Definity's Federal CDH Plan Nets 4,579; Competing Plan Could Be Offered for `04


Reprinted from the 3/14/03 issue of INSIDE CONSUMER-DIRECTED CARE, a brand new biweekly newsletter with news and analysis of benefit design, contracts, market strategies and financial results.


More than 10,000 federal employees, family members, and retirees have been covered by a CDH plan since January 1, according to enrollment figures that were finalized March 7 and obtained by ICDC. And the numbers could grow if the government adds a second CDH option, as is being discussed for 2004.

The American Postal Workers Union (APWU) Health Plan, which introduced the plan to its 266,000 active members last fall, is the first federal workers' union to offer a CDH option to its members. The CDH plan was made available alongside a "high option" PPO plan. In past years, the PPO was the only option available through the APWU Health Plan. The CDH option, administered by Minneapolis-based Definity Health, also was made available to members of the Federal Employees Health Benefit Program (FEHBP), which represents 1.8 million active employees and more than 8 million employees, retirees, and family members. This year's enrollment of 4,579 federal employees exceeded APWU's goal of 4,000.

"People are always reluctant - especially when their money is at stake - to try new things. But I'd say we are pleased with the results," says Ken Perlberg, the marketing manager at APWU who helped select and implement the plan. "We will see better growth in years two and three."

The numbers are especially encouraging in the federal arena, where the CDH plan was just one of 188 choices federal employees (including APWU members) had in 2003, says Definity spokesman Chris Delaney, who adds that his company will try a different strategy to promote the plan prior to this fall's open-enrollment season. And a new strategy could be critical if the FEHBP introduces a competing CDH plan in the fall, as is being considered.

Some of FEHBP's insurance carriers have already suggested plans to offer a CDH option next year. Insurers have until May 31 to submit proposals for 2004.

"We were delighted to be the first to have one of these [CDH] plans, but we expect to have company if we're successful," says Perlberg.

Enrollment demographics dispel the notion that the CDH plan would attract only young and single employees, says Perlberg. The average CDH enrollee is 49 years old. The average federal employee is 46.

APWU has until May 31 to make design changes to the plan that will be offered in 2004. Perlberg expects few, if any, changes.

OPM Director Applauds CDH Plan

Overall, FEHBP pays more than $24 billion a year in medical claims, according to Kay Cole James, director of the U.S. Office of Personnel Management. During a February 25 presentation at the American Association of Health Plans' National Policy Forum in Washington D.C., James called Definity "arguably the most experienced provider in this field."

"This cutting-edge option reflects exactly the kind of fresh thinking we had in mind when we asked plans to use their creativity and ingenuity to imagine every solution for containing cost and keeping health care affordable."

Despite its experience in the CDH arena, Definity still has little, if any, name recognition among federal employees. Delaney says it's nearly impossible to reach federal employees through traditional recruiting strategies such as meetings, presentations, and handouts.

"The biggest challenge we faced last year, and will face again this year, is getting people to go through the documents and understand that there is a different plan available," he explains. They're not used to seeing anything new and are most interested in how much is coming out of their paycheck each week."

Delaney expects word-of-mouth endorsements from enrollees will help boost enrollment for 2004. Definity's clients see an average enrollment increase of about 40% a year, he says. Perlberg adds that APWU will likely pay closer attention to educating new hires about the plan.

The Consumer's Checkbook Guide to Health Plans for Federal Employees, which some federal employees rely upon when selecting plans, provided a favorable overview of the Definity plan last year, touting the flexibility of its personal care account (PCA), which can be used to pay medical expenses not covered under other plans. Beneficiaries can tap the account to cover prescription drugs, dental and vision costs (up to $400 for single and $800 for a family annually), and up to 12 chiropractic visits a year. The guidebook also calls the plan "attractive for retirees with Medicare" because the PCA can be used to pay for expenses not allowed by Medicare, such as pharmaceutical and dental expenses.

"It was a nice endorsement," says Delaney.

APWU/FEHBP CDH Enrollment
Total employee enrollment: 4,579*
Postal employees: 1,279
Federal employees: 2,868
Retirees/surviving spouses (federal and postal): 432
New hires (federal and postal): 356
Total lives covered: 10,053
Family enrollment average: 3.19 lives
Average enrollee age: 49
*Total does not include new hires.
Source: APWU Health Plan/Office of Personnel Management


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