Direct Health Networks, Inc.

DirectHealthNetworks

Direct Health Networks, Inc.

Direct Contracting Health Benefit Strategies

For The Next Evolution Of Managed Care

Max Jack, President & CEO

Fall 2002 / Winter 2003DirectHealthNetworks

04/19/23 2


Overview

• Employer Challenge– Aggregate Plan Cost Inflation – Inflation by Type of Plan

• Employer Response– Trends for Insured and Self-Funded– Impact on Employee Out-of-Pocket Costs– Insider’s Perspective and Vision

• Direct Contracting Value Proposition– Value Proposition– Stakeholders– New Partnership in Health

• Direct Contracting Program Strategies– Correcting Flaws of Managed Care– Collaborative Partnership– Active Disease State Management– Implementation

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Overview



• Direct Contracting Value Proposition– Value Proposition – Stakeholders– New Partnership in Health


04/19/23 4


Why are employers challenged by premium cost?

0

20

40

60

80

100

120

1991 1994 1997 2000 2003

Cost IncEst. Range

Source: William M. Mercer Inc., Medical Economics/April 10, 2000 & pmpm Consulting Group

%CumulativeCosts

Employers Needed HelpIn 1999

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Premium Cost by Plan Type

0100020003000400050006000700080009000

Annual PE

Premium

2000 2001 2002Est.

Contract Year

KaiserHMOPOSCOLA

Health Care Premiums AreRising Much Faster Than Cost of Living

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Discount Medicine is a Flawed Model

Fixed Cost

PhysicianCost

Hospital/Ancillary

Cost

Pharmacy18-22%

40-45%

20-25%

18-22%

Expected Claims Cost

Physician discounts represent less than 6% of total premium costs

TraditionalDiscountMedicine

Model

Direct HealthCare Management

Model

Physicians influence 80% of savings achievable fromappropriate care management

Educate and offer incentives to consumers to be healthier

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Overview



• Direct Contracting Value Proposition– Value Proposition– Stakeholders– New Partnership in Health


04/19/23 8


Responses to premium increases?

• If currently insured:– Retain provider networks, but modify plan designs to achieve

less cost increase by:• increasing employee contributions to premium;• increasing co-pay levels; and / or• increasing annual deductibles.

– Change to lower cost plans often accompanied by• increased employee contributions to premium;• increased employee co-pays; and /or• necessity of provider changes.

• If currently self-funded:– Change TPA or broker or both; and– Change to lower cost provider network.

But what are the prospects for long term cost containment? Without change in health and disease management how will cost be contained?

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Movement Back to Self-Funding

-5

0

5

10

15

20

25

1988 1991 1994 1997 2000 2003

1993 Forward1993 BackEst. Calif.

Source: William M. Mercer Inc., Medical Economics/April 10, 2000 & pmpm Consulting Group Estimates

%Annual PlanCost Increase

Shift FromSelf-InsuredTo HMO

ManagedCare-HMO

Trend BackTo Self-Funding

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What’s Wrong With Traditional Health Plans Today?

• Health plan costs pose serious financial challenges for many employers.

• Benefit design offerings are increasingly limited.• Relationships between insurance companies and providers are

strained.• Health plans are taking back responsibility for demand (utilization)

management and interceding in patient-physician relationships.

• Care management models continue to focus on prior authorization controls.

• Little focus on realizing opportunities to improve health status (reducing risk factors / need for services).

• Employers and enrollees need help accessing health care information and co-managing their care.

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Overview



• Direct Contracting Value Proposition– Value Proposition – Stakeholders– New Partnership in Health


04/19/23 12


Direct Health NetworksValue Proposition

Direct Health Networks is the integrator of the technology, programs and services that:

• Diversify the Broker’s product line.• Enable a provider organization to sponsor new health

care programs and contract directly with local employers through local brokers.

• Develop or enhance employer / community health coalitions.

• Reduce employer health program cost and risk.• Improve health status and reduce claims cost

through health promotion and active disease state management.

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Vision for the Next Evolution of Employee Benefit Plan

• Incentives for being a good health care consumer are developed and managed collaboratively among Employer, Local Health Network representatives, and Broker.

• Enrollees get help accessing appropriate health care information and managing their care from their local providers.

• Employers and employees monitor plan costs and design to assure the long term health plan effectiveness.

