Mitchell Diamond likes to stay ahead of health care trends.
From his consulting firm in the 1970s, he helped organize HMOs and the Maryland Association of Health Maintenance Organizations. His HMOs, he says, were among the first to use global capitation -- paying doctors a flat fee per patient to be responsible for all care.
In the 1980s, as some started to complain that HMOs, by using "gatekeeper" doctors, limited their access to specialists, he helped develop preferred provider organizations. In PPOs, the health plan negotiates a rate with the doctor, but the patient can see any participating doctor, including specialists, without a referral from a gatekeeper.
As more employers became self-insured, Diamond's firm became a "third-party administrator" to run self-insured plans. As physicians began to form groups to handle managed care contracting, he consulted for them.
"Part of the fun is leading the curve," he says.
And he thinks he knows where the curve is headed.
In 1994, he started an insurance company, Maryland Fidelity, out of the same suite of Lutherville offices where he does his consulting and administration of self-insured plans. (The parent company for all these operations is called Fidelity Health Systems Corp.) Maryland Fidelity offers a policy that is almost unique in the industry, but which he expects to become common.
His plan, called Health Care 2000, allows a subscriber to go to nonparticipating doctors without a plan-imposed penalty. If the out-of-plan doctor will accept Maryland Fidelity's usual reimbursement, the patient pays the same $10 office visit co-pay that applies to in-plan doctors. If the doctor charges more, the patient has to pay the difference.
Most managed care plans now offer some benefits for using doctors or hospitals outside its list of participating providers. According to a survey by the American Association of Health Plans (AAHP), more than 80 percent of HMOs now offer such a "point-of-service" option -- up from just 38 percent in 1990. (Although most plans now offer point-of-service options, many employers do not choose them, so the majority of HMO subscribers do not get out-of-plan benefits.)
But when out-of-plan benefits are offered, they come at a price -- to the patient. According to the AAHP, 88 percent of point-of-service members have deductibles, most typically $300, so the patient pays that much out of pocket before the plan will pay anything. And 96 percent have co-payments once the deductible is met. Most often, the plan will pay 70 percent of "usual and customary charges," so the patient pays 30 percent, plus anything the doctor charges above "usual and customary."
Diamond thought the out-of-plan penalty, thought to be a check against unnecessary use, wasn't needed. As long as it didn't cost the plan any more, why not let the patient choose any doctor?
"From the patient's point of view, you have the best of both worlds," says Marilyn Maultsby, director of development and management services for Fidelity Health Systems.
"You can have your primary physician coordinate your care, or you can go outside the plan."
Patients, doctors and hospitals can call Maryland Fidelity in advance of treatment to determine whether the Maryland Fidelity rate will equal what the provider charges.
William F. Simmons, president of Group Benefit Services, an insurance broker who handles Health Care 2000, says the new product "appeals more to smaller employers, who have a more direct relationship with their employees and like to get maximum flexibility." He said other insurers may be reluctant to offer such a policy because it can be "complicated to administer," but Diamond's background in claims administration helps him handle it.
Premiums for Health Care 2000 are competitive with other small-group HMO and PPO plans.
Maultsby said Maryland Fidelity has a staff of three to explain the plan to brokers, who in turn offer it to employers. Health Care 2000 has about 4,500 subscribers now, about triple what it had a year ago. Another 11,500 receive the same benefits through self-insured plans administered by Diamond.
Out-of-plan use, Diamond says, ranges from 10 percent to 20 percent. That's close to the level of out-of-plan use in plans with deductibles and co-payments -- 12 percent to 15 percent, according to the AAHP.
The AAHP's survey also found that 42 percent of plans (weighted for size in the survey) reported higher per-subscriber medical costs for point-of-service members, another 42 percent reported no difference in costs, and the remaining 16 percent said point-of-service members actually ran up lower costs than regular HMO subscribers.
"In 1997, I think you'll see one or two bigger companies coming out with plans like this," Diamond predicted. "In 1998, others will be converting to this design. Within five years, lots of plans will look like this."
Pub Date: 12/16/96