Ronald Bachman, FSA, MAAA President & CEO Healthcare Visions, Inc.

Ronald Bachman, FSA, MAAAPresident & CEO

Healthcare Visions, Inc.

Senior Fellow, Center for Health [email protected]

404-697-7376

A Workbook for

Developing a Vision and Roadmap

to 2nd+ Generation

Healthcare Consumerism

mailto:[email protected]

mailto:[email protected]

2

Table of ContentsPage # Topic . 2 Agenda 3 Scope of Work 4 Background Info 5 Task #1 – Setting Principles for Change 8 Task #2 – Vision Statement Development

11 Task #3 – Identification of Acceptable Stategies 14 Change Formula 18 Actuarial Issues 20 Consumerism 40 Task #4 – Personal Care Accounts

65 Task #5 – Wellness, Prevention, & Early Intervention 78 Task #6 – Disease Management 93 Task #7 – Decision Support Tools 102 Task #8 – Incentives & Rewards 111 Task #9 – Viewing Consumerism by Generations

145 Task #10 – Create Consumerism Plans 154 Task #11 – Setting Time Frame for Implementation 158 Integrated Health Management 161 Potential Savings from Healthcare Consumerism 164 Actual Industry Experience Results

170 Task #12 (summary) – Potential Savings 171 Consumer-driven Healthcare Surveys of Growth

3

AgendaDay# Goal1 Morning Agenda, Scope of Work, Background, (T1-3),

Change Formula, Actuarial Issues, Consumerism,Building Blocks (T4), Building Blocks (T5)

1 Afternoon Building Blocks T(6-8), Multi-generational Issues (T9),Create MSFT Plans (T10), Time Frame for

Implementation (T11)

2 Review Decisions from Tasks 1-11, Financials Task 12, Final Input to Roadmap

Tasks To Be Completed During 1.5 Day “Extreme” Consumerism1. Principles 7. Decision Support Tools2. Consumerism Vision Statement 8. Incentives & Rewards3. Strategies 9. Viewing by Generations4. Personal Care Accounts 10. Create Consumerism

Plans5. Wellness 11. Time Frames6. Disease Management 12. Financial Analysis

4

Scope of Work for Developing the Roadmap and Beyond

Diagnostic

and Readiness Assessment

Perform Financial

& Actuarial Analysis

(set metrics)

Design Benefits

and Contrib. Strategy

(The Road Map)

Evaluate, Select,

Implement Vendors

Developand

Implement Education,

Comm., Training,

etc.

Monitor and

Evaluate

•Evaluate current plans

•Interview •stakeholders

•Identify Basic Principles for Change

•Create Consumer Vision Stmt

•Select Strategies

•Develop Obj. & scope, set timeframe

•Match HR/business plan

•Est. Rel. Value of Components

•HDHP & Accts

•Wellness & DM

•Transition strategy

•Optional Coverages

•Carve-out Programs•Support services•Health vs. Healthcare•Debit/Credit Cards•Incentive Programs

•Develop baseline costs

•Co.& Ee contrib. level

•Model options

•Evaluate cost impact and revise

•Develop measures of success

•Communication Strategy

•Web-based Training, education

•Print, video, other media uses

• Internal vs. External Services

•Vendors

•Technology

•Services

•Performance

•Accountability

•Reliability

•Periodic reevaluation of baseline metrics

•Consumer scorecards

•Survey, measure success, acceptance

•Vendor/supplier audits

•Reassess & modify as appropriate

5

Background & Issues

Current Benefits, Design Issues, Service Issues, General Concerns, Anti-selection Reasons for Change, Interests in Consumerism, Driving Forces for Change, Perceptions of Employee Satisfaction, Dissatisfaction Other Problems and Positives with Current Plans

6

Task #1 – Setting Principles for Change Important…Not Important1. Have the Right Vision & Vision Stmt 1 2 3 4 52. Have a 3-5 Year Roadmap/Strategic Plan 1 2 3 4 53. Consider Other Related Corporate Initiatives 1 2 3 4 54. Create plan as part of Employer of Choice 1 2 3 4 55. Consider other HR metrics impacted by Healthcare 1 2 3 4 5

6. Provide Information on Rx Costs & Alternatives 1 2 3 4 57. Provide Information on Dr. & Medical Service Costs 1 2 3 4 58. Provide Information on Hospital Costs 1 2 3 4 59. Provide Information on the Quality of Dr. Care 1 2 3 4 510. Provide Information on the Quality of Hospital Care 1 2 3 4 5

11. Focus on Discretionary Costs (Rx and OV) 1 2 3 4 512. Focus on High Cost Claims & Claimants 1 2 3 4 513. Focus on Wellness and Preventive Care 1 2 3 4 5 14. Focus on an Individual Behavior Changes 1 2 3 4 515. Focus on Group Behavior Changes 1 2 3 4 5

7

Task # 1 – Setting Principles for Change Important…Not Important16. Use Incentives and Compliance Rewards 1 2 3 4 517. Increase Costsharing to Change Behaviors 1 2 3 4 518. Increase Employee Contributions to Offset Costs 1 2 3 4 519. Focus on Overall Plan Cost Reduction 1 2 3 4 520. Set the Right Measurements for Monitoring Progress 1 2 3 4 5

21. Build Broad Employee Agreement for Change 1 2 3 4 522. Minimize Change from Current Plans 1 2 3 4 523. Make Choices and Plan Options available 1 2 3 4 524. Improve Access to Care 1 2 3 4 525. Maintain Existing Network of Providers 1 2 3 4 5

26. Provide $ for post-65 retirement healthcare 1 2 3 4 527. Provide $ for pre-65 retirement healthcare 1 2 3 4 528. Provide $ for non-plan medical 1 2 3 4 529. Provide $ for terminated ee’s healthcare 1 2 3 4 530. Provide $ for non-healthcare expenses 1 2 3 4 5

31. Alternative to cutting benefits or initiating contributions 1 2 3 4 5

8

Sample Vision Statement: Create health and healthcare program options valued by employees that adapt effectively to

environmental trends that increase the quality of services,

improve access to care, and lower costs.

Task #2 – Sample Vision StatementPositioning to Balance Cost, Quality, and Access

AccessAccess

CostCost

QualityQualityConsumer

Valued Quality

Consumer Involvement & Transparency

Demand Driven Controls

Uncertain, Clinically Oriented

Third Party

Reimbursement

Supply Driven Controls

9

Task #2 – Create a Consumerism Vision Statement

Sample Vision Statements:

1. Providing high performing highly educated employees and their families with the security of comprehensive health and healthcare coverage that meets their diverse needs and rewards their personal involvement and responsibility as wise users of services to optimize their individual health status and functionality.

2. Affect employee behavior change towards healthier lifestyles and greater consumerism through the use of rewards and incentives.

3. Make employees better consumers of healthcare services by providing them with the necessary health education, decision support tools and useful information including provider cost and quality data.

4. Encourage greater employee awareness and involvement in healthcare and financial decision making, as a building block towards a defined contribution strategy for healthcare in the future.

10

Task #2 - Key Words / Phrases for Consumerism Vision Statement or Addition to Guiding Principles

__________________________________

__________________________________

__________________________________

__________________________________

__________________________________

11

Task #3 - Identification of Acceptable Strategies

High Priority...Low Priority1.Create Transparency – support “employee’s right to know,” minimize distortions of third-party reimbursement system, create transparency in costs, provide education/ training on healthcare costs, use decision support programs. 1 2 3 4 5

2.Create Personal Involvement – establish greater financial involvement through HDHPs, HRAs or HSAs, reward good behavior, offer valued options, provide long term incentives, provide immediate feedback. 1 2 3 4 5

3. Be Bold and Creative - Shift from supply-side controls to demand-side control designs. Be an early adopter/fast follower, consider out-of-the box ideas. 1 2 3 4 5

4. Focus on High Cost “Pareto” Population - Provide financial protection to families in need due to high unexpected medical costs and/or chronic conditions 1 2 3 4 5

12

Task #3 - Identification of Acceptable StrategiesContinued

Important…Not Important5. Focus on Saving Lives and Improving Health – Focus on improving the health of the entire population regardless of plan design selected. Implement prevention & wellness for long term savings and DM for immediate impact. 1 2 3 4 5

6. Focus on Preventive Care – Create incentiveprograms that change behaviors towards acceptance and compliance with wellness and early intervention, including pre-natal, non-smoking, diet, exercise, and safety 1 2 3 4 5 7. Minimize Impact of Cost Shifting – Use consumerismas an alternative to increased cost shifting or highercontributions. 1 2 3 4 5

8. Implement Optional Consumerism – Provide new programs and plan options on a voluntary basis. 1 2 3 4 5

13

Task #3 - Identification of Acceptable StrategiesContinued

High Priority…Low Priority9. Implement Change on a Multi-Year Program – Establish a consumer-centric program with a pre-determined multi-year introduction of options and use of accumulated HRAs and/or options. 1 2 3 4 5

10. Focus on Information Sharing Only– Provide eeswith decision support systems and information sources w/o accounts or incentives to reward behavioural change. 1 2 3 4 5

11. Use Packaged Programs – use full integration of plan design, information, disease management, and decision support systems from single vendor. 1 2 3 4 5

12. Use Existing Vendors – develop consumerist programs through current vendor relationships only. 1 2 3 4 5

13. Use “Best of Class” Programs – use selected vendors thatMay overlay core benefit designs as long as integration is Non-disruptive and transparent to members 1 2 3 4 5

14

A Reason To Consider Change

The Definition of Insanity:The Definition of Insanity:

““Endlessly repeating the same process, Endlessly repeating the same process, hoping for a different result.”hoping for a different result.”

