a step-by step approach to launching cdhps & hsas
DESCRIPTION
A Step-by Step Approach to Launching CDHPs & HSAs. The Healthcare Cost Problem Introducing a CDHP Design Preparing for an HSA Launch Launching the HSA Plan HSA Enrollment Results. Agenda. Sperian Protection: A Brief Introduction. - PowerPoint PPT PresentationTRANSCRIPT
•September 2007•Michael Vittoria
A Step-by Step Approach to Launching CDHPs & HSAs
2
The Healthcare Cost Problem
Introducing a CDHP Design
Preparing for an HSA Launch
Launching the HSA Plan
HSA Enrollment Results
Agenda
3
Sperian Protection: A Brief Introduction
World’s largest manufacturer of Personal Protective Equipment. Headquartered in Paris, France.
$1 billion global sales, $400m in the United States
1600 Employees in 14 Business Units in U.S.
10 Major locations in 9 States + National Sales Force
2007 US health insurance expense: $8.8 million
4
Sperian’s Cost Containment Challenge
1600 Employees in 14 Business Units in U.S.
5 Health Plans in 2002
Health Insurance Trend
• 2002 $6,616,212 (12.3% increase)
• 2003 $7,132,928 (7.8 % increase)
• 2004 $9,764,864 (36.9% potential increase)
Tried Contingent Premium
EmployerContribution
EmployerContribution
EmployeeContribution
2005
EmployerContribution
EmployeeContribution
2006
EmployerContribution
EmployeeContribution
2007
EmployeeContribution
2007
Funding Gap:
When will it occur and how much will it be?
20042001 2002 2003
5
Achieving Long-Term Cost Containment Required a Strategy
Key Elements of our strategy:
Support our overall business plan
Be consistent with our corporate culture. Understand our benefits relationship with our employees. What is it now and what do we want it to be in the future?
Be implemented in phases so that employees will be introduced to consumerism gradually, over time.
6
Health Cost Per Employee Per Year
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
Do
llars
Market Trend
PCI Hybrid Funding
Reduced Trend
Implement Tiered Choice
Increase Self-funding Level
ROI from Wellness
Initiatives
Implement HSA Program
Our Roadmap to Containing Healthcare Costs Over Time
ImplementHealth Behavior
Incentives
7
Our Solution: Phasing in a CDHP
Working with Primarily Care, Inc. (“PCI”) Sperian adopted a hybrid funding arrangement in 2004 to reduce health insurance premiums by carving out certain parts of our insured plans to be self-insured.
1 National PPO plan and 2 regional HMOs BCBS-RI Covers 1,013 Employees (274 in HSAs) A lower health cost trend
• 2004 $7,965,538 (11.7% increase)
• 2005 $8,320,981 (4.5 % increase)
• 2006 $8,622,024 (3.6.% increase)
• 2007 $8,846,197 (2.6.% increase)
3-year plan savings of $7.69 million Payroll deductions have remained stable for 4 years
8
Average Cost Per Employee - 2007
•Avg. Cost of PPO Plans Family Individual•Kaiser Survey (Sept. 2007) $12,443 $4,638•Sperian PPO Option $ 9,616 $3,640•Sperian HSA Option $ 8,685 $3,299•Source: Kaiser/HRET 2007 Survey of Employer-Sponsored Health Benefits, Exhibit 6.3
•Average Cost Per Employee – All Plan Types•Towers Perrin (2007) $8,748•Sperian $6,532•Source: 2007 Towers Perrin Health Care Cost Survey
9
Claims Reduced 20% Compared with Traditional PPO Design
0 50 100
Rx Drugs
Physician
Outpatient
Inpatient
Diagnostics
SperianBlue Cross
Comparison of Sperian Per Member Utilization with BCBS-RI Plan-wide Data for 2006 Plan Year
(18.7%)
(0%)
(28.3%)
(25.5%)
(22.8%)
$ $ $
10
The Healthcare Cost Problem
Introducing a CDHP Design
Preparing for an HSA Launch
Launching the HSA Plan
HSA Enrollment Results
Agenda
11
Components of a CDHP Hybrid Funding Plan
The Primary Insurance Plan
The Supplemental Plan
Flex Account (or an HSA) with a Debit Card
12
Advantages of the Hybrid CDHP Design
The Hybrid CDHP design permits employers to reduce cost while preserving benefits. By self-funding the deductible & coinsurance expense the employer accomplishes five things:
Significantly reduces overall health plan costs
Maintains present level of benefits for PPO participants
Raises employee awareness as to the value of the benefit they are receiving from the company because the company name is on the E.O.B.
