Comparison of the Cigna Choice Fund and the Blue Cross PPO

Rick Kronick
Department of Family and Preventive Medicine
University of California, San Diego

For open enrollment in 2008, UC is offering a new health plan option – the Cigna Choice Fund. For many of the approximately 7,100 employees who are currently enrolled in the Blue Cross PPO, the Cigna Choice plan is likely to be a financially superior option – typically saving at least $1,000 per year for a single employee, and at least $2,000 per year for an employee with a family (see Exhibits 1–3).

Exhibit 1. Employee out-of-pocket payment (including premium payment), Employee-only policy, Blue Cross PPO and Cigna Choice Fund. See Note.

Exhibit 2. Employee out-of-pocket payment (including premium payment), Family policy, Blue Cross PPO and Cigna Choice Fund, assuming all spending is split equally between two family members. See Note.

Exhibit 3. Employee out-of-pocket payment (including premium payment), Family policy, Blue Cross PPO and Cigna Choice Fund, assuming all spending is by one family member. See Note.

The key factor in determining whether the Cigna Choice Fund plan will save employees money is whether the physicians, hospitals, and other health care providers that the employee (and family members) use (or are likely to use) are in the Cigna network. The Cigna network in California is quite large – including approximately 45,000 physicians and 300 hospitals. However, it is not as large as the Blue Cross network, which includes approximately 64,000 physicians and 330 hospitals. If an employee (or family member) uses substantial amounts of health services, and expects to use providers who are in the Blue Cross network but who are not in the Cigna network, then the Blue Cross PPO may be a better choice. Employees can check whether their providers are in the Cigna network by clicking here, and can check the Blue Cross network by clicking here.

There are three main differences between the Cigna Choice Fund and the Blue Cross PPO coverage that will lead to substantially lower costs in the Cigna Choice Fund plan:

• Lower employee premiums for the Cigna Choice Fund plan vs. the Blue Cross PPO – $733 less per year for employee single-coverage, $2,124 less per year for employee family-coverage (please click here for a full listing of rates).
  
  
• First dollar coverage in the Cigna Choice Fund – For employees who enroll in the Cigna Choice Fund, the university creates a ‘Health Reimbursement Account’ (HRA). The HRA amount is $1,000 for an employee choosing single coverage, $1,500 for an employee choosing employee plus child or employee plus spouse coverage, and $2,000 for an employee choosing family coverage. When a subscriber or family member goes to the doctor (or uses prescription drugs or other health care services), the money to pay the doctor is subtracted from the HRA. Thus, the employee has no out-of-pocket payment for the first $1,000 (or $1,500 or $2,000, depending on family size) in medical expenses. In contrast, in the Blue Cross PPO, the employee pays a $250 deductible for each family member (up to a maximum of $750), and then starts paying 20% of the allowed charge for in-network services after the deductible has been met. An employee in the Blue Cross PPO using $750 in in-network medical services would pay $350 out of pocket (the $250 deductible plus 20% of the next $500), while the employee in the Cigna plan would pay nothing out of pocket, since the $750 would be deducted from the HRA. Further, unused funds in the HRA roll over from one year to the next, so that in this example the employee would start the next year with $250 in rollover funds, plus whatever additional contribution UC makes to the HRA in the subsequent year.
  
  
• Lower out-of-pocket maximum payments in the Cigna Choice Fund -- Both plans have out-of-pocket maximum amounts (reached by paying the deductibles and 20% of hospital and physician bills), above which each plan pays 100% of allowed charges. The Cigna Choice Fund out-of-pocket maximum for ‘in-network’ services is $2,000 for a single employee, and $4,000 for an employee choosing family coverage [see Note 4]. The Blue Cross PPO out-of-pocket maximum for ‘in-network’ services is $3,000 for a single employee, and $9,000 family-coverage. Thus, not only does the Cigna Choice Fund provide better financial protection for first dollar coverage, but it also provides much better protection for people likely to use a lot of health care.

There is one way in which the Cigna Choice Fund is financially less attractive than the Blue Cross PPO, but this slight disadvantage for the Cigna plan does not alter the basic conclusion about the financial superiority of the Cigna plan. The Cigna plan has a so-called ‘donut hole’ in which the employee is fully responsible for medical expenses. For a single employee, the ‘donut hole’ is between $1,000 and $1,500 of allowed medical expenses – the HRA pays for the first $1,000 of medical expenses, but after the $1,000 has been spent, the employee is fully responsible for the next $500 of expenses. Then, after $1,500 has been spent, the Choice Fund starts paying 80% of the allowed charges until the employee reaches the out-of-pocket maximum. Some people may be concerned about being fully responsible for the $500 of expenses in the ‘donut hole’, but even someone with $1,500 of expenses is financially better off in the Cigna plan. At $1,500 of in-network expenses, the Blue Cross subscriber will have paid the $250 deductible, plus 20% of the next $1,250, or $500 in total in out-of-pocket expenses. The Cigna subscriber will also have paid $500 in out-of-pocket expenses, but will have paid $733 less in premiums (see point 1 above). And after the $1,500 level has been reached, both plans pay 80% of the allowed charge for in-network services, but again the Cigna plan has a lower out-of-pocket maximum. There is a similar donut hole for family coverage in the Cigna plan – between $2,000 and $3,000 of spending -- but all employees will be financially better off in the Cigna plan if they are able to use in-network providers.