- Albert Einstein- Albert Einstein

15

Employee Perceptions

Lead to a sense of entitlement…Employees underestimate total premium cost

Employees overestimate their share of cost

Source: Watson Wyatt

63%Underestimate

16%Close

21% Overestimate

20%Underestimate

11% Close

69% Overestimate

16

Requirements &Stages of Change

Desire forChange

Vision Process Change

Requirements for Change

Sta

ges o

f C

hange Comfort Level

Cautious Doing

CHANGE

Threshhold

Gather Info

Pros & Cons

Awareness

No No

CCHHAANNGGEE

No No

CCHHAANNGGEE

NO CHANGEWithout Desire – “Back Burner”

Without Vision – False StartsWithout Process – Frustration

++ ++ ==

- - - - - - - Alignment - - - - - - --

CHANGE

Awareness

Pros & Cons

Gather Info

Threshold

CHANGE

17

The Formula for Making Change Happen

Desire for Change

+Vision /

Roadmap+

Process for Change

=POSITIVECHANGE

Desire for Change

+Vision /

Roadmap+

Process for Change

=Put on Back

Burner

Desire for Change

+Vision /

Roadmap+

Process for Change

=Expensive False Starts

Desire for Change

+Vision /

Roadmap+

Process for Change

=Frustration

Set by Mgmt’s Set by Mgmt’s DirectionDirection

Task at HandTask at Hand Later - Next StepsLater - Next Steps ResultsResults

18

Preliminary Actuarial Work & Issues(NOT performed by CHT)

1. Data Collection and Population Profiling

2. Distribution of claims (low-medium-high-catastrophic claims)

3. Types and Analysis of Chronic & Persistent Conditions

4. Review of Industry Data on Consumerism

5. Use of Actuarial Pricing Model

6. Behavioral Modification Recognition

7. Cost Impact of Strategies and Plan Designs Selected

19

Purpose of Actuarial Work

Perform the actuarial and financial analysis to determine the impact of options available under a Consumerism Plan.

Determine Potential:

Plan designs

Savings Elements / HRA, HSA, & Account Credits

Combinations and interactions of “Building Blocks”

Costsharing structure

Contribution strategies

Participation

20

Consumerism

Supply Controls vs. Demand Controls “Them” or “You”

Reform is Not Enough, Transformation is Required

21

Supply Controls or Demand Controls

Plan Sponsors and Members have two basic choices to control costs:

1. Managed care & HMOs - The “supply of care” is limited by a third party who controls the access to medical services (e.g. utilization reviews, medical necessity, gatekeepers, formularies, scheduling, types of services allowed), or

2. Healthcare Consumerism - The member controls their “demand for care” because of a direct and significant financial involvement in the cost of care, rewards for compliance, and the information to make wise health and healthcare value driven decisions.

22

High Healthcare Costs Climbing Higher

Patients have lost control of their own healthcare, and are not truly engaged in the process of managing their health

Patients are frustrated with managed care “rules” and the impact on time and productivity

Patients don’t understand healthcare costs – costs are not transparent

“Every System is perfectly designed for the results achieved.”

Supply Controls Are Failing

23

Mega Trends Leading to Demand Control

1. Personal Responsibility

2. Self-Help, Self-Care

3. Individual Ownership

4. Portability

5. Transparency (the Right to Know)

6. Consumerism (Empowerment)

Healthcare Consumerism is about transforming an employer’s health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants.

It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors.

24

Healthcare Consumerism - Defined

““The job of a leader is to create the possible” – The job of a leader is to create the possible” – Condi Rice Condi Rice

25

Consumerism – Saving Lives & Saving Money

The Moral Imperative for Consumerism:

Increasing the Quality of Care, Better Health,

and Improving Lives

The Economic Imperative for Consumerism:

Saving Money (Lower Product Prices and More Jobs)

26

Objectives Of Consumerism

Change participant health and healthcare purchasing behaviors

Narrow market cost and quality variations using patient decisions• Increase transparency of healthcare costs to plan participants• Give plan participants more control over and “shared responsibility” for

managing own healthcare and related costs• Supply participants with the tools to act as better informed healthcare

consumers

Reduce costs for “discretionary care” through informed purchasing & incentives

Reduce long term costs with added incentives for “good health”

Reduce costs of Chronic Conditions through improved compliance with treatments and disease management programs

Reduce Acute Care costs with incentive hospital tiering based upon cost and quality

27

Basic Requirements for Successful Healthcare Consumerism

Must work for the sickest members, as well as the healthy

Must work for those not wanting to get involved in decision-making, as well as those that do

28

The Core of Consumerism

The Unifying Theme for a

Health and Healthcare Strategy is:

Behavioral ChangeBehavioral Change“Implement only if it supports

behavioral change consistent with the strategy”

29

Healthcare ConsumerismRoles & Responsibilities / Implications

Employers Facilitators of change Provide increased information and decision making tools Improved employee morale with choice and access Link to productivity, absenteeism, disability, turnover, etc. Consumerism can improve costs/budgeting (current & future)

Payers (Self-Insured Employers) Focus on high cost case mgmt/disease mgmt/population mgmt Will become responsible for more communications, training,

education direct to consumers Value added services may change, including transactions and

asset management Diminished role of managed care for routine care

30

Healthcare ConsumerismRoles & Responsibilities / Implications

Employees Increased responsibility for own health & healthcare Involved in own treatment and medical necessity decisions Improved access to care Involved in financial costs of health & healthcare (P4C)

Providers More direct involvement with patients and treatment Service and quality will be determined by consumers Pricing will become more flexible and visible (P4P)

Overall implications Roles will change for all players The picture change quickly - your strategy must prepare you for

rapid market changes

31

Consumerism Choices Involve Options for Behavioral Change

Consumerism Choices:

WellnessPreventive careEarly InterventionLifestyle Options (diet, exercise, smoking, safety)Self-help, self careDiscretionary Expenses (e.g. OV, ER, Rx)Value purchasing (e.g. DXL, o/p vs. in/p)Participation in Disease Management ProgramsCompliance with Evidence Based Medicine Treatment Plans

32

Consumerism – Much Broader than HDHP & Consumer-Driven Healthcare

Consumerism is Consumerism is A StrategyA Strategy

************************************It’s about moving from a It’s about moving from a

“benefit” to an “accumulating “benefit” to an “accumulating asset.”asset.”

33

Evolution of Healthcare Consumerism

Focus Impact Choices

First Generation

High Deductible Plans with HRAs or HSAs, Decision Support Tools

Discretionary Expenses: Rx, ER, OV, D-X-L

Initial Level and Type of Accounts with CDHC / HDHP Designs, Information and Decision Support Services

Second Generation

Behavior Change Through Rewards

Chronic and Persistent Conditions, Pre-natal, Preventive Care

Covered Benefits, Type and Level of Matching Funds and P4C / P4P Incentives for Prevention, Wellness, and Disease Management Programs

Third Generation

Health and Performance

Organizational Health, Turnover, Absenteeism, Productivity, Disability, and Presenteeism

Group rewards, Importance and Impact on non-health Corporate metrics

Fourth Generation

Personalized Health and Lifestyle Needs

Personalized Health and Performance Outcomes, Genetic Predispositions

Lifecycle Needs, Culturally Sensitive DM, Holistic Care, Information Therapy

34

The Evolution of Healthcare ConsumerismFuture Generations of Healthcare Consumerism

Behavioral Change and Cost Management Potential

Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

Traditional

Planswith

ConsumerInformation

2nd Generation Consumerism

Focus onBehaviorChanges

TraditionalPlans

3rd Generation Consumerism

IntegratedHealth &

Performance

1st Generation Consumerism

/CDHC

Focus on Discretionary

Spending

4th Generation Consumerism

Personalized Health & Healthcare

mjthompson001

35

The Promises of Consumerism

Personal CarePersonal CareAccountsAccounts

Incentives & Incentives & RewardsRewards

Wellness/PreventionWellness/Prevention

Early InterventionEarly Intervention

Disease and Case Disease and Case ManagementManagement

InformationInformation

Decision SupportDecision Support

The Promise of Demand Control & Savings

The Promise of Wellness

The Promise of Shared Savings

The Promise of Transparency

The Promise of Health

It is the creative development,

efficient delivery, efficacy, and successful

integration of these elements that will

prove the success or failure of

consumerism.

Major Building Blocks of Consumerism

36




IntegratedHealth &

Performance



Spending



Personal AccountsPersonal Accounts




Disease ManagementDisease Management



Initial Account Only

Activity & Compliance

Rewards

Indiv. & Group Corporate Metric

Rewards

Specialized Accts,Matching HRAs,Expanded QME

100% Basic Preventive Care

Web-based behavior change support

programs

Worksite wellness,safety, stress & error

reduction

Genomics, predictive modeling push

technology

Information, health coach

Compliance Awards, disease

specific allowances

Population Mgmt, IHM, Integrated Back-to-

Work

Wireless cyber –support, cultural DM,

Holistic care

Passive Info Discretionary

Expenses

Personal health mgmt, info with

incentives to access

Health & performance info, integrated health

work data

Arrive in time info and services,

information therapy

Cash, tickets,Trinkets

Health Incentive Accounts, activity based incentives

Non-health corporate metric driven incentives

Personal development plan incentives, health

status related

The Consumerism

Grid

37

Creating Healthcare Consumerism Plans

Understand Basic Consumerism Plan Designs Including Consumerism in All Plan Options

Building Blocks 1. Understanding HRAs/HSAs to Create Personal Care Accts as a

Basis for Health “Asset Accumulation”

2. Include Wellness Programs that Encourage Healthy Habits

3. Include Disease Management Programs that Encourage Compliance

4. Include Decision Support Tools for All Plans

5. Include Incentives/Disincentives to Change Behavior

38

Basic Plan Design Options & Healthcare Consumerism


Incentives &Incentives &

RewardsRewards




Case ManagementCase Management

HMOHMO&&

FSAsFSAs

HRAs?HRAs?

PPOPPO&&

FSAsFSAs

HRAs?HRAs?

PPOPPO& &

FSAsFSAswithwith

HRAsHRAs

HDHPHDHPPPOPPO

& &

LtdLtdFSAsFSAs

& & HSAsHSAs

HDHPHDHPPPOPPO

&&

Ltd Ltd FSAsFSAs

&&HSAsHSAs

&&LtdLtd

HRAsHRAs

Most Healthcare Most Healthcare Consumerism Plan DesignsConsumerism Plan Designs

Must Meet HSA / Must Meet HSA / HDHP Legal HDHP Legal

DefinitionDefinition



TypicalTypicalCDHPCDHP

Traditional Traditional Health PlansHealth Plans

39

Potential Use of PCAs to Support Consumerism Plan Designs


Incentives & RewardsIncentives & Rewards

Wellness/Prevention Wellness/Prevention



HMOHMO PPOPPO

PPOPPO

HDHPHDHPPPOPPO

HDHPHDHPPPOPPO

Most Healthcare Most Healthcare Consumerism Plan DesignsConsumerism Plan Designs

Must Meet HSA / HDHP Must Meet HSA / HDHP Legal DefinitionLegal Definition



TypicalTypicalCDHPCDHP

Minimum Minimum Co-Payment Co-Payment

DesignsDesigns High Ded & Co-Insurance High Ded & Co-Insurance DesignsDesigns

Health Health Incentive Incentive

Accounts?Accounts?

