Insurance executives spoke before a packed hearing room on Capitol Hill on Wednesday, presenting strong evidence that the private health insurance market is evolving rapidly to respond to demands from consumers and companies for change.

The program was sponsored by the Galen Institute and the Council for Affordable Health Insurance and inspired by director Merrill Matthews. Big, established companies and new, growing firms demonstrated a strong capacity for innovation.

Charlie Klippel, vice president of Aetna, described his company’s new HealthFund products that encourage employees to “more sensibly and more gracefully share the cost of health care” and, in return, to receive more flexibility and choice.

Employers put money into an individual HealthFund for each employee to pay for routine care, with the option of using physicians in pre-arranged fee networks. The company also provides insurance protection for major expenses.

Ben Cutler, president and CEO of Fortis Health, described some of the many innovations his company is developing as the nation’s largest provider of MSAs and of individual, temporary, and small group health insurance policies.

Ken Linde, president and CEO of Destiny Health, insisted that, “Consumers have to become better informed and empowered” by understanding the costs of their health care consumption. Destiny has created a Personal Medical Fund that is “the member’s money” to spend or save “on more frequent, more controllable, less expensive” medical care. “When people use their own funds, significant savings occur,” he said.

Comprehensive insurance benefits protect members against the costs of “less frequent, less controllable, more expensive” care. Destiny also provides “fun and creative wellness programs” with rewards, like weekend stays at Ritz-Carltons.

Experience is showing that the innovative funds don’t just appeal to younger, healthier workers, but to all workers, reducing fears that they would lead to adverse selection.

Lee Newcomer, M.D., executive vice president of Vivius, demonstrated how web technology has enabled more direct communication with consumers to facilitate choice. He walked the audience through Vivius’ impressive, user-friendly software product that allows individuals to tailor a health insurance policy to their individual preferences and to see and control the cost. Consumers can get down to the level of picking their deductibles and choosing individual physicians, with instant, on-line advice from trusted doctors about which specialists to include.

Kallijah Paraska, a vice president of Acordia in Seattle, described the popularity of Medical Savings Accounts in a state that had nearly crushed its private health insurance market by trying to be the first to implement HillaryCare.

Linde acknowledged, “the insurance industry does need to improve its behavior” so that it offers “dazzling customer service.” Based upon the presentations, that is a realistic goal. (A study released on Thursday by Ernst & Young shows that the insurance industry is embracing the Internet, allowing more and more physicians and patients to file and track insurance claims online.)

The industry needs to do its part, but Washington and state governments need to participate by recognizing and lowering policy barriers to more affordable, more consumer-friendly products and services.

The executives called for 1) reform of tax laws to make subsidies more equitable and to give individuals more control; 2) allowing MSAs to be more flexible; 3) allowing roll-over of flexible spending accounts; 4) stopping the proliferation of expensive insurance mandates and regulation; and 5) breaking up monopolistic control of markets which keep new entrants out, limiting their ability to offer more competitive and affordable options.

John Hoff, a Bush administration official from the Department of Health and Human Services, said the market creativity that the audience learned about during the briefing is impossible for government to match. “We need a broader understanding that the health insurance market is working and that private health insurance is all that is standing between us and a government-controlled health system,” he said.

Grace-Marie Turner

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