Wednesday, April 25, 2007

Humana Caps Annual Increases on Consumer-Driven Plans--Too Bad it Isn't a Real Guarantee

Humana says it will cap annual increases on self-insured consumer-driven plans for three years.

Two problems:
  • Humana is capping the costs of its "SmartResults" self-insured plans and only putting 40% of their fees at risk. If they were really putting their money where their mouth is they would be capping the cost of fully insured plans--and if they are so confident on their self-insured product, why not put all fees at risk?
  • Humana is guaranteeing that the consumer-driven employer plans total health costs will rise by no more than 6% to 9% during the next three years (based upon how aggressive the employer plan is). Since they have consistently said employer trend is now in the 5.5% to 6.5% range, I wouldn't call that one of the bigger risks I have ever seen a health insurer take.
They point out that their consumer-driven plan costs only rose by 4.2% between 2002 and 2006. The problem I have with that is that as consumer-driven plans grow they tend to get the healthiest people first. A consumer-driven plan should have lower trend at first. The question is whether that is sustainable or not?

Apparently, Humana agrees with my concern that their 4.2% trend rate won't be sustained. If they believed in their 4.2% trend rate, they'd be guaranteeing a lot better than a 6% to 9% cap.

Humana Caps Annual Rate Increases on Some Plans (bizjournals)

Post: More Than 10 Million Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work
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