InitialInitial$500-$500-$1000$1000HRAHRAwithwith

IncentiveIncentiveHRAsHRAs

Initial Er HSAInitial Er HSAContributionContribution

Initial Er HSA Initial Er HSA ContributionContribution

With With HRAHRA

MatchMatch&&

Incentive Incentive HRAs &HRAs &HSAsHSAs

Traditional Traditional Health PlansHealth Plans

40

PPO/HRA and PPO/HSA High Deductible Health Plans

Four components that work together to improve quality, outcomes, and lower cost.

Health Accounts (HRAs or HSAs)

“Benefit dollars” topay for healthcare

expenses.

1.

PersonalizedHealthCare

Web- and Phone-Based Tools

Health Toolsand Resources

Wellness, Condition care Programs, Information and Decision Support Tools and

Resources.

3.

4.

HRA – ER provided $s

HSA - ER and/or EE Provided $s

HRA/HSA – Individual & Group

Reward $s

Incentives and Rewards

Additional Health Coverage beyond the HRA/

HSA.

2.

Health Account (HRA/HSA)

Deductible Gap

PPO

Preventive 100%Coverage

41

Task #4 - Personal Care Accounts

The Promise of Demand Control & Savings

HSAs, HRAs, FSAs, FHSAs

“Of the 5 building blocks, the greatest among them is the Personal Care Account”

42

HSAs and HRAs - Two Very Different Accounts to Support Consumerism

HSA (2003 MMA) - A law, with specific requirements and benefit design

requirements. - Most TAX ADVANTAGED vehicle ever created

HRAs (6/26/2002) - A regulatory creation based upon an IRS ruling - Most FLEXIBLE vehicle ever created

43

Health Savings Accounts – Advantage Employees

Tax-free savings vehicles for medical expenses, no use-it-or-lose-it rule

Effective January 1, 2004

Eligibility: must be covered under high deductible health plan (HDHP)

Portable

44

Health Savings Accounts

Individual accounts

To permit saving for qualified medical and retiree health expenses on a tax-free basis

Must be offered in conjunction with a legally defined HDHP - “High Deductible Health Plan”

Portable

An HSA is owned by the individual, similar to IRAs, and transfers if the employee changes jobs

Held in a trust or custodial account; trustees – banks, insurance companies, approved non-bank trustees

45

Health Savings Accounts: Contributions

Contribution limits determined monthly based on status, eligibility, HDHP coverage as of first day of month (offset by other HSA contributions)

2005 Monthly limit – 1/12th of lesser of deductible or $2,650 (self-only), $5,250 (family), indexed

Catch-up contributions, age 55 to 64, $600 in 2005, phased up to $1,000 annually in 2009

46

HSAs – Real Dollars, Portable, Vested

Can be used or taken in cash at anytime, even when no longer eligible to make contributions

Tax-free if used to pay for qualified medical expenses (IRC Section 213(d))

For other purposes, subject to income tax and 10% penalty - 10% penalty waived in case of death or disability - 10% penalty waived for distributions after age 65 or older

HSA can be transferred tax-free to spouse on death; otherwise taxable to estate or beneficiary

Transfers upon divorce, nontaxable, becomes spouse’s HSA

47

HSA Eligible HDHPHigh Deductible Health Plan – By Law

Self-only: a deductible of at least $1,000; maximum HSA is $2,650; no more than $5,100 maximum out-of pocket expenses (incl. Ded.)

Family coverage: a deductible of at least $2,000; maximum HSA is $5250; no more than $10,200 on out-of pocket expenses (incl. Ded.)

2005 Age 55 and over catch up amount of $600

Preventive services are not subject to the deductible

OK for out of network costs to exceed maximum out-of pocket limits

THE ABOVE 2005 AMOUNTS ARE SUBJECT TO ANNUAL INDEXING

48

HRAs- Advantage EmployersNational Accounts, Er Controlled Rules

Employer does not fund and has cash flow value

Employer can determine rules for HRA usage; they are subject to forfeiture; they are not portable, but can be subject to vesting

HRAs are more flexible in plan design, can tailor scope of reimbursements, are less costly for employer

Employer decides if HRA can used for (1) medical plan expenses not otherwise reimbursed, (2) non-plan QME 213(d), and/or (3) insurance premiums

49

Important Differences between Use of HRAs and HSAs for Supporting Behavioral Change

Generation 1


Generation 2

Activity & Compliance Rewards

Generation 3

Indiv. & Group Corporate Metric Rewards

Generation 4Specialized Accts,Matching HRAs,Expanded QME

1. Any Amount 2. Notional Acct 3. Employer Determined 4. Employer Only Contributions

1. Flexible Activity & Compliance Rewards 2. Employer Determined 3. Can not be cashed out 4. Must be used for healthcare

1. Flexible Indiv & Group Rewards 2. Employer Determined 3. Can not be cashed out 4. Must be used for healthcare

1. Specialized Notional Accts, 2. Can terminate by employer rules 3. Potential IRS Expanded QME

Health Savings Health Savings AccountsAccounts

1. Amounts Set by law 2. Real Dollars in Acct 3. Er or Ee Contrib 4. Contributions up to

plan deductible of $1000-2650 Single

$2000-5250 Family 5. Non-substantiation

1. Ltd Potential – (But For Rule) 2. Must give Cash Option 3. Awards must be same $ amt or same % of deductible 3. HSA can be used (with 10% penalty) for non- healthcare expenses

1. Ltd Potential – (But For Rule) 2. All participants must receive same amount or same % of deductible 3. Difficult to use for Group Incentives

1. Ltd Potential – (But For Rule) 2. 100% Vested & Portable 3. Can use matching HRAs, 4. Potential IRS Expanded QME

Health Health Reimbursement Reimbursement ArrangementsArrangements

Personal Care

Accounts

50

Er-Based with HSA HSA ContributionsContributions

HRAs – Best for Larger Groups?HSAs – Best for Individuals and Small Groups?

Current State

HRAs HSAs

Employer-based

Healthcare with Individual Accountability

Individual-based Healthcare

FSAs

Employer-based

Healthcare

Traditional (Ltd Carry-over)

Special Purpose Non-

Plan

Combination Accounts

Employer-based

healthcare

Special Purpose Accounts

Incentive Matching

Employer-basedDefined

Contribution Developments

51

Are HSAs the right vehicle for large employer groups?

Yes, If………..

Or

No, Because…….

Need to Understand the Consumer Movement, Federal Health Policies, &

the Market Transformation that is Underway

52

Are HSAs the Wave of the Future?Which Direction will Legislation Take?

Yes, if…. … we recognize the HSA legislation and regulations as a good start and another building

block for consumerism and behavioral change. …Er’s and Ee’s recognize current limitation and optimize available uses …there is additional legislation/regulation to support large Er interests in providing HSAs

(use for healthcare only, Rx coverage problem, combination accounts). …there is legislative support for the common use of FSAs for targeted needs, HSAs as

true “Health Savings Accounts” and HRAs as true “Health Reimbursement Arrangements.

No, because…. … they were not legislated/regulated with large employers in mind. … of a desire to promote individual insurance over individual ownership (under employer

and individual policies) … they are just a tool to cost shift to employees, they can not reward behavior change … they are only desirable to the young, healthy, and wealthy

53

Summary - PCA Comparisons

54

Summary - PCA Comparisons (cont)

55

The Fundamental Federal Policy Question

Will Legislation/Regulation Use HSAs to

… mainly promote portable Individual & Small Group Insurance,

OR

… expand Personal Care Account ownership through in both an employer-based and individual-based healthcare system thru HSAs, HRAs, and FSAs.

56

- The Answer - Flexible Health Savings Accounts (FHSAs)

FHSAs would have the tax advantages of HSAs and the key flexibilities of HRAs.

Basic Principles:

1. Retain personal responsibility goal of HSA/HDHPs

2. Focus on Behavior Change

3. Recognize value of Pay for Compliance as a driver for behavior change and shared savings with personal responsibility

4. Expand adoption and funding of HSAs by large employers

57

Flexible Health Savings Accounts (FHSAs)The Next Generation

Four needs that would allow FHSAs the flexibility to:

1. Provide financial Rewards and Incentives for Behavioral Change.

2. Encourage Employer/Carrier FHSA contributions towards healthcare

3. Be provided with plan designs other than HDHPs

4. Address FHSA/HSA Technical Issues

58

FHSA Flexibilty to Provide Financial Rewards and Incentives for Behavioral Change

1. Allow for compliance incentives under disease management programs (e.g. diabetes, asthma, CHF) and wellness initiatives (e.g. wellness assessments, smoking cessation, etc.).

2. Change Comparability Rule to mean all members under a given program of care or treatment, such as, a disease management or wellness program.

3. Rewards and/or incentives should not be limited by the deductible limit, but should be consistent with expected savings from programs for which participation is being rewarded.

59

FHSA Flexibility to Encourage Employer Contributions to Healthcare

1. Allow employers/carriers to voluntarily contract with employees to require employer/carrier funded FHSAs to be used only for healthcare expenses while employed and covered under the plan.

2. Remove cap on employer/carrier funded FHSA contributions or expand to at least the plan’s Maximum Out-Of-Pocket total exposure in a given calendar year.

60

FHSAs Flexibility to be Provided with Plan Designs Other than HDHPs

1. Preventive drugs include maintenance drugs. Drugs now defined as preventive by the Treasury Dept. can be covered below the deductible, while the cost of maintenance drugs is now included in the deductible.

