Humana hopes to gain a competitive edge by joining two important components of today's insurance — consumer-directed health plans and information technology — with a rare cap on premium hikes.
The health plan launched SmartAssurance on June 2, capping rate increases at 9.9 percent in the second year for customers enrolled in SmartSuite, a consumer-directed plan.
It comes down to this: Humana is betting that the combination of an engaged consumer and Internet access will allow it to make money despite the cap, even though medical costs may still be volatile.
"It's a manageable risk for Humana," Ed Kaplan, a consultant at Segal, tells the Wall Street Journal. Meanwhile, "For companies that want stop-loss, it is attractive." Humana has sold SmartSuite to 145 companies with about 225,000 enrollees.
Typically, consumer-directed plans provide a defined amount to workers to pay for their health needs. Once that fund is depleted, the worker must meet a deductible limit. If his expenses rise beyond the deductible amount, 80/20 coverage takes over.
One of the keys to such plans is that employees, on the hook for expenses to a greater degree than in an HMO, take an active interest in their health benefits, and thereby (employers and insurers hope) make cost-effective choices.
To that end, they are supplied with a host of Internet tools designed to make monitoring and selection of benefits easier.
"A growing body of evidence is proving that consumer engagement is the way to solve the employer's cost dilemma, while at the same time empowering employees to choose and use their benefits with confidence," says Michael B. McCallister, Humana's CEO.