Insurers find individual and small group markets newly attractive, thanks to looming mandates.
Restaurant workers are typically young. They typically work part time. And they typically can't afford health insurance.
Yet the nation's cooks, servers and dishwashers recently found themselves being courted by some of the nation's biggest health insurers. Their trade group, the National Restaurant Association, was able to line up a smorgasbord of individual and small-group plans from UnitedHealth, some priced 15 to 20 percent cheaper than the open market.
The potential prize for UnitedHealth: access to 13 million restaurant workers, between 4 million and 6 million of whom currently have no insurance.
"They showed the most interest and gave us the best proposal," said Mike McCallum, the association's chief strategy officer. "They seemed to understand the demographics and our diverse set of employers -- from McDonald's down to the mom-and-pop shop."
The full effects of federal health reform won't kick in until three-and-a-half years from now, when most Americans will be required to carry health insurance and most employers will be required to offer it to their employees.
But insurers aren't waiting. Led by Minnetonka-based UnitedHealth, they're busy floating new products and seeking out unplumbed markets.
They have good reason to move early. The federal health reform law calls for the establishment by 2014 of health insurance exchanges in which individuals and small employers with up to 100 workers can shop for coverage. These exchanges are expected to spur competition and lead to better prices for consumers, but also thinner profits for insurers.
Hunting new business
Insurers hope to make up for this by insuring a lot more people. UnitedHealthcare, the commercial insurance arm of UnitedHealth Group, the country's biggest health insurer by revenue, has been especially busy seeking new markets.
"They have taken shots at what the exchanges need in the next few years. They've tried products with practically every price point and benefit mix," said Jane DuBose, an analyst with HealthLeaders-InterStudy, a Nashville-based research firm. "They have figured out how to be all things to many people. What they have to do when it comes to reform is figure out how to make less money on some of these products."
The sprawling health reform law signed by President Obama in March is expected to help provide health care to some 32 million uninsured Americans. Some of that will be through an expanded Medicaid program, with the rest through new private plans to be sold through the exchanges.
Starting in 2014, the new law will prohibit health insurers from denying coverage to those with preexisting conditions and provide federal subsidies for individuals to buy coverage. That's expected to drive many people to shop on the exchanges.
With the economy still sputtering, membership growth for insurers is unlikely to come from big national companies, which remain reluctant to hire. "They are really going to have to go after the new exchanges and give the small employers the choices of large employers -- the add-ons, the bells and whistles," DuBose said.
To appeal to these customers, insurers are emphasizing flexibility and personalization, such as varying levels of deductibles. Generally, the lower the premium, the higher the deductible. They are also bringing perks to the individual and small group market that were previously only associated with large self-insured companies -- such as wellness programs and prevention coverage.
In this new environment, no target is too small.
Recently, as part of a study, UnitedHealth researchers profiled a real woman who couldn't afford regular insurance, said Yasmine Winkler, the company's senior vice president of product and innovation. The woman got by on a catastrophic plan and paid out of pocket at retail clinics for routine care. She found out which pharmacies offered $4 prescriptions and went there.
Said Winkler: "We want to make sure we have a plan design for her."
A menu of options
The National Restaurant Association had surveyed its members and found that health insurance -- or the lack of it -- was a major concern. Not only are many restaurant workers young and working seasonally or part time, restaurant profit margins are often too slim for owners to offer health insurance.
So last year, the association put out a call for bids from insurers for plans specifically targeted at its industry. It ended up choosing UnitedHealth because it had the broadest network of doctors and hospitals and the widest variety of health plans.
"Some want a rich plan with first-dollar coverage, some want a high deductible," McCallum said. "The reason we chose United was they can go anywhere up and down that scale."
One small group plan offer offered by UnitedHealth had low premiums paired with a high deductible, but also tacked on preventive care upfront. That plan is 15 to 20 percent cheaper than something comparable in the market, McCallum said. Another plan offers lowered co-payments if members see doctors whom UnitedHealth has designated as high quality and low cost.
The deal with the restaurant association is similar to a longtime partnership UnitedHealth has with AARP to sell Medicare drug and coverage plans. "What health reform has done," said Dr. Richard Migliori, the company's chief medical officer, "is turn up the heat on affordability."
Some consumer groups, however, say they're not so sure the high-deductible plans can rightly be described as affordable. While premiums may be lower, the high deductible amounts to a doughnut hole that these mostly lower-income workers must struggle to bridge before insurance kicks in.
"It's easy to say something is better than nothing," said Tara Straw, legislative and policy director at Health Care for America Now!, a national pro-health reform coalition of some 1,000 community and labor groups. "If I'm making $8 an hour, $5,000 for a deductible is awfully hard to come by. We have some cynicism about this kind of approach."
Since announcing the restaurant partnership in May, UnitedHealth has rolled out the plans in Colorado and Pennsylvania. Though it is headquartered in Minnesota, the for-profit UnitedHealth has limited commercial business in the state, which is dominated by nonprofit plans.
In Colorado, many are checking the plans out but not many have enrolled, said Pete Meersman, president of the Colorado Restaurant Association. Some are still weighing a decision. Others may be waiting to see if the new plans coming out in 2014, which will be based on benefits to be determined by the government but offered by private insurers, might be cheaper.
"A lot of companies, even though they'd like to provide it now, because of financial reasons, are going to wait until it's mandated," Meersman said.
Chen May Yee • 612-673-7434