2. Allow Rx to exist as carve out benefits at least for prescription drugs associated with chronic and persistent disease states

3. Allow “incentive only based” FHSAs for employer/carrier only funding under non-HDHPs (i.e. no initial FHSA funding or employee funding)

4. Allow some mental health and substance abuse benefits (besides EAPs) to be included under preventive care.

5. Allow use of HSA to pay for pre-65 Retiree and Individual Healthcare premiums

61

FHSA Flexibility - Technical Issues

1. Allow FHSA/HSAs to go into effect on the first day of coverage is effective.

2. Allow FHSA/HSA contributions for a full calendar year regardless of when a plan is effective.

3. Allow FHSA/HSAs to be used to pay for health coverage premiums (other than current limited use for (1) Premiums for coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), and (2) premiums for HDHP coverage for those who receive federal or state unemployment compensation).

4. Allow Flexibility to "post-date" the FHSA/HSA effective date so that FHSA/HSA dollars can cover expenses incurred before the account was established. Allow the account to be opened under a "provisional status" until the necessary paperwork is filed, at which time the account becomes active.

62

Growth of Personal Care Accounts

HRAs HSAs2000* None None2001* 19,000 None2002* 53,000 None2003* 394,000 None

2004(est) 1-1.5M 400,0002005(est) 3.2M 1,000,0002006(est) 6.0+M ???2007(est) 12-15M ???* Deliotte Consulting

63




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

64

Task #4 - Discussion on Type(s) and Use of Personal Care Accounts

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

65

Task #5 - Wellness, Prevention, and Early Intervention

The Promise of Wellness

66

Wellness - Defined

Wellness is a proactive organized program providing lifestyle and medical/clinical assistance to employees and their family members in maintaining good health.

Wellness programs encourage voluntary behavior changes and support compliance with proven approaches to maintain health, reduce health risks and enhance their individual productivity.

67

Wellness – The Need

For every 100 members:

23-30% smoke (70% want to quit, 35% try each year) 29% have high blood pressure 30% have cardiovascular disease 80% do not exercise regularly 55% or more are overweight or obese 30% are prone to low back pain (many linked to obesity) 6-9% have diabetes 10% are depressed 35% are under significant stress 50% do not wear their seat belts

68

Wellness – The Desire for Change

For every 100 members:

47% are trying to improve their diet 37% plan to undergo some health screening 30% state they exercise regularly Only 23% are aware of the health promotion and wellness programs offered by their employer sponsored health plans 76% of employers with over 11,000 employees offer health management programs

Kaiser Family Foundation Survey, 9/03

69

Wellness - How Does It Impact Employees and Family Members?

Well

e.g., Low Risk, Good Nutrition, Active

Lifestyle

At-Risk / Acute Conditione.g., Inactivity, High Stress,

Overweight, High Blood Pressure, Smoking

Chronically-Ille.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA

Catastrophice.g., Cancer, Rare

Diseases, Head Trauma

No Claims GenerallyHealthy

O/P (Low) In/P (High)

Maternity O/P (Low) In/P (High) In/P (High)

% Ee 15% 48% 14%

3% 3% 12% 4% 1%

% $

0%

12%

15%

12% 5%

21%

20%

15%

% Ee 63% 20% 17%

% $ 12% 32% 56%

PreventionWellness – Lifestyle Wellness - Lifestyle

Minimize Acute Episodes Minimize Complications

Maximize Recoveries Maximize Stabilization


Wellness - ClinicalWellness - Clinical


Traditional Wellness ProgramsTraditional Wellness Programs

70

Wellness – Examples for Employer Sponsored Programs

Common Programs Weight Management Fitness/exercise/health clubs Smoking cessation

Employer Support Communication and awareness (newsletters, health fair, posters) Screening (health awareness profiles, blood pressure check, blood tests, body fat analysis) Education (seminars/classes, self help kits, group discussions, lunch and learn) Behavioral Change (on-site fitness center, flu shots, lunchtime walks, yoga classes)

71

Wellness – Working within Consumerism

Traditional Plans Cover selected wellness in benefit plan at 100% Supplement with non-plan wellness and work-site programs Other: same * as below PPO/HRA incentives

PPO/HRA Include Employer defined wellness/prevention benefits at 100%

* Include HRA Incentive for Wellness Appraisal* Include HRA Incentives for personal wellness activities* Include HRA Incentives for work-site wellness participation

PPO/HSA Include IRS defined Preventive Care benefits at 100% Benefits contingent upon HSA contribution? Wellness Appraisal Other: same * as above with PPO/HRA incentives

72

Consumerism - Programs and ServicesPrescription Drugs Information

Evidence Based Medicine Medical Care Guidelines Health Library

Disease Management Condition Specific Assessment

Tools Chronic & Persistent Wellness Voluntary Participation Voluntary & Incentive Based Mandatory Participation Mandatory & Incentive Based

Self Care Management Information

On-Line Health Risk Assessment

Personal and Family Tracking

Health & Performance Population Management Case Management Cost & Quality Management

Stress Management Assessment Tools Self Help Tools

Depression Screening

Preventive Care – Lifestyle

Lifestyle Nutrition Fitness Personal Health Management

Preventive Care – Clinical Immunizations Hypertension Screening Cholesterol Testing Mammograms Pap Smears Blood Pressure Checks Colorectal Cancer Testing Diabetes Testing Osteoporosis Testing Chlamydia Tests

Early Prevention

Wellness

Online News

Safety

Pre-Natal

Well Baby Care

New Mom Programs

Medical Services Support

FAQ, Preparation for In/P

End of Life Care

Provider Cost/Quality Incentives

Regional Centers of Excellence

73

Wellness & Preventive Care for HSAs

Preventive care includes, but is not limited to, the following:

Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Routine prenatal and well-child care. Child and adult immunizations. Tobacco cessation programs. Obesity weight- loss programs. Screening services

However, preventive care does not generally include any service or benefit intended to treat an existing illness, injury, or condition.

74

HSA Safe Harbor Preventive Care Screening Services

Cancer ScreeningBreast Cancer (e.g., Mammogram)Cervical Cancer (e.g., Pap Smear)Colorectal CancerProstate Cancer (e.g., PSA Test)Skin CancerOral CancerOvarian CancerTesticular CancerThyroid Cancer

Heart and Vascular Diseases ScreeningAbdominal Aortic AneurysmCarotid Artery StenosisCoronary Heart DiseaseHemoglobinopathiesHypertensionLipid Disorders

Infectious Disease Screening• Bacteriuria• Chlamydial Infection• Gonorrhea• Hepatitis B Virus Infection• Hepatitis C• Human Immunodeficiency Virus (HIV)• Syphilis• Tuberculosis Infection

Mental Health/Subst. Abuse Screening• Dementia• Depression• Drug Abuse• Problem Drinking• Suicide Risk• Family Violence

75

Wellness – Planning

Will the wellness program be for employees only, or employees and dependents?

Will you purchase from vendor, internally developed, or a combination

Consider in conjunction with plan covered wellness benefits (immunizations, mammograms, screening, EAP, physical exams, pre-natal care, well child care, etc.)

Consider in conjunction with worksite programs (safety, ergonomics, work-life programs, etc.)

Incentives/rewards provided for compliance

76




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

77

Task #5 - Discussion on Type(s) and Use of Wellness and Prevention

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

78

Task #6 - Disease Management Programs

The Promise of Health

The “Holy Grail” of Cost and Quality Improvements

79

Disease or Condition Management – the Holy Grail of Potential Savings

Primary cost drivers are chronic disease and serious acute conditions.

The direct impact on productivity is comparable to the direct cost of health care

80% of

costs

20% of claimants

Driven by

For a typical employer, 15-30% of costs are driven by controllable health risks

50% of

costs

Have a behavioral root cause

(CDC 1999)

80

Disease Management PotentialFocus on Hi-Volume / Hi-Cost Users

Cost Curve

% Members % Costs

1% -> 20%

15% -> 68%

50% -> 95%

EBRI -Stakeholders in Consumer-Driven Health Care

81

Disease Management - Defined

Disease Management is an proactive organized program providing lifestyle and medical/clinical assistance to employees and their family members with chronic and persistent conditions.

Disease Management programs encourage voluntary behavior changes and support compliance with proven medical practices which stabilize conditions, reduce health risks and enhance their individual productivity.

82

Disease Management – The Need

60+% of an employer’s total medical costs come from chronic and persistent diseases such as, diabetes, asthma, congestive heart failure, back pain, and depression.

45% of Americans live with at least one chronic disease. 14% live with two or more chronic diseases.

76% of hospitalizations, 72% of physician visits, and 88% of Rx is due to chronic conditions

The average cost of health care for a diabetic is $13,200/yr compared to $2,600/yr for a non-diabetic.

61 million Americans live with cardiovascular disease

50% of chronic disease deaths are traced to cardiovascular disease.

Coronary artery disease is a leading cause of premature permanent disability.

Obesity is becoming the #1 preventable cause of death

83

Today’s Health Care Environment and Trends

Determinants of Health

0%

10%

20%

30%

40%

50%

60%

Determinants 10% 20% 20% 50%

Access to Care

Genetics Environment Behavior

Source: IFTF, Centers or Disease Control and Prevention

84

Disease Management – The Desire for Change

Very Little under Traditional System:

50% do not follow recommended standards of care 33% will high blood pressure do not know 33% of diabetics do not know it Patient’s lack of knowledge and information Patients without financial incentives to change health and healthcare behaviors Distortions of current 3rd party reimbursement medical financing system. Plans pay for treatments not prevention or compliance Physicians without incentives to take time and effort to deal effectively with chronic conditions

85

Disease Management – Elements for a Successful Program

There are four elements of a successful disease management:

1. A delivery system of health care professionals and organizations closely coordinating to provide medical care and support the patient’s compliance throughout the course of a disease.

2. A process that monitors the compliance and describes outcome-based care guidelines for targeted patients.

3. A process for continuous improvement that measures clinical behavior, refines treatment standards, and improves the quality of care provided.

