SeeChange believes plan flexibility will set apart its value-based insurance

The value-based SeeChange Health insurance company in San Francisco could be excused for waving the white flag given the current health insurance market. Many industry watchers question whether smaller insurers have the economies of scale to survive health reform. On top of that, traditional insurance heavyweights such as UnitedHealth Group recently reported seeing some traction with their value-based insurance products.

Yet CEO Martin Watson believes that SeeChange is well-positioned, thanks to its technology-based agility and its engagement incentives. SeeChange includes two companies:

1. Value-based fully insured SeeChange Health. SeeChange has launched in Fresno, Monterey, San Benito and Los Angeles and plans to roll out in Santa Clara and Santa Cruz this fall, says Watson. The company now sells insurance to employers with two to 200 employees, as well as supporting self-funded customers. "We are on track to have less than 1,000 fully insured members by the end of the year, and we will have close to 18,000 self-funded customers by Jan. 1," he explains.

2. Value-based healthcare administration platform provider HealthInsight. This already-profitable company "is the entity that houses all of the technology and service components that enable us to deliver the value-based solutions," says Watson. HealthInsight also supports value-based products offered by other health insurers, including UnitedHealth and the regional insurer Medica. "We have a little bit north of 200,000 members that have been on our system for over a year now," he says.

SeeChange has 12 insurance product designs. Next-generation technology platforms give SeeChange the functionality to provide "multiple plan designs running in parallel for an employer," says Watson. In other words, members aren't stuck choosing a single plan during annual enrollment that they then have to keep for the next 12 months.

Consider this potential scenario: A SeeChange member starts with a base benefit of an 80/20 plan and a $2,200 deductible. SeeChange will ask that member to take three steps. First, the member will need to have a routine annual wellness visit with his or her physician. Second, the member will have to participate in a biometric screening (i.e., basic lab tests). Third, the member will need to register at SeeChange's member portal and complete a short health-risk questionnaire.

"When the person completes the three items, we move them to a much higher benefit design," explains Watson. "So they might go from an 80/20 to a 100/0 coinsurance. We lower their out-of-pocket by a thousand dollars, and we fund a health incentive account with $200 for a single or $400 for a subscriber plus one, such as a spouse. We also retroactively re-adjudicate any claims that have come through the system during the plan year against the richer benefit. So members may get a check from us for some out-of-pocket expenses."

The cost differentials associated with the stages of type-2 diabetes highlight SeeChange's logic. "For us, a stage-1 type-2 diabetic costs about $6,800 a year vs. a stage-3 type-2 diabetic, who is about $15,000 to $16,000 a year. So we are on board with giving you a richer benefit and having an additional benefit cost of $1,000 or $2,000 if we can help keep you in stage 1 vs. progressing to the next stage," says Watson. "That's the whole bet: We can look at a total population, identify the conditions, and help them change behavior and manage their conditions through benefit design and engagement with physicians. And that will result in an overall smoothing out of both premium and medical-cost trend."

SeeChange uses HealthMedia's online support tools, but physicians are the insurer's "first-line coach," stresses Watson. "We present it to physicians that we are delivering appropriate revenue opportunities that they might normally ignore." SeeChange, he adds, is also developing a pay-for-performance platform tied to physicians reducing the company's medical-loss ratio trends.

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