Insurer's voucher plan is first in state; does it boost workers' choice -- or just cost?

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With health-insurance premiums paid by employers rising like helium-filled party balloons, employees grumbling "Honey, my boss shrunk the benefits package!" and lawsuits and legislation insisting that insurance cover everything from chiropractors to contraceptives, who could blame employers for wanting to try something new?

After more than a year of rumblings around the country that a new type of health insurance would revolutionize the industry, "defined-contribution" health plans are being offered in Washington by one of the largest insurers.

Under the plans' most pure form, employers would hand employees a voucher, give them a push toward a list of insurance plans and wish them luck. Touted as giving employees more choice, the plans trouble some health-care economists who worry that the trend may unleash forces that will widen the gap between health-insurance haves and have-nots.

Regence BlueShield and an Oregon company, MyHealthBank, are expected to announce a partnership today to offer the insurance plans, tangible evidence of their belief that employers are increasingly eager to move away from buying a package of defined benefits for their workers and to put more of the tough choices into employees' hands.

Under the defined-contribution plans, which will be available in August to companies of more than 50 employees, employers will hand employees a voucher and point them toward a Web site that will describe an array of benefit packages and deductibles. If employees choose a plan that costs less than what the boss gave them, they'll get to keep the savings in a "health-freedom" account that can be used for other health-care expenses and will carry over to the next year.

Targeted at small- to medium-sized companies, most of whom now offer employees only one choice, the new offer by Regence, one of the three largest health-insurance companies in the state, is a "baby step" toward giving employees true control and choice in health care, says Regence spokesman Chris Bruzzo.

In Oregon, where the program was launched last year, 16 employers have signed up, with more than 1,700 employees. Many employers said they signed after realizing they were caught between big premium increases and wanting to maintain coverage levels.

For employers, it appeals because it's predictable. Instead of waiting to see what it's going to cost for the same benefits package, they can budget an increase of, say, 10 percent, and the rest will be up to employees. And the plan, with its online paperwork system, will take care of a lot of burdensome administration, said Shannon Burke, MyHealthBank's senior vice president of marketing and sales.

Employers also said they were eager for a system that showed employees not only how much the company was spending on their health insurance but pushed employees to take responsibility for tough coverage tradeoffs.

Around the country, a number of firms, including Sageo, Lumenos, CaliforniaChoice, Definity Health, HealthSync and Vivius, are in various stages of offering defined-contribution plans.

Health-care economists for some time have been predicting this trend. But some critics see the camel's nose under the tent, and this beast doesn't smell so sweet. Is this just employers' first step toward dumping hapless workers out into the cold, cruel world of negotiation without the bargaining power of a big group? And if that happens, will an employee with a bad health history be in much the same sour pickle as someone who has to buy individual health insurance today?

Ewe Reinhardt, a health-care economist at Princeton University, worries that healthy yuppie employees, if given choices, will eventually find ways of freeing themselves from the burden of sharing a risk pool, actuarially speaking, with those less careful about their cholesterol levels and body-fat ratios.

Others worry it will hasten the deepening rift between those employees whose employers give them enough to afford benefit-rich insurance and those forced to pick tightly managed plans, or between healthy and chronically ill employees. And some experts say if faced with an array of choices, some consumers will inevitably choose badly, leaving themselves underinsured or even uninsured.

Advocates of defined contributions tout its "consumer-choice" aspects, noting that Internet-savvy consumers have already shown a lively interest in their own health care, although in most cases they're disconnected from knowing how much those choices cost. So, these same advocates ask, who better to control health-care costs than those who use the health-care services?

It's too early to say which vision will prove more accurate. And at this point, the insurance product offered by Regence is a hybrid, offered at the same small group rates those businesses pay now, said Regence President Mary McWilliams. It won't dump employees out to negotiate their own premiums but will likely offer them more choices than they're getting now.

Play it out a couple of years, critics say, and employees could get caught in the middle, as employers' contributions lose ground to rapidly escalating benefit costs. An early version of this movement found that when health-insurance premiums rose faster than company contributions, employees simply dropped coverage, and the employers were forced to rethink the whole strategy.

McWilliams thinks that if employees begin to realize what health care really costs - starting with knowing what their employers have been paying for them - they'll be transformed into "more prudent stewards of the health-care dollar." She's not suggesting that it will happen overnight or that it will solve the whole health-care dilemma, she adds.

But it's clear, with health-insurance premiums inflating rapidly, something has to change - and fast. "Health-care inflation is not abating," McWilliams says. "Employers need ways to fix what their costs are, and a lot of the tools we had in the past to try to manage health-care costs aren't workable today."

Carol Ostrom can be reached at 206-464-2249 or costrom@seattletimes.com.