Cigna Corp., a Philadelphia-based health insurance company, calls Orange County a “phenomenon.”
The company has some 85,000 local members in its health maintenance organizations and preferred provider associations. Many of them are looking for creative solutions to reduce costs in this tough economy.
Cigna mainly sells to businesses,it does not offer HMOs that serve beneficiaries of Medi-care, the federal health insurance program for seniors, in California. It does offer coverage for prescriptions under the Medicare drug benefit.
Like other insurers dealing with the effects of the economic crisis, Cigna, which had revenue of $19 billion in 2008, has been getting creative.
As an example, Cigna is showcasing its “alternative funding” program, under which a business assumes the responsibility for funding benefits, while Cigna processes claims and provides other services.
Cigna also has launched what’s called a “voluntary program” that is designed for businesses with more transient workforces, such as restaurants, auto dealerships and retailers. Such a health plan, while offering pharmacy, doctor’s office and hospitalization benefits, is generally capped at a maximum benefit of $250,000.
But, like other businesses, Cigna’s clients are having to pay more for their coverage.
Chris De Rosa, Cigna HealthCare of Southern California’s Irvine-based president and general manager, says customers, on average, have been paying 10% to 15% more for their health insurance this year,topping an earlier projected 6.9% hike from Hewitt Asso-ciates Inc., a Chicago human resources service company.
Some clients have seen rate decreases as low as 8% and increases as high as 30%, according to De Rosa.
Those hikes are compounded by recent layoffs, which tend to keep older, more established employees in the office and let go of younger ones, who traditionally use less healthcare coverage.
De Rosa talked about Cigna’s OC activities with Vita Reed, the Business Journal’s healthcare reporter. An edited version of the conversation follows.
What are some of types of programs geared to OC?
The ones we’ve been emphasizing specifically in the Orange County area have really been our alternative funding. We offer employers the ability to self-fund, partially self-fund (or) fully insure their businesses.
We have reserves that they can pay as they go with claims, even though it’s an insured business. A lot of employers today have really been examining their whole cash flow and their capital position. And one of the things we bring to the table, quite uniquely in the marketplace, is the broadest range of (health plan) funding arrangements.
How do you plan to grow your membership here?
First, I’d be remiss if I didn’t say I was pleased to service the members and employers I have today and truly value them as customers.
We do continue to look for ways to increase our market share, if you will, in the OC area. We’ve been doing a couple of things: offering our customers the alternative funding and offering them new plan designs.
A number of them have been leaner, but some of them have just been more creative. So we’ll enrich them in some areas that matter to them and decrease the benefits in areas that have not been as important to them.
How has the recession affected what type of benefits your clients offer?
If you had to pick one that’s been predominant right now, it’s been a lot of the benefit changes. I’ve seen benefit changes getting a little bit leaner, not as dramatic as say a couple of years ago, but it’s definitely been a way to try to trim the (costs). I have seen contributions going up as probably a close second and I’ve seen very limited instances of em-ployers just stopping coverage for certain classes of employees. It’s been happening, but it’s fairly limited.
Has Cigna involved itself in the consumer-driven healthcare movement in Southern California?
Orange County, Los Angeles, Riverside, San Diego,as a core bunch of counties,are (places where) the HMO rate is still very competitive, the primary low-cost leader, if you will. (That) is absolutely a Southern California phenomenon.
I would say in Northern California and particularly the rest of the country, we’ve seen a lot of consumer-directed programs.
Even with the low HMO rate primacy, have some employers asked about going to consumer-driven plans?
We have a lot more interest (in some areas). I’ve written quite a few in San Diego; I’m beginning to see them around. But in the core L.A.-Orange, I have not (seen increased interest).
What’s the role of private insurers in Obama’s healthcare reform efforts?
I will say that we support the goals of the administration. I think we do need to find coverage for everyone.
I think guaranteed issuance is something as an insurer, we’ve been behind. The concept is if everyone’s in the pool, it becomes a lot easier for us to want to (guarantee healthcare coverage) because we don’t have vast selection issues taking place.
We think that’s important with the goals. It’s not necessary to have yet another public plan in place. There’s already Medicaid, there’s already Medicare. We think that there are some reforms that can take place within the private insurers, (so) we don’t necessarily have to see another public plan introduced.
We have been working closely with the (Obama) administration and others around the things we do think need to be changed, including (coverage) mandates. The government sort of self-inflicts the high cost onto members by requiring mandates far in excess on what’s actually needed for the market and individuals.
(Reforming) mandates could help us out quite a bit .