Raises the level of employee awareness that health costs are increasing rapidly and that change is imminent
Prepares employees for taking more responsibility for their own health care purchasing and lifestyle
13
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000Deductible
Total Claim Value
Coinsurance
Paid by Insurance
$17,000
$2,000
20% to $3,000
HSA Platform as an HSA Specific Stop Loss
Example of the maximum self-funded exposure in a $6,000 family deductible HSA plan that is repackaged into a $2,250 employee deductible HSA Plan
Employee pays first $2,250 of claims
Sperian pays claims from $2,251 to $6,000
All Claims above $6,000 paid by health insurer
14
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000Deductible
Total Claim Value
Coinsurance
Paid by Insurance
$17,000
$2,000
20% to $3,000
HSA Platform as a PPO Specific Stop Loss
Example of the maximum self-funded exposure in a $6,000 family deductible HSA plan that is repackaged into a PPO with employee co-pays.
Employee pays PPO co-pays
and deductibles for all services on first $6,000
of claims
Sperian pays difference
between PPO co-pays and the cost of service on first $6,000 of claims
All Claims above $6,000 paid by health insurer
&
HSA
Platform
15
2007 Plan Comparison
PPO Option•Weekly Payroll Deduction:
$23 Single
$46 2-Person
$59 Family
•Deductible $500/$1,000
Everything but OVs & Rx
•Co-pays $15/$25 OV 25% Rx
•Use with Flex Account
HSA Option•Weekly Payroll Deduction:
$13 Single
$26 2-Person
$39 Family
•Deductible $1,100/$2,250
Up-front, cumulative
•OVs & Rx are FREE after deductible is met
•Use with HSA Account
Both Plans UseBoth Plans Use
16
The Healthcare Cost Problem
Introducing a CDHP Design
Preparing for an HSA Launch
Launching the HSA Plan
HSA Enrollment Results
Agenda
17
Listen Before You Launch
To help us understand the decision-making behavior of our employees when it come to health care decisions – and to help us plan our communication campaign, we held a series of focus groups around the company in June 2006:
71 Employees from 5 key locations
12 to 15 per session – mixture of salaried and hourly
Participants from all of our health plan options, plus non-participants
Each group followed a structured agenda with four main components that allowed us to capture consistent information for comparison and analysis:
Reasons for selecting their current plan option
A ranking exercise for key health insurance attributes
Understanding of how they make consumer decisions
Recommendations for improving plan communications and education
18
•Coverage Comprehensive Network, Providers & Services
•Cost Payroll & Out-of-Pocket Co-pays and Deductibles
•Convenience Easy to follow forms and processes
•Cash Flow Ability to pay as you go - with no surprises
2006 Focus Group Results - % of Responses
Ranking 1 2 3 4
Coverage 59 24 14 3
Cost 30 53 10 7
Convenience 8 11 44 37
Cash Flow 3 12 32 53
#
#
Most Common Response in the Category
Second Most Common Response
2006 Focus Groups: Ranking the 4 C’s
19
Focus Groups: Effective Communication
General Observations and Conclusions
Plan communications need to be broken down into a series of smaller, more targeted pieces leading up to enrollment meetings
Comparisons between key plan options must be described simply and clearly without a lot of unnecessary detail
Simple decision making calculators and tools are essential
General Observations and Conclusions
Plan communications need to be broken down into a series of smaller, more targeted pieces leading up to enrollment meetings
Comparisons between key plan options must be described simply and clearly without a lot of unnecessary detail
Simple decision making calculators and tools are essential
Buying Behavior
Willing to spend a lot of time researching a major consumer purchase (car, home appliance, computer purchase, etc.)
Will use a variety of information sources (print, friends, internet, legwork)
But - DO NOT want to spend a lot of time choosing a health plan
Buying Behavior
Willing to spend a lot of time researching a major consumer purchase (car, home appliance, computer purchase, etc.)