The accompanying graphs show the employee out-of-pocket expenditure under the two plans for various levels of health care spending and family sizes, and show that under all scenarios, IF all medical care is delivered by in-network providers, employees will be substantially better off under the Cigna plan [see Note 5].

Any time someone changes health plans it takes time (and often aggravation) in learning how to do things such as dealing with claims processing with the new plan and getting prescriptions transitioned to a new prescription drug vendor. Employees who are Blue Cross PPO members and are thinking of switching to the Cigna Choice plan should balance the expected financial savings from switching with the potential hassles created by learning how to deal with a new plan.

Finally, we should all remember that ‘If something sounds too good to be true, it probably is.’ The favorable terms (relative to the Blue Cross PPO) under which the Cigna plan is offered will likely not last for too many years. In subsequent years, it is likely that the premiums will increase on the Cigna Choice Fund, the university contribution to the HRA may decrease, the deductibles might increase, or some combination of all three could occur. However, the likelihood that in the future the Cigna Choice Fund will be less attractive than it is today does not detract from the advantage that it currently has over the Blue Cross PPO.

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1. Note: Graph shows employee liability, by level of total in-network covered spending for an employee in the Blue Cross PPO and in the Cigna plan. Analysis assumes that allowed expenses do not vary by plan (that is, that the negotiated rates are the same in the two plans, and that the prescription drug benefits are equivalent.) Analysis assumes that all spending is in-network. Contracted rates do differ between the plans, but these differences are not likely to have a material effect on the analysis. The drug benefits also differ -- Blue Cross has a 3-tiered copayment, while the Cigna copyament is 20% of allowed charge. The difference in drug benefit are unlikely to have a material effect on the results of the analysis.

For employees in the Cigna plan with less than $1,000 in covered spending, the advantage over the Blue Cross PPO is even greater than it appears to be in the graph. For employees with less than $1,000 in covered spending (which accounts for a large fraction of employees in any given year) unused funds in the HRA roll over to the next year.

Graph shows employee liability for employees in Pay Band 2 -- $45,001-$89,000 per year. Premiums for higher (or lower) paid employees will be higher (or lower) than the amounts shown in the graph, but the differences between Cigna and Blue Cross are the same in all pay bands.

2. Note: Analysis assumes that all spending is split equally between two family members. For employees in the Cigna plan with less than $2,000 in covered spending, the advantage over the Blue Cross PPO is even greater than it appears to be in the graph. For families with less than $2,000 in covered spending (which accounts for a large fraction of families in any given year) unused funds in the HRA roll over to the next year.

3. Note: Analysis assumes that all spending is made by one family member. For employees in the Cigna plan with less than $2,000 in covered spending, the advantage over the Blue Cross PPO is even greater than it appears to be in the graph. For families with less than $2,000 in covered spending (which accounts for a large fraction of families in any given year) unused funds in the HRA roll over to the next year.

4. Note: The UC open enrollment material lists the out-of-pocket maximum for the Cigna plan as $1,500 for a single employee and $3,000 for an employee choosing family coverage. In order to compare the Cigna and Blue Cross plans on an equal footing, the $2,000/$4,000 amounts I use here for the out-of-pocket maximum include the portion of the deductible that is potentially the employee's responsibility -- $500 for a single employee (the difference between the $1,500 deductible and the $1,000 HRA), and $1,000 for family coverage.

5. Note: There are two additional differences between Cigna and Blue Cross which will matter to some employees. First, behavioral health benefits for members of both plans are provided by United Behavioral Health, and the coverage and benefits for 'in-network' services are identical for Cigna and Blue Cross PPO members. However, Blue Cross PPO members do get some reimbursement for out-of-network behavioral health benefits, while Cigna members do not. Thus, if an employee anticipates using out-of-network behavioral health benefits, the Blue Cross PPO may be a better choice. Second, the structure of the drug benefits are different -- in the Blue Cross PPO, members pay a co-payment of $15 per prescription for a 30-day supply of generic drugs, $25 per scrip for branded drugs that are 'on-formulary', and $40 per scrip for branded drugs that are non-formulary (with a separate schedule for mail-order drugs). In Cigna, the member pays 20% of the allowed charge for both generic and brand drugs at in-network pharmacies.

On average, the Cigna coinsurance for drugs is not likely to be much different than the Blue Cross drug copayment, but for members taking very expensive drugs (particularly injectables), the 20% coinsurance structure may create greater liability. An additional difference in favor of Cigna is that the coinsurance for drugs does count towards the out-of-pocket maximum, while the drug copayments in the Blue Cross PPO are not counted towards the out-of-pocket maximum.