4. Incentive awards that support the disease management medical and clinical care services

86

20 Priority Areas per the Institute of Medicine

1. Asthma, supporting and treating those with chronic conditions.

2. Care coordination for patients with multiple chronic conditions.

3. Children with special health and care needs, particularly those with chronic conditions.

4. Diabetes, which can lead to high blood pressure, heart disease, blindness and other complications.

5. End-of-life care for people with advanced organ failures, concentrating on reducing symptoms.

6. Frailty - preventing accidents, treating bedsores and improving advanced care.

7. High blood pressure - left untreated it can lead to heart attack, stroke and kidney failure.

8. Immunization.

9. Evidence-based cancer screening, which can reduce death rates for many cancers, including colorectal and cervical.

10. Ischemic heart disease, also known as coronary heart disease. Efforts should focus on prevention.

87

11. Major depression, which currently has a much lower treatment rate that other major diseases.

12. Medication management to prevent errors.

13. Noscomal infections. These are infections acquired in the hospital and kill an estimated 90,000 Americans annually.

14. Obesity, which is blamed for as many as 300,000 deaths annually in the United States.

15. Pain control in advanced cancer.

16. Pregnancy and childbirth, especially improving the quality of prenatal care.

17. Self-management and health literacy, using public and private organizations to increase the level of health education.

18. Severe and persistent mental illness; improving mental health care in the public sector, including state hospitals and community centers.

19. Stroke, the third highest cause of death in America.

20. Tobacco-dependence treatment for adults.

20 Priority Areas per the Institute of Medicine

88

Disease Mgmt - How Does It Impact Employees and Family Members?

Well

e.g., Low Risk, Good Nutrition, Active Lifestyle

At-Risk / Acute Condition e.g., Inactivity, High Stress,


Chronically-Ille.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA

Catastrophice.g., Cancer, Rare

Diseases, Head Trauma


O/P (Low) In/P (High)

Maternity O/P (Low) In/P (High) In/P (High)

% Ee 15% 48% 14%

3% 3% 12% 4% 1%

% $

0%

12%

15%

12% 5%

21%

20%

15%

% Ee 63% 20% 17%

% $ 12% 32% 56%

Prevention Wellness – Lifestyle Wellness - Lifestyle

Minimize Acute Episodes Minimize Complications

Maximize Recoveries Maximize Stabilization


Wellness - ClinicalWellness - ClinicalWellness - ClinicalWellness - Clinical

Disease Management ProgramDisease Management Program

89

Passive Assertive Aggressive Program Type: Phone and mail

out- reach, no incentives

Incentives (i.e., waiving Rx copays)

Incentives (i.e, waiving Rx copays,

premium differential

DM vendor pricing method

Per employee per month, all

employees

Low PEPM on all ees plus hourly or per

case rate on participants only (rate

varies based on participant risk

status)

Low PEPM on all ees plus hourly or per case rate on participants only (rate varies based on participant risk

status)

Percentage of chronic diseased participating in program

10% 50% 75%

Return on investment of disease management programs

0 - .5 1.5 - 2 1.5 - 3

Disease Management ProgramsDesigned and Financially Aligned for Success

90

Disease Management Program Planning

Identify key populations Focus on Compliance Manage expectations Respect privacy Follow Best practices (EBM, Outcomes Based Medicine) Integrate demand management, disease management and utilization management Give patients their own data Align Incentives for patients, providers, and Employer

91




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

92

Task #6 - Discussion on Type(s) and Use of Disease Management Programs

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

93

Task #7 - Decision Support Tools

The Promise of Transparency

&

The “Right to Know”

94

Healthcare Consumerism – Already Active Consumers

Consumers Search Internet for Medical Content

Consumers Ask Physiciansfor Genetic Testing

Consumers Work with Providerson Personalized Health Plans

Consumers Monitor and TrackTheir Own Medical Status Regularly

Consumers and Providers Coordinate Care and Understanding through Integrated Clinical and

Information Therapies

95

Decision Support ToolsSurvey of Attitudes

Employer Role:

Recognize the “consumer-preference spectrum”

Provide consumer-focused decision support tools for:Choice of Health PlanChoice of ProviderChoice of TreatmentCurrent and Future Financial Considerations

Patient decision making preferences

“INFORMED” PARENTAL

INTERMEDIATE SHARED DECISION MAKING

PATIENT AS DECISION-MAKER

4.8%17.1% 45% 11% 22.5%

96

Decision Support Tools for Consumerism

Basic Design Information Provider Selection SupportHRA Fund Accounting Physician Quality Comparison

Underlying PPO Plan Design Physician Cost ComparisonDisease and/or Medical Management Hospital Quality ComparisonHSA Fund Accounting Hospital Cost ComparisonDebit/Credit Card

Personal Benefit Support Care SupportPlan Comparison Cost Estimator On-line Provider DirectoryAccount Balance Provider SchedulingOn-line Claim Inquiry On-line Rx ComparisonsSPD On-line Patient Decision Support

24/7 Nurse Line Personal Health Management

Health Risk AppraisalHealth & Wellness InformationTargeted Health ContentMedical Record, HistoryHealth Coach

97

Decision Support ToolsEmployer Considerations

• Employee Readiness Sophistication and orientation Internet competency and access

• Due Diligence Accuracy Usability Independence Stability Integration issues

• Targeted Clinical Support: Value-based Evidence Based Medicine Personalized Chronic Care Management Tools Consumer-Focused Stress Management

98

Consumerism – a new force

Consumerism

can be a force to address

quality and cost variations

in a given market

99

Align Strategy with the “Value

Purchasing”

Awareness Pay for

Performance Tiered

Networks Regional

Centers of Excellence

CostEfficiency

Quality

Variation in Cost & QualityHospitals – CABG*

Fewer Adverse Affects Lower Complication Rates Lower Mortality

Lower LOS Lower Cost Episodes of Care

* Healthshare/SelectQualityCare weighted averages

Decision Support Tools for Cost & Quality Information

100




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

101

Task #7 - Discussion on Type(s) and Use of Decision Support Tools

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

102

Task #8 - Incentives, Rewards,

The Promise of Shared Savings

Pay for Compliance&

Pay for Performance

“Two sides of the same coin”

103

Consumerism Incentives – Participation Based

Incentives must be participation and activity-based rather than outcomes-based. HIPAA laws prevent rewards based on health standards. The law allows incentive designs if the following requirements are met: Limit the reward to a specified amount (not to exceed between 10%-20% of the cost of employee-only coverage). Be reasonably designed to promote health or prevent disease. Be available to all similarly situated individuals. There must be a feasible alternative for those that cannot reach the health standard because of a medical condition. Inform employees that individual accommodations and alternatives are available.

104

Wellness Incentives – Outcomes Based

While HIPAA generally prohibits plans from differentiating benefits or premiums based on health status, employers can still design and implement wellness programs with financial incentives. Only a "bona fide wellness program" can provide a reward based on a health standard or health outcome (i.e., a low cholesterol level). To be a "bona fide wellness program," the law specifies that the program must meet four requirements:

1. Limit the reward to a specified amount (not to exceed between 10%-20% of the cost of employee-only coverage).

2. Be reasonably designed to promote health or prevent disease.

3. Be available to all similarly situated individuals. There must be a feasible alternative for those that cannot reach the health standard because of a medical condition.

4. Inform employees that individual accommodations and alternatives are available.

- National Business Group on Health- National Business Group on Health

105

Wellness Incentives – Participation Based

All wellness programs that are based on participation rather than outcomes are permitted.

For example, financial incentives or premium discounts for participating in a health fair, joining a health club, or attending smoking cessation program, regardless of the health outcomes or results, are allowed.


106

Rewards & Incentives for Smoking Cessation

The NGBH conducted a Quick Survey in December 2003 on "Smoking Cessation Incentives/Disincentives." The results from 26 respondents showed:

69% of the respondents offered discounts on annual health care premiums/contributions for non-smokers, and 15% offered another type of benefit enhancement.

Similarly, 45% of the respondents offered premium discounts for employees that participated in smoking cessation/wellness programs.

57% included smoking cessation as part of a broader wellness initiative/incentives at the worksite.


107

Incentive Awards - Three Very Different Personal Care Accounts

1. Flexible Spending Accounts (FSAs) – Traditional Group Plans with Use-it-or-Lose-it

2. Health Reimbursements Arrangements (HRAs) – Employers’ choice for cash flow flexible incentive based medical plan benefit designs (best suited for self-insured groups)

3. Health Savings Accounts (HSAs) – Employees’ choice for funded portable triple tax advantaged with “High Deductible Health Plans” (best suited for individuals and small groups)

4. Combination Accounts – creative but confusing

108

Using Information & Incentives To Address Wellness & Disease Management

Behavioral Changes

Low Users Medium

Users

High

Users

Very High Users

No Claims

Generally Healthy

Acute Episodic Conditions

O/P, Low In/P, High Maternity

Chronic & ersistent . Conditions .

O/P, Low In/P,High

Catastrophic

% Mem 15% 48% 14%

3% 3% 12% 4% 1%

% Dollars

0%

12% 15% 12% 5% 21%

20%

15%

% Mem 63% 32% 17%

% Dollars 12% 32% 56%

PreventionPrevention Wellness - LifestyleWellness - Lifestyle

Minimize



Maximize

Minimize

Maximize

Wellness - LifestyleWellness - Lifestyle


109




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

110

Task #8 - Discussion on Type(s) and Use of Incentives & Rewards

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

111

Review of

Plan Design Concepts

by

Generation

Task #9 – Viewing Healthcare Consumerism by Generations

112

1st Generation Healthcare Consumerism

Focus on Plan Design and implementation of HRAs and/or HSAs and basic decision support tools.