• Local health system partners are active stakeholders in the success of the employer’s benefit plan and the health of enrollees.

• Artificial restrictions on health access are removed.

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The Real Stakeholders: Long Term Players Concerned About Improving Health Status

Employer Local Providers Employee

Wants healthy, productive workers.

Wants healthy local health system.

Views health benefit plan as part of employee compensation.

Want healthy local community.

Want to promote health through education; providing access to needed services; and serving as triage to best specialty institutions.

Want improved family health and well-being.

Want local access to quality health care.

Need assistance in accessing health information and managing health.

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Partnership in Benefits DesignExample 1: Obstetrics

• Health condition: pregnancy• Employee wants: healthy baby• Employer wants: healthy baby• Employee responsibility: see MD in first trimester and

follow prenatal care plan• Employer responsibility: facilitate employee ability to follow

prenatal care plan• Benefit design: employer pays 100% for delivery when

employee sees physician in the first trimester • Employee pays $500 co-payment if doesn’t start care in

first trimester.

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Partnership in Benefits Design

Example 2: Wellness

• Health condition: wellness evaluation and screening• Enrollee wants: prevention and early detection• Employer wants: healthy enrollee• Employee responsibility: follow guidelines for

immunization, physical, well-baby care, screening tests• Employer responsibility: facilitate and reward employee

completion of wellness recommendations• Benefit design: employer pays 100% for wellness plus

incentives (prizes, bonus, discount coupons, day off) • Employee at risk for higher out of pocket costs if ill.

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Partnership in Benefits Design Example 3: Chronic Disease

• Health condition: diabetes, heart disease, asthma• Enrollee wants: information about disease management /

reversal, family educational support, competent clinical treatment

• Employer wants: healthy employee, cost-effective care• Employee responsibility: actively participate in disease

management program; comply with health maintenance guidelines

• Employer responsibility: organize and offer disease management programs matching conditions of enrollees

• Benefit design: Employer pays 100% for disease management program; lower employee co-pay if enrollee compliant with clinical guidelines identified in pre-employment screening (for probationary and post-probationary periods) and during health screening programs.

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How would an actuary look at the claims risk pool?

Employees 360

POS PlanEnrollees 721

Deductible % Enrollees # Enrollees Est. Claims

$0-$100 33% 238 $11,880

$100-$500 40% 288 $72,000

$501-$1,000 9% 65 $48,600

$1,001-$2,000 7% 50 $75,600

$2,001-$5,000 6% 43 $151,200

$5,001-$10,000 3% 18 $135,000

$10,001-$25,000 2% 11 $189,000

$25,001-$50,000 0.50% 4 $135,000

$50,001-$100,000 0.20% 1 $108,000

Over $100,000 0.50% 4 $540,000

Total 100% 721 $1,466,280

•60% of employer enrollees will incur less than $250 in claims per year.•90% of employer enrollees will incur less than $2,000 in claims per year•Only 5% will have major medical expenses

Premiums pay for the risk that more than 5% of employees will have major illnesses and that others will not be good health care consumers

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Overview



• Direct Contracting Value Proposition– DHN’s Value Proposition – Stakeholders– New Partnership in Health


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Correcting the Flaws in Traditional Programs

• Providers are divorced from working with employers

• Denial of access is key cost containment strategy

• Uneven playing field• Paperwork• Hostility-punishment • Primary care gate-keeper• Risk/cost/discount shifting

• Providers work directly with employers

• Focus on appropriate access and disease management

• Even playing field• Streamline paperwork• Collaboration-partnership• Consultation• Aligned incentives

Current HMO, PPO,Self-Funded Models Direct Health

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Direct Health Networks’Self-Funded Program

TARGET: Medium to Large Employers• Direct Health Plan

– employers with over 125 employees– self-funded ERISA-qualified program – facilitated partnership of employer and local health system– active disease state management– continuous monitoring of plan performance

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Direct Contract Self-Funded Model

•Private label•Internet connectivity•Medical management•Disease State Management•Patient education•Aligned incentives

