October 03, 2011 | By Atlantic Information Services, Inc.     By reducing or eliminating costs tied to treating chronic conditions, offering discounted medical services to the uninsured and giving large employers a way to reduce retiree medical costs, a handful of small but innovative firms are wooing members by offering alternatives to traditional health coverage.

Here’s a look at four companies that are working to reform the health system in their own way.

(1) SeeChange Health: Martin Watson left UnitedHealth Group’s productdevelopment division in 2009 to launch a value-based insurance model aimed at small employers. While some large, self-insured employers have had value-based benefit designs in place for years, it’s a model that hasn’t really been seen on the small-group side. “We’ve seen data that show these plan designs are having a positive impact for these self-funded companies. But [small] employers have traditionally been ignored by insurers when it comes to innovative products” because they’re more expensive to administer, he tells HPW. “Because we’re a new company, we don’t have a bunch of legacy administrative costs tied to our model,…so we can afford to bring an innovative product design to smaller employers.
The San Francisco-based insurer began selling coverage in several California markets late last year, and expanded statewide to the large-group market in August. The plans will be available statewide to small employers on Oct. 1, and Watson says he hopes to move into Colorado by the first quarter of 2012. The company is licensed to sell coverage in 25 states. Watson, SeeChange’s CEO, received $40 million in venture capital (VC) financing from Psilos to get off the ground, and in May received another $20 million from Psilos and Maverick Capital.

Unlike more traditional health insurance, SeeChange Health’s model seeks out chronically ill enrollees — as well as those at risk for developing chronic conditions — and offers them richer benefits in exchange for compliance in managing the condition (HPW 10/5/09, p. 1). And treating illnesses early ultimately will reduce costs, he says. Case in point: While treating early-stage colon cancer might cost $12,000, late-stage treatment can cost 10 times as much.

SeeChange enrollees can dramatically reduce out-ofpocket costs if they (1) meet with a primary care physician for a wellness visit and preventive screening, (2) submit to a blood draw for biometrics screening, and (3) complete a 15-question health risk assessment. A person enrolled in a plan with a $500 annual deductible, for example, could receive a $500 contribution into a health fund for completing all three of those tasks.

When a chronic condition is identified, the member can receive additional funds for following SeeChange’s  recommendations for managing that condition. The idea is to catch high-cost illnesses early and make them inexpensive, or free, for members to manage. While the company has just a few thousand members now, Watson anticipates having as many as 10,000 by February. “We’re growing at a rate of about 800-to-1,000 members a month and 60-to-80 new employers a month.”