Impact: Discretionary Expenses

Choices: Level and Type of Accounts with Plan Designs, information and Decision Support Services

113

Preventive Care (Insurance)

Health Reimbursement Arrangement

Deductible Gap

S.M.M.Insurance

• Ensures good health

• Neutralizes “hoarding”

• Part of the Insurance Plan

• Employer Funds Only

• Notional Account

• Section 105 Plan

• Balance rolls over year to year

• Employer controls growth %

• Employer controls exit rules• Vesting• COBRA• Retiree medical• Qualified long-term care

• Participant responsibility

• Can fund thru Section 125 plan

1st Generation HRA Prototype

Education and Decision-Support Tools

• Consumer education• Chronic disease

management• Health Promotion• Online tools• Telephonic support

114

Preventive Care (Insurance)

Health Savings Account

Deductible Gap

S.M.M.Insurance

• Ensures good health

• Neutralizes “hoarding”

• Part of the Insurance Plan

• Defined by IRS

• Employer HSA &/or Ee Contributions

• Interest earning Real Dollars in Real Accounts

• Legally Defined by 2003 MMA

• Balance rolls over year to year

• 100% Vested at Point of Contribution by Er

• 10% Penalty and Taxable Income for W/D for Non-health if <65

• Non-substantiation W/Ds

• Participant responsibility

• Can funded thru Employee Tax Advantaged HSA Contributions

• Can Not be Funded by FSA, HRA or other Insurance

1st Generation HSA/HDHP Prototype

Education and Decision-Support Tools

• Consumer education• Chronic disease

management• Health Promotion• Online tools• Telephonic support

115

Year 2: Employee elects $$ Option, maintaining $1,000 risk corridor.

Employee has $1,000 in claims, allowing Personal Account to carry over $1,000.

Personal Acct$1,500

Deductible$1000

Ins.

Personal Acct$1,500

Deductible$1500

Ins.

Personal Acct$1500

Deductible$2,000

Ins.

Year 1

$$$ Option

$$ Option

$ Option

Year 1

Year 3

Personal Acct$1,500 + $500

Deductible$1,500

Ins.

Personal Acct$1500 +$1,000

Deductible

$2,000

Ins.

Year 1: Employee elects $$$ Option with $1,000 risk corridor. Employee

has $1,000 in claims, allowing Personal Account to carry $500

over.

Year 3: Employee elects $ Option, again maintaining $1,000 risk corridor.

Employee no longer has a need for the $$$ Option.

HRA/HSA Healthcare Consumerism – Multiple Options

Year 2

116




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

117

2nd Generation Healthcare Consumerism

Focus on Behavior Changes. How to use plan design to effectively change health and healthcare purchasing behaviors with individual and group incentives/rewards.

Impact: Chronic & Persistent Conditions, Pre-Natal, Wellness & Preventive care.

Choices: Covered Benefits, Type and Level of Matching Funds and Incentives for Prevention, Wellness, and Disease Management Programs

118

2nd Generation Healthcare Consumerismwith Focus on Behavioral Changes

Healthcare Consumerism models require a shift in responsibility from the employer to the employee in the

purchase and use of health and healthcare. Communication, information, and education along with the reward system drives

this change.

Passive Users of

Health Care Services

Educated, Engaged, and Empowered Health Care Consumers

Basic Health Care Information

Benefit Education

Consumerism Behavior Support

Access to Information &

Decision Support

119

2nd Generation Behavioral Change a Key Determinant of Health

Today’s Health Care Environment and Trends

Determinants of Health

0%

10%

20%

30%

40%

50%

60%

Determinants 10% 20% 20% 50%

Access to Care

Genetics Environment Behavior

Source: IFTF, Centers or Disease Control and Prevention

120

Healthcare ConsumerismDrives New Behaviors from All Participants

Employee Active & EmpoweredPatient/Consumer, P4C

Passive Participant

Employer Plan Facilitator Financial Contributor

Primary Purchaser

Health Plan Enabler / Education & Information

Barrier

ProviderClinical and Service Standards, Care Manager, P4P

Contracted Supplier

121

Consumer Behavioral Changes

1. Focus on Preventive Care

2. Live Healthy & Safely

3. Use Nurse Line for Common Issues

4. Treatment Compliance for Chronic Persistent Problems

5. Consider Health and Healthcare Issues Together

6. Use Lower Cost / Higher Quality Alternatives

122

Consumer Behavioral Changes

7. Choose Rx Substitutions

8. Talk to Doctors as Informed Consumers

9. Be Compliance with Disease Mgmt Treatment Plans

10. Learn About Diagnosis/Condition

11. Act Like a Consumer - Demand Value and Service

12. Consider Plan as an Accumulated Asset rather than a Time Limited Benefit

123

Health Promotion Health Management

Chronic Disease Management

High Cost Case Management

Website Wellness AppraisalPatient Identification

and enrollment

Targeted Behavior

Modification

Care Coordination

Practice Guidelines

Healthy Lifestyle Promotion

Physical Activity Campaign

Address Comorbid Conditions

Integrated Services, Communications, Measurement and EvaluationIntegrated Services, Communications, Measurement and Evaluation

2nd GenerationPrograms to Change Behaviors

Acute Conditionse.g., Infections, Respiratory, Lacerations

Navigational Support

Patient Advocacy

Care Coordination

Address Comorbid Conditions

At Risk / Acute Condition

e.g., Inactivity, High Stress, Overweight, High Blood Pressure,

Lacerations, Infections

Chronic Conditions

e.g., Diabetes, Depression, Heart Disease, Asthma,

MS/SA

Catastrophic Conditions

e.g., Cancer, Hepatitis C, Head

Trauma

Well

e.g., Low Risk, Good Nutrition, Active

Lifestyle

124

2nd Generation Consumerism – Improving Health and Lowering Costs with Behavioral Changes

Low Users Medium Users

High Users

Very High Users

No Claims

Generally Healthy

Acute Episodic . Conditions .

O/P, Low In/P, High Maternity

Chronic & Persistent . Conditions . O/P, Low In/P, High

Catastrophic

% Mem 11% 29% 17%

9% 4% 18% 11% 1%

% Dollars

0%

2% 11% 17% 3% 18% 35%

14%

% Mem 40% 30% 30%

% Dollars 2% 31% 67%

Sample Impact Areas: Rx Rx Rx Rx Rx Rx Rx Office Visits Office Visits Hosp Admits Hosp Admits OfficeVisits Hosp Admits Hosp Admits DXL DXL, ER ER ER Specialists Specialists High Tech

Disease Management

Discretionary Expenses

Safety Programs, Regional

Centers of Excellence

Pre-Natal care

Evidence Based

Medicine

Evidence Based

Medicine

Stress Management / Health & Performance

125




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

126

3rd Generation Healthcare Consumerism

Focus on Health & Performance. How healthcare consumerism plan design and behavior change affects work performance and the corporate bottom line.

Impact: Manageable Costs - Organizational health, turnover, absenteeism, productivity, disability, and presenteeism

127

What are “Manageable Employment Costs”?

1. Health care: the dollars spent on health care whether self-insured or insured.

2. Turnover: the direct hiring costs, temporary replacement costs, learning curve costs, and lost productivity costs.

3. Presenteeism: the time an employee is at work and assumed to be productive, but is not productive.

4. Disability: the direct costs associated with workers’ compensation and non-occupational disability.

5. Unscheduled Manageable Absence: the cost of absence that could be positively influenced with proactive intervention.

Five components of “Manageable Employment Costs”:

128

3rd Generation Health & Performance Strategy

Health & Performance is a benefits strategy that is designed to balance the rising costs of health care while optimizing employee health & performance

through targeted, strategic, and value-added interventions.

Targeted, Strategic, Value-added Interventions

Better Health Employee Performance

129

3rd Generation –Incentives and Rewards

•

•Holistic Health & Productivity Focus • Culture of Health & Wellbeing

• Seamless Population Management• Shared Responsibility/Accountability• Organizational Alignment & Support

• Data Driven Process Excellence

Wel

lnes

s

Prev

entio

n

Dem

and

Man

agem

ent/

EAP

Dis

ease

Man

agem

ent

Cas

e M

anag

emen

t

Abs

ence

Man

agem

ent

Optimizing Individual and Organizational Health & Performance

3rd Generation “Account Based” Benefits and Incentives Platform

130

3rd Generation Health & Performance ROI

Health & Performance ROI will be measured by: Reduced unscheduled sick days Reduced paid time off Fewer disability claims, more and faster recoveries Reduced turnover Improved survey results on teaming, creativity, staff moral

Resulting in: More productive employees More effective employees Increased teaming, creativity, moral, workplace conflicts Better bottom line results

131

3rd Generation Creating the Health & Performance ROI

Keep in mind:

This is a multi-year strategy that results in cumulative savings over time

ROI estimates are based on static number of members

• expect more to enroll each year which will increase savings

Estimates assume the same benefit levels

• changes to the plan design could increase the ROI in the shorter term

132

Example of 3rd Generation Concept Consumerism Stress Management

Consumerism Stress Management is a process improvement methodology designed to quickly improve bottom line saving and progresses into a business strategy that optimizes a company’s human capital an innovation efforts.

Consumerism Stress Management emphasizes employee participation, the inclusion of corporate and operational performance metrics, and the power of the Internet to achieve savings by quantifying and positively influencing stress-related “Manageable Employment Costs”.

133

3rd Generation – Stress Management and Corporate Impact

21.5% of total health care costs

40% of the primary reasons that employees leave a company

50% of presenteeism is a function of stress

33% of all disability and workers’ compensation costs

50% of the primary reasons that employees take unscheduled absence days

Research suggests that stress has been directly attributed to:

134

Related / Imbedded Health Costs From Stress

Source of Demand Major Body Systems And Pressure Affected by Stress

Job Muscular System Family Digestive System Personal Cardiovascular Social Emotional Financial Endocrine, Immune Environment Cognitive

135




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

136

4th Generation Healthcare Consumerism

Focus on Lifestyle, Lifecycle, and Personal Health needs. How healthcare consumerism plan design and behavior change affects personal health and healthcare based on lifestyle and personalized needs.

Impact: Lifecycle needs, Personal health, genetic pre-dispositions, predictive modeling, healthy habits, and wellness.

137

4th generation – Individual Ownership and Portability

1. Ownership, security, and portability of the PCA.

2. Access to accounts post-employment.

3. Vesting will be important to employees to secure the value of the accounts.

4. Compared to HSAs, employees may ultimately expect “notional interest” on HRAs.

5. Demand for more immediate use of the funds for non-plan QMEs and use of HRAs for paying health premiums.

138

4th generation – Individual Ownership and Portability (cont.)

6. Added HRA credits from unused vacation or sick leave.

7. PCA will need to accommodate personal lifestyle expenses items such as, alternative medicines and acupuncture.

8. Ability to use debit/credit cards to cover internet purchases and cyber-office visits.

9. The IRS will have pressure to expand the definition of QME to cosmetic surgery and other personal care services.

139

4th Generation –Personalized Health and Healthcare

Based on genomics, predictive modeling, and push technology.

