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October 01, 2001
Defined-contribution Plans on the Rise
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na's recently announced venture into medical savings accounts is just one of many new offers to employers who've been stunned by double-digit increases in health insurance premiums, according to the American Medical News.

Small companies have offered the most radical new options to date, particularly in the defined-contribution category, the News reports.

Destiny Health in Oak Brook, Ill., boasts 2,000 members in that state since introducing its products in May and hopes to duplicate what it achieved in South Africa, where it has 1 million members. Another defined-contribution company is Portland, Ore.-based Myhealthbank, among a handful of others.

But another alternative is a defined-contribution model created by Minneapolis-based Vivius that it is selling to insurance companies, which would then sell and manage the plan for employers.

Vivius will not go online until the first quarter next year, with its initial focus on Spokane, Wash., Dallas and Boston.

Other midsize and large companies eyeing HMO alternatives include Humana Inc. That company may offer a defined-contribution plan next year, a company spokeswoman told the News.

WellPoint Health Networks rolled out its first version of a defined-contribution plan, FlexScape, in California in April with its Unicare subsidiary in Texas seeing a similar plan this summer. The plan was added into options available to 900,000 members, though only 200,000 members have gone through their renewal cycle and only 10,000 of those have chosen the fixed-contribution plan.

Uwe Reinhardt, PhD, professor of health economics at Princeton University, told the News that he sees medical savings accounts and defined-contribution plans as signs of a health care industry flailing about, unsure of what to do.

The only trend he does see is that employers, health insurers and the government are intent on pushing more health care costs onto consumers, a situation he expects could create an enormous backlash against doctors and hospitals.

Defined-contribution plans and those with medical savings accounts, Reinhardt said, make consumers responsible for where their health care dollars are spent, but just try to find out what a specific procedure costs before having it done. It's impossible to comparison shop, he said, because the costs are closely guarded.

"Imagine going blindfolded into Macy's and being told to buy shirts," he said. "You pick a shirt, they say, 'We'll send you a bill later,' then you drive home. Now, you understand how health care is bought. If you wanted to get prices on health care ... you couldn't get it. Prices for drugs, you can't get them.

"Imagine unleashing people into a market where they don't know what they're buying and don't know the price of what they're buying. I can't imagine American consumers saying, 'I feel empowered.' They'll hate their doctors and their hospitals, and there could be a big backlash if MSAs became widespread."

To view the American Medical News article, click here.
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