, which might normally cost $2,000 an eye, for something like $1,200 an eye, or the same rate that the HMOs would pay for the procedure.

Doctors, in turn, are able to determine and update their own rates and promote their practices nationally. Providers don’t have to pay to belong, and also benefit, Guffy said, because they submit their claims to HealthMarket and are paid “in a timely manner” and can charge fees and thus get paid according to their expertise and experience.

Right now, she said, insurers reimburse the Harvard educated doctor with 40 years experience at the same rate as the novice right out of medical school

For consumers, individual annual Exchange memberships cost $100 and family memberships with up to four dependents cost $150. There is also a transaction fee each time a service is contracted, a tiered system based on the price of services received.

Rolin Bartlett, Chief Life, Accident and Health Insurance Analyst at the state Department of Business Regulation, said last week that as far as he knows, no application to provide health insurance by either HealthMarket or an administrator representing the company has been filed with the DBR.

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