how to design and implement a consumer-driven health care plan april 30, 2003 9am to 12pm presented...
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How to Design and Implement aConsumer-Driven Health Care PlanApril 30, 2003 9AM to 12PM Presented by:
Consumer Driven Healthcare
“Unleashing the Power of Free Market Economics on the Healthcare Industry”
Workshop Agenda
Note: 50% of this Workshop will be spent on Part IV (below): Designing & evaluating real solutions for real companies taken from the Benemax case files.
Part I: What is CDHC? - The Benemax Perspective Part II: The CDHC Tool Box - Kinder, Gentler
Strategies Part III: Implementing CDHC: Analysis to Evaluation Part IV: Interactive Case Studies of Benemax’ Clients
What a CDHC Plan DOES
Provides member with Targeted Incentives & Tools: to stay healthy to consume health care carefully to shop for health care prudently
Varies member cost based on health care behavior
Rewards members with below median health care costs
What a CDHC Plan does NOT
Shift Cost by: Increasing employees’ premium share Raising members’ co-pays Imposing up-front deductibles
Raise employees’ cost across the board regardless of health regardless of consumption pattern regardless of purchasing decisions
Who needs a CDHC Plan?
National Health Care Cost Increases vs. GDP & Inflation Employee Productivity Corporate Revenue & Household Income
Employer’s Health Care Cost Increases vs. Sales Profits Payroll
Health Benefit Cost Trends
1993 - 1999: 4% per year average
2000 - 2002: 12% per year average
2003: 16% projected
. . . the average company pays 3% of revenue for health care benefits – up 50% in five years
2.0%2.1%
2.2%
2.4%
2.7%
3.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1998 1999 2000 2001 2002 2003
Health care as percent of revenue
CAGR=9%
Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity estimated based on first 3 Quarters)
Health care costs are growing much faster than productivity (revenue per employee)
$183,067$187,110
$194,153 $195,994
$205,087
$3,676
$3,963
$4,336
$5,456
$4,778
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
1998 1999 2000 2001 2002
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
Revenue per employee
Healthcare costs per employee
Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity estimated based on first 3 Quarters)
CAGR=3%
CAGR=10%
Healthcare increases are rapidly consuming the growth in household income
39%
65%
4%7%
1999 2000 2001 2006
—Annual increase in household income
—Portion used to pay increases in healthcare premiums and out-of-pocket expenditures
* 2002 estimate based on 2001 growthSource: U.S. Census Bureau, Kaiser Family Foundation, UHC Analysis
100% =$2957
100%=$2293
100% =$1073
100% =$1093
Why CDHC Works
Consumerism
The Claim Cost Curve
Incentives & Tools
Why CDHC: Consumerism
Patients shop for quality & price
Providers compete for patient traffic
Patients subject treatment options to cost/benefit analysis
Why CDHC: The Claim Curve
20% of claims = 1/2% of patients 50% of claims = 3% of patients 87% of claims = 31% of patients
69% of patients = 13% of claims
Median patient = $500 non-Rx claims
Member Health Care Expenditure
8%
24%
69%
60%
26%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Healthy Transitional Chronically Ill/High Risk
% Members % of Dollars
($1-$999) ($1,000-$4,999) ($5,000-$100,000)
$30 pmpm
$176 pmpm
$1,259 pmpm
Why CDHC: Incentives & Tools
Patients have incentives & tools to stay healthy
Patients have incentives & tools to consume carefully
Employers have incentives & tools to promote health
2
The Impact of Employee Absence
Fact: Employees absent from work due to disability drivethe majority of your employee medical costs.
UnumProvident Disability & Health Pareto Analyses 2001. Sample size of 225,000 employees of which 22,000 filed disability claims. Dataprovided by Options and Choices, Inc., a UnumProvident Corporation subsidiary that specializes in disability reporting and analysis.
PP-126-39 (02-03)
2
The Impact of Employee Absence
Fact: Employees absent from work due to disability drivethe majority of your employee medical costs.
UnumProvident Disability & Health Pareto Analyses 2001. Sample size of 225,000 employees of which 22,000 filed disability claims. Dataprovided by Options and Choices, Inc., a UnumProvident Corporation subsidiary that specializes in disability reporting and analysis.
PP-126-39 (02-03)
3
STD Claim Duration and Claimant Medical Costs
Based on approximately 4,300 short-term disability claims over 36 months from 1999 through 2001.Costs are adjusted for medical inflation and for claims incurred during the study period but notexpected to be reported until a later date. These adjustments are made using historical experience.
Fact: Employers may impact medical costs by focusing on absencemanagement to reduce the duration of disabilities.