Will use a variety of information sources (print, friends, internet, legwork)
But - DO NOT want to spend a lot of time choosing a health plan
Communication Preferences
Keep it simple – use basic side-by-side comparisons
Health insurance is too complex – give us more time to make a decision
Give us tools (like online calculators and worksheets) to help determine how much it will cost us.
Communication Preferences
Keep it simple – use basic side-by-side comparisons
Health insurance is too complex – give us more time to make a decision
Give us tools (like online calculators and worksheets) to help determine how much it will cost us.
20
The Healthcare Cost Problem
Introducing a CDHP Design
Preparing for an HSA Launch
Launching the HSA Plan
HSA Enrollment Results
Agenda
21
Our Plan Design Strategy for 2007
Increase employee control, involvement and responsibility for their health care by:
Redesigning our PPO option to make more services subject to the deductible while maintaining our current 70/30 cost-sharing formula
Changing the Pharmacy co-pay to increase employee awareness of the true cost of their prescriptions
Introducing the next phase of Consumer Driven Health through an HSA compatible health plan with an up-front deductible
Making Health Savings Accounts available to employees to allow them to save for their current and future health care needs
It’s YOUR money – to keep, spend or save!
22
Explaining the Plan to Employees
Use multiple communication vehicles to get your message across:
Employee Meetings Webcasts Print
Intranet
Clearly explain what is changing – and what isn’t
Health insurance is a family decision – plan your communication for ease of use at home
Communication needs to be adaptable for bilingual/bicultural audiences
23
Targeted Employee Communications Campaign
24
HSA – FSA Comparison
FSA Account
•It’s a Spending Account
$3,000 max/yr.
Available Jan. 1 to use
Use it or lose it
•Tax Advantages
Pretax payroll deduction
Earns no interest
Tax-free withdrawals
•Leave your unused $$ behind if you leave the company
HSA Account
•It’s a Savings Account
$2,850/ $5,650 max/yr.
$250 Company contribution
Use it or save it
•Tax Advantages
Pretax payroll deduction
Savings can be invested
Tax-free withdrawals
•It’s YOUR money – take it with you if you leave the company
25
The Healthcare Cost Problem
Introducing a CDHP Design
Preparing for an HSA Launch
Launching the HSA Plan
HSA Enrollment Results
Agenda
26
2007 Enrollment Results
Based on 1219 Employees enrolled in a health plan option for 2007
23%
17%
60%HSAsHMOsPPOs
23% HSA Enrollment in Year 1
27
HSA Participants by Age
HSA Participants by Age
9%
22%
36%
25%
8%
Under Age 30
Age 30 - 39
Age 40 - 49
Age 50 - 59
Age 60 and Over
Based on 274 Employees enrolled in the HSA option for 2007
69% of HSA Participants Age 40+
28
HSA Participants by Income
HSA Participants by Income
34%
18%22%
15%
11%
Earn $30,000 or Less
Earn $30,001 - $50,000
Earn $50,001 - $75,000
Earn $75.001 - $100,000
Earn Over $100,000
Based on 274 Employees enrolled in the HSA option for 2007
52% of HSA Participants Earn < $50,000/yr.
29
Focus Group Comparison: “The Maslow Effect”
#2
#1
2007 Focus Group Results - % of Responses
Ranking 1 2 3 4
Coverage 45 30 5 20
Cost 29 39 27 5
Convenience 12 20 34 34
Cash Flow 14 11 34 41
2006 Focus Group Results - % of Responses
Ranking 1 2 3 4
Coverage 59 24 14 3
Cost 30 53 10 7
Convenience 8 11 44 37
Cash Flow 3 12 32 53
30
“Concierge Service” for Plan Participants
“Call Sara”
31
Mike VittoriaSperian Protection900 Douglas Pike
Smithfield, RI 02917
401-757-2111
Mike VittoriaSperian Protection900 Douglas Pike
Smithfield, RI 02917
401-757-2111
For More Information
Ed BeltPrimarily Care, Inc.75 Sokanosset CR
Suite 300Cranston, RI 02920
401-946-4441800-395-1300
ebelt@ primarilycare.com
Ed BeltPrimarily Care, Inc.75 Sokanosset CR
Suite 300Cranston, RI 02920
401-946-4441800-395-1300
ebelt@ primarilycare.com