Enrollees Employer

Broker / FacilitatorProvider Organizations

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QualifiedTPA

PharmacyManagement

Disease State Management

QMDirect HealthNetworks

Employers

Secondary Commercial Medical Network

Direct Health Self-Funded ProgramDHN & Local Network Partnership Model

Achieving Integration, Economies, & Effective Care Management

Local NetworkPartner

(Primary Network)Plug-in

EmployersEmployers

Care Managed LocallyNational Brand & EconomyFor Sales and Administration

Local Broker Reinsurance

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Direct Health Self-Funded ProgramActive Disease State Management

(via American Health Holdings)

• Home Health Visit for SpecificPrograms

• Medication Management

• Biometric Monitoring for HighRisk Participants

• Disease Specific EducationalMailings, as needed

• Clinical Outbound Reporting

Low Risk High RiskModerate RiskLow Intensity High AcuityModerate Intensity

• Outbound TelephonicAssessment Welcome Call

• Quarterly Outbound Education &Telephonic Intervention byPrimary Nurse

• Claims and Pharmaceutical DataAnalysis

• Access to Website

• Program Welcome Packet

• Condition Specific Web-BasedEducation & Newsletters

• 24-hour Health Information Line(Speech Recognition)

• 24-hour Nurse Support Line

• Quarterly Mailed Disease-SpecificNewsletters

• Utilization & Satisfaction Reporting

• Claims and PharmaceuticalData Analysis



• Condition Specific Web BasedEducation & Newsletters



• Quarterly Mailed DiseaseSpecific Newsletters

• Utilization and SatisfactionReporting

• Claims and PharmaceuticalData Analysis



• Condition Specific Web BasedEducation & Newsletters



• Quarterly Mailed DiseaseSpecific Newsletters

• Utilization & SatisfactionReporting

• Outbound TelephonicAssessment Welcome Call

• Quarterly Outbound Education &Telephonic Intervention byPrimary Nurse

• Disease Specific EducationalMailings every other Month

• High Risk Case Finding

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Health Solutions Condition Management

Supports patients with chronic conditions and encourages partnership in managing their own health.American Health’s Health Solutions Condition Management program provides education and support to participants with one or more conditions. The program is structured around symptom management and medication compliance. Stratification by risk level ensures that interventions are appropriate to each participant’s needs.

The objectives of the Health Solutions program are:

The Health Solutions program covers more than 20 conditions, including:

• To slow the rate of condition progression and prolong periods of health through symptom management and medication compliance;

• To promote treatment plan compliance by providing education, counseling and support;

• To reduce emergency room visits and hospital admissions.

• Arthritis• Asthma• Cancer• Cardiac Arrhythmia• Cerebrovascular Accident (CVA)• Chronic Obstructive Pulmonary Disease (COPD)• Dementia• Depression/Anxiety• Diabetes Mellitus• Epilepsy• Heart Failure (HF)• Hypertension

• Injuries• Neonatology/Perinatal• Osteoporosis• Otitis Media• Pain Management• Peptic Ulcer Disease• Pregnancy• Pressure Ulcers• Sickle Cell Disease• Substance Abuse/Alcohol• Urinary Tract Infection

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Direct Health Self-Funded ProgramHealth Plan Management

• A partnership between employer, broker, local health system and DHN

• State-of-the-art administrative and disease state management systems

• Custom patient educational program • Monthly criteria-based monitoring of economic and

clinical performance• Quarterly consultative reviews

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Vision for Next Evolution of Health Benefit Program

• Large employers will go back to self-funding to create plan flexibility, enhanced health status and predictable costs.

• Employees will receive improvements in benefit packages while employers reduce cost and risk.

• Employers and employees will form more constructive partnerships.

• Provider organizations will begin to play an active role in local employer / community health partnerships.

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The Next Evolution of Self Funding

Traditional Models

Employer Employer

Insurer/Administrator

DHN /ProviderOrganizations

Network RentalAdministration

Vendors

Direct Contracting

The Next Evolution

Broker / TPA

04/19/23 29


Steps in Exploring Direct Contracting Options

• Employer must decide to consider self-funding.• Identify someone to facilitate the process of exploration (DHN / broker /

consultant).• DHN establishes partnership with local provider organizations (if not

already established), and include them in facilitated program design process.

• Establish enrollee census, preferred plan design and claims / premium history information.

• Design benefit package.• Secure stop loss insurance quote.• Price proposed program, present and secure client approval.• Implement.• Monitor program performance.

• Time Table to Complete: 3 to 6 months

Direct Health Networks, Inc.

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