With health care costs skyrocketing, companies are wondering how they are going to afford coverage for their employees in the years ahead. Bloom Health in Minneapolis re-thought the traditional managed care model and came up with something different.
Bloom calls the new approach a "defined contribution" plan. It is the first such health care provider in the U.S., founded in Minneapolis in 2009 by Abir Sen, which helps businesses transition from the standard "defined benefit" coverage to the "defined contribution" plan.
Here's how it works: Employers decide how much money they want to spend on health care, then each employee gets his or her own account, which they can customize according to their own needs.
“You'll end up with a tailored benefit really suited to your needs versus a one-size-fits-all approach that HR managers chose, 'cause they were trying to meet everybody's need at once. So in a very real sense, we are part broker for the individual, we help them figure out how to spend their money, and part matchmaker. We match the demand with the supply,” says Sen.
"First we do an assessment on the individual's needs. That includes a health assessment—so are they running marathons or do they have a chronic condition? A financial assessment—so are they millionaires, are they living paycheck to paycheck, or somewhere in between?"
Sen says another step in the process is appetite for risk. "How risk-averse is this individual when it comes to buying their benefits? And then, based on those inputs, the health input, the risk input, and the finance input, we put together what we think of as a long-term plan for their health and health care,” he says.
Think of it as a supermarket for benefits. In one aisle could be insurance, with different products on the shelf. Another aisle could be wellness programs. In another aisle, there could be disability benefits.
Sen describes the transaction process as giving the employee “the power of the purse—because they have the money, and the employer gave them the money to spend in the supermarket.”
One of those employers is Orion Corporation in nearby St. Paul, Minn. Orion provides residential services and support for people with intellectual disabilities, It employs 120 people.
Last year, Orion CEO Mike Sarafolean and his team were reviewing the renewal process with their traditional health insurance plan and found rates were climbing so high they simply couldn’t continue going forward with them.
Searching for a solution that satisfied the bottom line and his commitment to his employees, Sarafolean turned to Bloom.
“As an employer,” Sarafolean says, “I feel we have an obligation to provide our employees with health care that both meets their needs and is affordable. And during our last renewal, we were presented with rates that we could no longer afford. We would have had to pass 40 percent increases onto our employees”.
Bloom sees its business plan as disruptive in two ways. First, they’re giving individuals the opportunity to pick and choose their own benefits, custom-tailored to their individual or family needs.
Secondly, the company says it’s a more efficient way for insurers and wellness programs to distribute their products and services. By doing the individual assessment on each employee, Bloom can match the consumer with the exact goods and services they’re looking for.
It’s also affecting employees’ health. Sen says that Bloom’s customers are finding their employees more likely to get preventative care, more likely to go to the doctor and more interested in the state of their own personal health.
Look for special coverage of the Wired Business Conference, Tuesday, May 3, on "Power Lunch" at 1pm ET on CNBC. Michelle Caruso-Cabrera will report from the event and will speak with key participants, including some of the tech world's most-watched leaders.