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Calif. payers refine plans for the HMO market

WOODLAND HILLS, CA – Since Health Net of California launched its Optimizer HMO in May, four employer groups have signed on.

Health Net is following a trend in California by introducing an HMO version of a consumer-directed health plan, referred to in the industry as a CDHMO, but with a big difference – its CDHMO is based on co-pays instead of deductibles.

That means no deductibles and first-dollar coverage, said Wendell Gurley, vice president of product development for Health Net of California.

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Consumers are reeling from the sticker shock of high deductibles, where CDHP deductibles are typically between $7,000 to $15,000. “This is our way of bringing consumer engagement of CDHP on a cost-efficient platform,” Gurley said.

This hybrid model of an HMO with an employer-funded health reimbursement account, decision-support tools and incentives is a more robust version of an HMO, Gurley said.

Kaiser Permanente introduced its health savings account-compatible HMO in January 2005 in Colorado to meet market need and has seen a 30 percent growth rate in that product, according to Charles Bevilacqua, senior vice president of products and benefits administration. Kaiser introduced a similar plan in California in 2006 and has seen high adoption as well.

The plans include first dollar on preventive services. “This is critical,” Bevilacqua said. “It translates to longer-term cost savings.”

Blue Shield of California introduced its HMO coinsurance/deductible plans, which offer eight different co-pays and deductibles, for the large group market in 2006. “We have seen more than a 100 percent increase in activity in these types of products since the beginning of this year and (a) 200 percent increase from this time last year,” said spokesperson Elise Anderson.

Carl Doty, senior analyst for Forrester Research, said these “managed CDHPs” are a “necessary step.” He sees similar plans being introduced in Massachusetts, where the HMO market is also strong.

Despite the attractiveness for employees of having no deductibles, Doty said Health Net is “only delaying the inevitable.”

“Employers will continue to look for ways to keep premiums in check, and eventually that will lead to higher deductibles,” he said.