The pictures and article below appeared on the cover of the Star Tribune Business Section on Monday, March 15, 2004. The helmet they used in the photo is actually mine (good old employee #4). If you look at it closely, there's a little call out to Geeks on the Web (actually "eeks on th...") on the bottom right. Nice!

Also below is the article about Definity Health (where I work). I'm pretty proud of that too.

Star Tribune - Cover of Business Insider - Monday, March 15, 2004, Section D

Building a revolution
Definity's vision of health care inches towards mainstream
David Phelps, Star Tribune

March 15, 2004

A new sticker is added to each hardhat as new clients are added to Definity. The company offers a new type of health plan to employers who give employees a personal health spending account that allows employees to choose the care they want.

The cubicles at Definity Health's St. Louis Park headquarters sport an icon that seems out of place for a health insurance company.

Virtually every desk has a yellow hard hat somewhere in sight.

The hard hats are symbolic, CEO Tony Miller said of Definity's founding theme of "building a new health care system."

Employees are awarded stickers for their helmets for key events, much like college football players earn stars or other symbols for their helmets by making big plays. The names of brewer Coors and pacemaker giant Medtronic, for instance, are on the helmets as two principal clients. There's also a sticker to identify the first quarter the company had positive cash flow.

A year from now, there could be another sticker, one that stands for "initial public stock offering."

That will be the test to determine whether Wall Street agrees with Definity's vision for changing the way Americans look at health insurance.

"It's been a roller-coaster ride with thrills and spills," Miller said.

Definity is part of a movement called consumer-driven health care. In it, employees decide when and how to spend their health care benefits.

The theory is that the cost of health care for employees and employers alike can be better controlled when consumers are making educated decisions.

"As an employer, as soon as I heard the concept it made all the sense in the world to me," said Michael Dougherty, head of Minneapolis-based Dougherty Group and an investor in Definity through his fund's Brightstone unit. "It's the right concept at the right time with the right management."

Definity members this year on average will see a 5 percent increase in the cost of coverage, according to company estimates. In contrast, the average cost increase nationwide for health coverage is projected at 12 to 13 percent.

Dan Conroy of Vadnais Heights-based Nexen Group Inc., said his employees have been customers of Definity for two years and have embraced it enthusiastically.

"They get it. And they got it quickly because it's their money," Conroy said, noting that premiums went down seven percent after the first year. "They became medical consumers immediately."

Some criticism

There are critics of the concept. They contend that employers are moving toward such plans to shift some of their premium costs to employees. Critics also say the model favors the young and the healthy at the expense of those with chronic illness and those at the lower end of the wage scale.

Three weeks ago the director of health policy analysis for the Consumers Union, Gail Shearer, raised concerns about the concept before the Joint Economic Committee of Congress.

"Consumer-driven implies that consumers have a full range of choices, and are in the driver's seat and calling the shots," Shearer said. "The problem with this is that too many consumers are not in control of their health care out-of-pocket expenses or health coverage. "

However, Nexen's Conroy said he's not seen any of his employees stopped from seeking medical care because of the account limits.

"It makes them more prudent before they run out, but it hasn't stopped them from doing what they are supposed to do," Conroy said.

About one-third of Nexen's 150 employees had money left in their accounts at the end of the first year.

Definity was founded in 1998 by Miller and Craig Swanson. Miller came from UnitedHealth Group and Deloitte Consulting; Swanson also was in the Minneapolis office of Deloitte, where he worked with large health care companies.

They knew that year after year of double-digit cost increases for health care was driving businesses crazy and capitalized on an alternative -- personal health care spending accounts rather than managed care.

Definity has grown from 5,000 members in 2000, the first full year of operation, to more than 300,000 at the start of 2004.

Last fall the company also passed a milestone when it had its first-ever quarter of positive cash flow. It expects to double revenue this year over 2003 to $67 million and to post revenue of $110 million by 2005.

Definity's business growth has not gone unnoticed. It now has in the neighborhood of 20 competitors, including industry giant Aetna. But Definity remains the largest provider of consumer-driven health care, with twice the members of Aetna, its closest competitor.

Of the 1.1 million people enrolled in such plans across the country, Definity's market share is about 40 percent. The company expects to have a million members by 2006, making it one of the largest health care providers in Minnesota.

Financing

Definity has been funded by venture capital, raising $70 million to date. Next month it's expected to close on a package that will provide an additional $15 million for strategic needs, including the acquisition of a claims processing, customer service and medical management operation in Buffalo, N.Y. That deal will add 240 employees to its payroll.

Wall Street is next. Miller has been taking Definity's story to health care investor conferences sponsored by Piper Jaffray, UBS Warburg, and J.P. Morgan. Merrill Lynch already is an investor in Definity.

Miller and marketing Vice President Chris Delaney have a loose schedule that calls for taking the company public next spring, if all goes according to plan.

"We're telling the street that consumer-driven health care is the wave of the future," Delaney said. "We've had two decades of managed care, and it's not working."

Under the Definity model, an employee of a member company is assigned a health care spending account of, usually, $1,000 for an individual and $2,000 for a family to spend as they see fit. Any unused amount is rolled over into the next year. Expenses in excess of the account receive comprehensive coverage but only after an out-of-pocket deductible is met, usually between $500 and $750 for singles and around $1,200 for a family.

The employer pays for comprehensive coverage after the deductible is spent.

For each person enrolled, Definity collects a fee of $35 to $45 to administer the claims and staff the health call center.

There are no co-pays for prescription medicines or charges for office visits to a broad network of doctors who offered preferred rates. Definity also offers an around-the-clock call center staffed with registered nurses who can offer medical advice.

"Rather than run to the emergency room when you kid sprains an ankle playing soccer, you call there first," Conroy said.

Researchers at the University of Minnesota Carlson School of Management and the Academic Health Center concluded in an ongoing study that people using the Definity plans were fairly accurate at gauging whether they would exceed their annual spending account limits.

The study by Stephen Parente, Jon Christianson and Roger Feldman also looked at whether the youngest and healthiest workers would flock to Definity-type plans, leaving sicker patients in managed care policies. The study determined that Definity was chosen by higher-income patients and families and was most favored by workers between the ages of 35 and 44.

Among its regional customers, Definity counts Medtronic, Wells Fargo, Supervalu and the University of Minnesota.

Definity projects revenue of $67 million in 2004 and $110 million in 2005. Membership is expected to grow in that period from 310,000 to 575,000.

None of these numbers surprise Dougherty, a Definity board member who also is chairman of the Allina Health System board. "What they [at Definity] have accomplished in the last three to four years is nothing short of extraordinary," he said.

David Phelps is at dphelps@startribune.com.