Pro-health insurance

Michael Barone

11/29/2004 12:00:00 AM - Michael Barone

In the next few weeks, millions of American employees will choose which health insurance plan will cover them and their families for calendar year 2005.

Among the choices facing some is an innovative insurance plan pioneered in 1992 in South Africa by a firm called Discovery and marketed in the United States as Destiny Health. It's an approach George W. Bush's and Congress's health care policymakers should keep in mind as they scramble to come up with proposals to deliver on Bush's vaguely worded campaign promises to reform health care finance.

 The Destiny health plan has several intelligent features. One is an annual deductible: you pay for basic expectable medical expenses before insurance kicks in. One reason for the high cost of most health insurance is that we expect it to pay for routine medical expenses: it is as if your auto insurance policy covered oil changes but didn't pay you when the car was totalled.

 When insurance kicks in, it is in the form of a personal medical fund, similar to the health savings account model that was part of the 2003 Medicare/prescription drug act. Unused amounts can be rolled over into the next year, and employees who leave the company will have access to remaining balances. This encourages employees to treat the money as if it is their own -- which it is -- and to keep cost in mind while making health care decisions. Experts of all ilks agree that one reason health care costs keep rising so rapidly is that consumers have gotten into the habit of making decisions with no regard at all for cost. The Destiny plan encourages them to break that habit.

 The third and perhaps most interesting feature of the Destiny plan is its wellness programs, designed to encourage healthier lifestyles. Employees' insurance premiums are cut if they abstain from smoking, exercise regularly, hold down their weight and seek preventive care such as Pap smears or prostate exams. For achieving such goals, they earn "vitality points," which can be redeemed for health club memberships and travel discounts.

 These health plans have proved popular. Destiny enrollment increased from 300,000 in 1998 to 1.6 million in 2004. A survey of Destiny members showed that 75 percent are familiar with the terms of their plan, compared with 38 percent for those in other plans, and that 97 percent believe a person's lifestyle choices have done something to reduce the cost of health care, compared to 29 percent for those in other plans. Some 85 percent of Destiny members have started an exercise program and 76 percent have started a nutrition program in the preceding year. For employers, the payoff is tangible: single-digit increases in the cost of health insurance, compared to double-digit increases for most other plans.

 The Destiny model addresses one of the leading causes of increased health care costs in America: bad lifestyle choices. In their book "Epidemic of Care," Kaiser Permanente CEO George Halvorsen and Dr. George Isham note that there has been a 33 percent increase in the number of Americans with diabetes since 1990 -- and that type II diabetes can usually be prevented by appropriate behavior and diet changes. "We eat foods that make us vulnerable to diabetes and heart disease," they write, "and then don't exercise enough to keep those diseases from taking over our bodies." This is hugely expensive: diabetes requires expensive medical interventions that all health insurance policyholders must indirectly pay for. The Destiny wellness program pays policyholders to avoid behaviors that, statistically, will produce huge health care costs later on. It looks to be well worth the money, even in the short term.

 Destiny's approach is part of a larger trend. Starting in the New Deal era and in World War II, government provided and encouraged employers to provide social insurance and health insurance that would guarantee benefits and buffer individuals against the workings of the market. Today, no one wants to eliminate the social safety net entirely. But it has become apparent that insulating individuals against cost has adverse consequences: low savings rates, unsustainable rises in health care spending, harmful personal behaviors that lead to enormous health care problems and costs. And it has become apparent as well that individuals are not helpless or incompetent beings in need of protection from the marketplace by big government or large corporations. With an adequate safety net, and within an appropriate structure, they can figure out things for themselves. The Destiny plan helps show us the way.