For pharmacist Mike Merrill of Idaho Falls, getting cash up front is always better. Anytime he deals with an insurance company, the money coming Merrill’s way first goes through a pharmacy benefit manager.
“They always take their chunk out of the middle, and I’m lucky to make anything at all,” he said.
Merrill, who operates Mike’s Pharmacy in Idaho Falls, is one of about 45 health care providers who has enrolled in a program called Direct Health. The program, which started Feb. 1, allows people to set up accounts online and use that money to pay on the spot for prescription drugs, urgent care visits, teeth cleaning, eye exams and health club dues. Providers offer discounts or, in Merrill’s case, guarantees that they will meet or beat any competitor’s price.
“I was skeptical at first,” he said. “But it has sent some new people in, so I guess it’s doing what it’s supposed to do. I’d much rather deal with somebody local and offer them a fair price.”
As an employer, Dr. Esther Machen, an Idaho Falls dentist who started her practice in August 2011, offers Direct Health to her staff. “This gives me a way to give them some benefit without the high out-of-pocket costs,” she said. “This is so much easier than health insurance right now.”
As a provider, Machen offers a 10 percent discount for anyone who comes in with a Direct Health card. So far, it’s brought her six customers, with two new patients scheduled for the last week of June.
The program is in its early stages,and it will take more subscribers before anyone can guess at its success, said David Self, vice-president and Idaho director of PacificSource, a conventional health insurance vendor that came to eastern Idaho in 2010.
Most of the 250 people with Direct Health accounts work for Channel Blend, an Idaho Falls call center operator, and the program has its origins in an arrangement dating back three years between Channel Blend and Mountain View Hospital.
Channel Blend doesn’t offer traditional insurance to most of its workers. CEO Jeff Neiswanger said the cost would drive his operating costs so high he’d lose business to offshore operators, and the turnover at the company is too great. Still, Neiswanger said he wanted to offer some sort of benefit. What evolved was an arrangement under which employees could sock money away for health care expenses and the company would make contributions itself. As a vendor, Mountain View agreed to offer discounts for participants in the program.
“It’s not an end-all solution,” Neiswanger said. “It’s not insurance, because we’re not pooling participants’ money. It’s designed to connect someone who needs health care to someone can provide it, and drive cost out of the model in the bargain.”
Last year, Neiswanger and some associates expanded their insurance program by forming a company and offering the product to the community. Tyler Archibald, Direct Health’s sales and marketing vice president, said that while Direct Health is seeking to sign up employers and individual customers, its early focus has been on finding providers – clinics, doctors, dentists, pharmacists, chiropractors, and health clubs.
“We’re going to grow as fast as consumers realize what we have to offer,” Archibald said. “A lot of providers, when I walk in the door they’re really hesitant. Once they grasp the concept that we’re a consumer-based solution, they warm up to the idea.”
In exchange for a discounted service or product, participants show their card, transactions are done online and providers get their money almost immediately, minus a 4 percent service charge that Neiswanger says they hope to lower as more people start participating. Online, the payment system is administered by No Late Payments, a Boise company.
Some people have taken a wait-and-see attitude. After he was approached by Archibald, Alex Constantino of Rush’s Kitchen Supply agreed to offer it to his handful of employees. The response has been tepid, mainly because of the 4 percent deposit charge, which would make a $100 contribution to Direct Heath show up as a $104 transfer on the person’s bank statement.
“The question I ask with anything like this is, ‘How are you winning and how am I winning?'” Constantino said. “They’re building this big pool of money. The provider gets his money without having to do any billing, which can be expensive. I’m not sure where my benefit is.”
The program isn’t designed to cover catastrophic health care expenses. There are no co-pays and no premiums. Unlike a flex plan, participants can keep their money if they leave a job, and the money can be rolled over from year to year. Direct Health savings cannot be written off on a participant’s taxes, but people with health insurance have out-of-pocket costs they could pay out of Direct Health account.
There is a big emphasis on preventive care and wellness. “We want to see people being judicious with their health care money,” said Julie Rae, Channel Blend’s human resources director. “With this, they spend it on what they need.”
For a consumer-based program like Direct Health, the challenge is always going to be gaining enough mass to make a difference in the marketplace, said Self.
“In most businesses, scale does matter,” said Self, who was president of Primary Care before it merged with PacificSource in 2009. He’s never heard of Direct Health. “There have been all sorts of experiments around the nation,” he said.
It’s not yet clear how groups like Direct Health will be affected by the U.S. Supreme Court decision June 28 that let stand the Affordable Care Act. The law requires all Americans to obtain health insurance or pay a fine.
The law, which was passed by Congress in March 2010, lays the groundwork for a nationwide insurance system that would reduce the number of people who lack health coverage.
Neiswanger said he hoped Direct Health would be counted as “coverage” of some sort, although it is not insurance.
Adler said the most significant aspect of the program is how it is designed to make consumers more aware of and responsible for their health care choices.
“If we can connect staying healthy with keeping money in your pocket, that’s an extra incentive to save,” he said. “Let’s not underestimate the incentive to stay healthy.”
How Direct Health Idaho works
Individual sets up Direct Health Idaho account. No employer sponsorship is necessary, but some employers make partially matching contributions.
Individual makes deposits online to account via www.directhealthidaho.com, with 4 percent handling charge added to the transaction. Money is held in a non-interest bearing trust account at the Bank of Idaho.
The individual presents a Direct Health card when visiting a doctor, dentist, or other provider. The money for the visit is paid online; the card-holder is charged a 4 percent handling fee.