Preventive care will include both lifestyle and clinical factors.

Treatments will include culturally sensitive care and guidance

Cyber-health Aides - decision support systems and wireless connections that link each person to a personalized health and healthcare cyber-support system (e.g. diabetes phone).

Personalized Internet Search engines based upon individual profile health and healthcare needs. Cyber-support systems built to profile activity and anticipate areas of interest (e.g. TIVO/Travelocity)

Connected to services through monitors that will provide real time feedback on health status, lifestyle, and health concerns. (e.g. Health Buddy)

140

4th generation – Decision Support tools and Individual needs

“Arrive in time” information and services at critical moments for care.

“Information therapy” is the active use of patient oriented information with clinical evidence based medicine. Information needs to be embedded into the process of clinical care—as information therapy.

Potential areas for Information Therapy: Prostate surgery Back surgery ACL surgery Coronary artery bypass surgery Medication for depression End-of-life care Prescription of beta-blockers following heart attacks Early-stage breast cancer testing Colon cancer screenings Immunizations and eye test reminders for diabetics

141

Nondiscrimination Rules

Health plans may not discriminate against similarly situated individuals on the basis of a health status-related factor with respect to 1) eligibility for the plan, or 2) premiums for the plan.

Health plans may not charge an individual a higher premium than applies to similarly situated individuals because of health status-related factors.

However, health plans are allowed to make enrollment in the plan, or receipt of particular benefits, contingent on regular completion of health awareness or promotion activities that do not require individuals to satisfy a particular health standard. Moreover, employers are allowed to provide any kind of financial incentive to plan enrollees who provide documentation of completion of such activities.

142

Individuals & Health Status Factors

Health status-related factors include diagnosis of overweight, obesity, results of cholesterol tests and a history of overweight or eating disorders. They are defined in a variety of ways, as follows:

• Health status• Medical condition (including both physical and mental

illnesses)• Claims experience• Receipt of health care• Medical history• Genetic information• Evidence of insurability• Disability

143




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


information therapy





status related

The Consumerism

Grid

144

Task #9 - Additional Considerations for Building Blocks of Healthcare Consumerism

PCAs ______________________________________________________________ ________________________________________________________________________________________________________________________________________

Wellness____________________________________________________________________________________________________________________________________________________________________________________________________

Disease Management _________________________________________________ ________________________________________________________________________________________________________________________________________

Decision Support ____________________________________________________ ________________________________________________________________________________________________________________________________________

Incentives _________________________________________________________ ________________________________________________________________________________________________________________________________________

145

Task #10 – Create/Design Basic Framework of

MSFT Consumerism Options

Design: Deductibles, Copays, Coinsurance, Max OOP, Fund Balances, Wellness, Disease Mgmt, Incentives, Carve-outs, etc.

Traditional PPO Plan

PPO with HRA

PPO with HSA

Other

146

Potential Anti-Selection from Consumerism on an Optional Basis

Introduction of Consumerism on an optional basis will limit the cost reduction. In particular, with HDHP’s fewer members will be

impacted and are those selecting HDHP’s are likely to have an existing favorable health status (anti-selection). Companies and

members can benefit most by introducing consumerism with both a HDHP option and consumerism features for current plans.

Example - Selection in An Option Environment

OPTION # 1 OPTION # 2

% MembersParticipating

Clms/Part.Mbr. Vs Clms/All Mbrs.

RemainingMembers

Clms/Part.Mbr. Vs Clms/All Mbrs.

10% 75% 90% 103%

30% 85% 70% 106%

50% 100% 50% 100%

147

Design a PPO Plan

Preventive

Deductible

20% Coins to a Maximum OOP

100% Coverage100% Coverage

PPO 80% Coverage

In-Network

Traditional PPO

Preventive

Deductible



PPO 80% Coverage

In-Network

DesirablePPO

What would you Include?What would you Include?Any Coinsurance?Any Coinsurance?

How large of a Deductible?How large of a Deductible?

In-Network Coins?In-Network Coins?In-Network Max OOP?In-Network Max OOP?

OON Coins?OON Coins?OON Max OOP?OON Max OOP?

Plan Maximum?Plan Maximum?

Other: Other: Carve-out Vision, Dental?Carve-out Vision, Dental?

148

Design a High Deductible PPO/HRA Option

PPO 80% Coverage

In-Network

What would you Include?What would you Include?Any Coinsurance?Any Coinsurance?

How Large of a How Large of a Deductible Gap?Deductible Gap?




Other: Other: Carve-out or Incl.?: Rx, MH & SA, Carve-out or Incl.?: Rx, MH & SA, Vision, DentalVision, Dental

Preventive

HRA ($500-$1000) Deductible Gap ($500-1000)

20% Coins to a Maximum OOP $2-5,000


PPO 80% Coverage

In Network

PPO / HRA

Preventive

HRA

Deductible Gap


PPO __% Coverage In

Network OOP of $______

Sample PPO / HRA

How Much in Initial HRA?How Much in Initial HRA?

HRA Incentives?HRA Incentives?Wellness, DM. Other?Wellness, DM. Other?

__% Coins to a Maximum OOP of $_______

149

Design a High Deductible PPO/HSA Option

Preventive

HSA=($1000=2600)

20% Coins to a Maximum OOP $5000 (incl deductible)


PPO 80% Coverage

In Network

PPO / HSA

Preventive

HSA = _____

___% Coins to a Maximum OOP _______


PPO __% Coverage

In Network

Sample PPO / HSA What would you Include?What would you Include?

Any Coinsurance?Any Coinsurance?




Other: Other: Carve-out or Incl.?: Rx, MH & SA, Carve-out or Incl.?: Rx, MH & SA, Vision, DentalVision, Dental

How Much in Initial HSA?How Much in Initial HSA?

HSA Incentives?HSA Incentives?HRA Incentive?HRA Incentive?Wellness, DM. Other?Wellness, DM. Other?

150

A Unified Theory of Plan Design

All Medical Plans can be view as catastrophic plans with first dollar benefits funded by:

1. Post-tax self pay – Pure high deductible

2. Insurance – traditional HMO, EPO, POS, PPO, or Indemnity

3. Health Reimbursement Accounts (HRAs) - HRA with Deductible Gap

4. Health Savings Accounts (HSAs) – Legally defined High Deductible Health Plan (HDHP)

5. Flexible Spending Accounts (FSAs)

6. Combinations of the above

151

PPO Plans Differ Mainly in the Way Initial Dollars are financed

Preventive

HSA



PPO 80% Coverage

Preventive

HRA

Deductible Gap



PPO 80% Coverage

Preventive

Deductible



PPO 80% Coverage

Traditional PPO Insurance Funding of Early Expenses

PPO with HRA Funding ofEarly Expenses

PPO with HSA Funding of Early Expenses

Similar Catastrophic ProtectionSimilar Catastrophic Protection

152

Sample Consumerism PPO Plan Designs Traditional PPO

Insurance Funding of Early Expenses

PPO with Er HRA Funding of

Early Expenses

PPO with Voluntary Ee HSA Funding of

Early Expenses and Er HRA Match

Preventive 100% coverage

Voluntary Ee Funded HSA up to $1000

$1000 HRA Er Match to HSA to cover part of:

20% Coins to a Maximum OOP of $4,000


PPO 80% Coverage


Er HRA $1000

Deductible Gap $1,000



PPO 80% Coverage


Deductible $250



PPO 80% Coverage

Max OOP = $5000Max OOP = $5000

Max Ee Cost = $5000+PremMax Ee Cost = $5000+Prem

Max OOP = $5000Max OOP = $5000

Max Ee Cost = $5000+Max Ee Cost = $5000+Lower PremLower Prem

Max OOP = $5000Max OOP = $5000Min OOP = $4000 w/ HRA MatchMin OOP = $4000 w/ HRA Match

Max Ee Cost = OOP+Max Ee Cost = OOP++HSA+Lowest Premium+HSA+Lowest Premium

Incentive HRAs from Initial Incentive HRAs from Initial “$0” Balance“$0” Balance

Incentive HRAs from Initial Incentive HRAs from Initial $1000 Balance$1000 Balance

Incentive HRAs for Incentive HRAs for CY Co-Insurance OnlyCY Co-Insurance Only

153

Task #10 – Create/Design Basic Framework of

Healthcare Consumerism OptionsPPO PPO/HRA PPO/HSA Other

Preventive Care Benefits

Front-end Deductible

Beginning Account Balance

Deductible Gap

PPO Coinsurance – In/Net

PPO Coins Max OOP-InNet

PPO OON Coinsurance

PPO OON Coins Max OOP

Carve-out Programs: Rx, Vision, Dental

Incentives - DM

Incentives - Preventive Care

Matching Er HRA to Ee HSA

Other Decision Support Tools

154

Task #11 – Implementation Planning & Time Frames

The Challenges and

A framework for Implementation

155

Consumerism

Pay-for-Performance

Focus on High Cost / High Volume Users

Standardize IT Platforms

CollaborationBuilding the

Future Employer Benefits Program

Lower Costs,

Increased Employee Satisfaction,

Quality/Value Driven Healthcare,

Improved Access to Care

Healthcare ConsumerismDemand-Driven Healthcare

Employer Challenges in Developing a Healthcare Consumerism Strategy

Enterprise-wide Impact of Health & Healthcare

156

Communication Milestones

Employee Decision-Making Cycle

Awareness

Education

PracticalApplication

Acceptance

What is it?

How does it work?

What does it mean to me?

I accept thechanges

Co

mm

un

icat

ion

s P

roce

ss

Accept Health Plan as an Accumulating

Asset Rather than a Short Term Benefit

157


Focus on BehaviorChanges


Integrated Health &Performance


Focus onDiscretionarySpending



Personal Care Personal Care AccountsAccounts








Rewards


Rewards


100% Basic Preventive

Care

Web-based behavior change

support programs

Worksite wellness,safety, stress & error reduction

Genomics, predictive

modeling push technology


Compliance Awards, disease specific allowances

Integrated Hlth Mgmt, Population Mgmt, Integrated

Back-to-Work

Wireless cyber –support, cultural DM, Holistic care


Expenses



Health & performance info, integrated health work data

Arrive in time info and services, information

Therapy

Cash, tickets, Trinkets

Health Incentive Accts, activity

based incentives


Personal dev. plan incentives, health

status related

Time Frame for Implementation of Consumerism (may

be Dependent UponVendor Capabilities)

Yr__- __ Yr__-__ Yr__-__ Yr__-__


158




IntegratedHealth &

Performance



Spending





Rewards


Rewards


100% Basic Preventive

Care

Web-based behavior change

support programs

Worksite wellness,safety, stress & error reduction

Genomics, predictive

modeling push technology



specific allowances

Integrated Hlth Mgmt, Population Mgmt, Integrated

Back-to-Work

Wireless cyber –support, cultural DM, Holistic care


Expenses




work data


information therapy

Cash, tickets, Trinkets

Zero balance acct, activity

based incentives


Personal dev. plan incentives, health

status related

Integrated Health Management

A Logical Stake in the Ground ?

Personal Care Accounts

Wellness / Prevention Early Intervention

Disease Mgmt & Case Management

Information & Decision Support Tools

Incentives & Rewards

159

Education

Communication

Acute Case Mgmt

Utilization and Case Management

NETWORK A / TPA A NETWORK B / TPA B

Wellness

Prevention

Demand Management

Disease Mgmt Programs

Integrated Absence Mgmt

The secret is cooperation and synergy between

components supporting the corporate strategies

Integrated Health Management ProgramImplementation Option for Multiple Generations

General ManagerPersonal Care Accts.

FSAs, HRAs, HSAs

Process Integration &

Disciplined Im

provement C

ompa

ny D

ata

War

ehou

se &

Met

rics

160

Potential Savings & Actual Industry Results from Early Generation Implementations

More than just Theory and Promises

““To achieve transformation to a 21To achieve transformation to a 21stst Century Century Intelligent Health System, all participants Intelligent Health System, all participants must advance in a consistent way to the must advance in a consistent way to the

future model.”future model.”

161

The Value Proposition

5-8% Savings over 5 years with 2% lower trends

Low Range of Savings5% x 5 years + 2% x 5 years = 35%

High Range of Savings8% x 5 years + 2% x 5 years = 50%

20-35% lower Rx costsLow Range: 20% x 20% = 4%High Range: 35% x 20% = 7%

162

Potential Savings from Full Implementation of ConsumerismAchievement of savings and improved outcomes is dependent upon both

the Type and Effectiveness of the programs implemented.

Gross* Savings as % of Total Plan Costs(Programs Applicable to All Members)

EffectivePrograms

Implemented

Traditional plans

Consumerism Plans

Passive 1st Generation 2nd Generation 3rd Gen & Future

Basic 2% 3% 7% 10%

Expanded 3-4% 5-8% 12-15.0% 20.0+%

Complete 4% 7% 17% 25%

Comprehensive (Future) 5% 10% 20% 30%

*Excludes Carry-over HRAs/HSAs and any added Administrative Costs of Specialized Programs

163

Healthcare Consumerism

Experience Results

164

Aetna Health Fund (AHF)Product Type:HRA with high deductible PPOStudy by: AetnaStudy Basis: 13,800 members (19 groups) enrolled in AHF vs. “randomly selected similar

population” in traditional PPOComparison of Jan-Sept, 2003 to Jan-Sept, 2002 experienceReleased March, 2004

Results - 2003 Experience vs. 2002 Experience for Members Enrolled in AHF in 2003

1. 30% increase in preventive care office visits vs. 14% for traditional group2. 1.5% medical cost increase per employee per month vs. 15.7% for traditional group3. 5.1% decrease in ER visits, 10.3% decrease in outpatient visits, and 14.5% decrease in inpatient admits4. 51% with HRA balances left over5. 31% of total HRA dollars rolled over6. 48%+ more use (than traditional group) of consumer health info (e.g. Intellihealth)7. 100% more use (than traditional group) of pharmacy price and generic substitution information8. 13%+ more use (than traditional group) of online provider directories

Results - One Group with Integrated Pharmacy in the High Deductible Plan

11.1% decrease in prescriptions per 1000 for AHF members vs. 1.8% increase for traditional plans34-44% increase (2002 to 2003) in generic usage for AHF vs. 40-45% increase for traditional plans

165

United Healthcare

Product Type: HRA with high deductible PPOStudy by: United HealthcareStudy Basis: Two years experience for 20,000 members enrolled in traditional plan year one

and in iPlan year two Two years experience for 25,000 members enrolled in traditional plans for two years Released June, 2004

Results for iPlan Members

1. Higher registration rate on myuch.com than non-iPlan members2. Higher use of preventive services than non-iPlan members3. Decrease in total emergency room visits; indication of more selective, responsible use

of emergency services after enrollment in AHF (in year two)4. Reductions in the use of specialists, outpatient procedures, and radiology and lab in

year two5. Less than 1% (per member/per month) year-over-year cost increase when iPlan was a

full replacement6. Most iPlan members carried an HRA balance into 2004 7. In-network utilization was in the 90th percentile8. Satisfaction ratings greater than 90% with customer service and decision-support tools

166

HumanaProduct Type:SmartSuite Multi-Option plansStudy by: HumanaStudy Basis: 10,000 Humana employees in 2001-2002; 5.6% enrolled in consumerism plan

(SmartSuite), remainder in traditional HMO/PPO Released December, 2002Results

1. 5.6% enrollment in SmartSuite (consumerism) products2. Early adopters of consumerism were “super-healthy”, of average age, and of higher average salary

than non-adopters3. More SmartSuite enrollees waived dependent coverage4. Apparent “spillover” of behavioral changes to traditional products due to communications and tools

resulted in a 4.9% cost increase for 2003 for entire group (10,000 employees) vs. 19.2% projected trend

Plan Option PMPM: 7/1/01 – 6/30/02 Expected (Trended)

PMPM: 7/1/01 – 6/30/02 Actual

HMO $127 $139

Tiered PPO $163 $141

PPO Standard $101 $110

SmartSuite Option 1 $64 $39

SmartSuite Option 2 $78 $51

167

Definity Health (Now United Health Care)Product Type:HRA or HSA with high deductible PPOStudy by: Galen Institute Briefing on Consumer Choice Health CareStudy Basis: 85 self-insured clients with 300,000 consumer-driven members, experience for Jan-

Nov, 2003Released February, 2004

Results1. 10% enrollment average for first year clients where Definity is an option2. Enrollment from a broad demographic cross-section of the population, no apparent favorable

demographic selection3. Large claim (> $50K)incidence rate of 4.6 per 1,000 members compared to standard claim

distribution incidence rate of about 2.3 per 1,000 members4. 95% re-enrollment rate5. 90% member satisfaction6. Overall renewal increase over Definity book of business of 0% in 2003 and 3.2% in 20047. Average pharmacy utilization rate for groups range from .57 to .69 prescriptions per member

per month (12% below the low industry benchmark and 34% below the high industry benchmark)

8. Generic drug substitution rate of 95%, compared to “norm” of 85%9. Hospital admits of 44.3 per 1000 vs. “norm” of 59.0 per 100010. Hospital days of 162.1 per 1000 vs. “norm” of 200.0 per 1000

168

Actual Published Consumerism Experience

In 2004, Aetna consumerism plans showed cost increases of only 1.5% versus increases of more than 10% for traditional health plans. Employers that offered only consumerism plans had an average decrease in premiums of 2.9%.

In 2004, United Health Care showed average cost increases of less than 1% for consumerism plans. Humana, Blue Cross Blue Shield, and other health insurers are finding similar results from their new consumerism products.

Forrester Research predicts 24% of Americans will be covered under such plans by 2010.

169

Task #12 (Summary) - Medical Plan Costs and Potential Consumerism Savings Worksheet

Well

e.g., Low Risk, Good Nutrition, Active Lifestyle

At-Risk e.g., Inactivity, High Stress,


Chronically-Ill

e.g., Diabetes, Musculoskeletal, Heart Disease

Catas-trophice.g., Cancer, Rare Diseases


O/P (Low) In/P (High) Maternity O/P (Low) In/P (High) In/P (High)

Distribution of MSFT Med Costs

___% ___% ___% ___% ___% ___% ___% ___%

Avg $ Cost (000’s) $0 $____

$____

$____ $____ $______ $_____ $______

Est. CDHCSavings Pct.

0% 15% 12.5% 8% 5% 15% 20% 8%

$ CDHC Savings (000’s)

$0 $____ $____ $____ $_____ $______ $______ $______

Incremental HRA Costs

$____ $____ $____ $____ $_____ $______ $______ $______

AmountAmount Pct.Pct.

Est. CDHC Savings $_______ _____%

Incremental HRA Costs $_______ _____%

Net Annual Savings $_______ _____%

170

Consumer-Driven Healthcare Surveys

A Fad or Exponential Growth ?

171

Milliman 10/2004 CDHC Survey

89% of those responding expect to offer a CDHC plan to employers within the next year, up from 29% in last year's survey. Specifically, these 89% currently offer or plan to offer within the next year a high deductible plan with an integrated employee account (i.e., HRA or HSA).

Milliman Group Health Insurance Survey CDHC Available Currently or Within 2005

Offer a Tiered Offer a High Offer a % Prem

Provider Network Deductible Plan CDHC Plan From CDHC2004 Survey 42% 96% 89% 7.8% (in 2005)2003 Survey 17% 48% 29% 3.4% (in 2004)

Percentage of Respondents

172

Survey Information on CDHC

Mercer 4/2004

Nearly three-quarters (73%) of employers asked by Mercer Human Resource Consulting said they were likely to offer the new accounts to their workers by 2006, according to a survey to be released this week.

"We're looking at a major market change," says Linda Havlin, Mercer's Midwest health care practice leader, noting that a 73% interest in adopting a new program within two years "is unprecedented.“

Forrester Research 9/2003

Ronald Bachman, FSA, MAAA President & CEO Healthcare Visions, Inc.

Documents

Transcript of Ronald Bachman, FSA, MAAA President & CEO Healthcare Visions, Inc.