PP-126-39 (02-03)
Part II: The CDHC Tool Box
Wrap Technology: employer funds claims underneath a high deductible plan
Flexible Spending Account: employee funds claims costs with pre-tax dollars
Health Reimbursement Account: employee builds a long term benefit bank with employer funded dollars
The Road to CDHC
The Virtual Indemnity Plan
The Virtual HRA (Health Reimbursement Account)
FSA with Optional Employer Funding
Triple Option Plan
True CDHC: HRA
Blended Approaches
The Virtual Indemnity Plan
Employer buys a high deductible plan: HMO, POS or PPO $500 to $5,000 up front claims corridor Premium Savings from 15% to 50%
Employer “self-funds” the deductible: Employer determines desired ultimate benefit level
Net savings vs. Fully Insured funding: 10% to 20%
The Virtual HRA
Employer buys a high deductible plan: HMO, POS or PPO $500 to $1,000 up front claims corridor
Employer deposits 100% of deductible into HRAs: Employees are fully indemnified against added cost Employees can carry unused funds into second plan year
Employer sets employees’ expectations: Lower HRA contribution in year 2 & beyond and/or higher deductible Gives employees a year’s grace to adjust to new philosophy
Why Consider a Virtual CDHC?
Reduces fixed premiums by 15% to 50% Gives Employer a Stake in Employees’ health & behavior Limits Employer Risk ($500 to $5k per member) Gives Employer credit for Employees’ good experience Gets around Community Rating & Small Group Reform Focuses Employees’ attention on health & behavior Incents Employer to introduce health & health care tools
Gives Employer unlimited plan design flexibility
FSA/Optional Employer Funding
Introduces Employees to a corridor of claims cost liability Employees can pre-fund claims liability with pre-tax $$ Employer can “seed” FSAs with uniform contribution Funds not used for medical can be reallocated to the cost of
vision care, dental care or alternative health therapies Employees become aware of costs and behaviors Employees incented to use health & health care tools But funds unused at year end are forfeited
Triple Option Plan
One high deductible base plan (HMO, POS or PPO) Multiple benefit options underneath Gold = Virtual Indemnity Plan (100% benefits &
freedom) Silver = Base Plan + FSA + HRA Bronze = Base Plan + FSA Only Employer sets cost of options to be “revenue neutral” Employees pay cost differential with pre-tax $$ All options Employer cost same for all options
True CDHP: HRA
High deductible plan (HMO, POS, PPO) Employer funds Health Reimbursement Accounts for ees HRA = an employee’s Virtual Benefit Bank Employee’s allowed out-of-pocket medical costs are paid from
that bank until funds are exhausted Any unused “bank balance” at year end can be rolled over and
used in the next plan year
28 Flavors of HRA
May be limited to certain “core” out-of-pocket costs... Health plan deductible only Health plan deductible & co-insurance only
…Or extended to cover other health care expenses: Dental, vision & alternative therapies Health plan co-pays
Rx drugs, well care and/or office visits may be separate May pay before or after FSA
Blended CDHC Approach
Tier One: Employer funded HRA for each employee Tier Two: Employee claim liability corridor FSA: Employee pre-funds liability with pre-tax $$
unused funds may be allocated to vision, dental, alternative therapies
employer may “seed” FSA in lieu of a formal dental or vision plan
Tier Three: Employer claim liability corridor (The Wrap) Tier Four: Fully insured contract with unlimited benefits
Part III: Implementing CDHC
Analyze the Situation Survey Employees Set Corporate Objective
Design the Solution Obtain insurance quotes Optimize claims cost breakpoint(s)
Implement the Plan Communicate, educate & enroll Deliver concierge service Measure results
Analyze the Situation
Current plan cost & proposed increase Employee cost share & cost sharing formula Current pay scale & planned increases Current benefits Industry norms (competitors): pay & benefits Current Labor market
Survey the Employees
Attitude toward benefits Attitude toward health & health care Benefit priorities Satisfaction assessment Identify current health & health care behaviors
Set Corporate Objectives
Acceptable total increase (if any) Acceptable employee cost increase (if any) Acceptable benefit reduction (if any) Immediate savings required (if any) Target employer budgets for next three plan years
Design the Solution
Identify qualified, competitive insurance carriers Inventory carriers’ CDHC - friendly products Analyze Claim Distribution Stats (ER specific or global) Optimize net savings from ‘wrap’ vs. pure insurance Determine optimum HRA/Deductible breakpoint Modify to reflect corporate objectives & survey results
Communicate the Solution
Begin 60 days out (if possible) - no sooner
Explain Company’s Dilemma & its Options
Present CDHC Design & Compare to other Options
Enrolling CDHC
On-site Group meetings of about 15 employees each Individual counseling available
And On-line CDHC tutorial, FAQs, Q&A Web based enrollment
On-going Education & Service
Permanent Web Site (“Virtual Benefit Manager”) Plan Summary CDHC tutorial & FAQs On-line Q&A
Follow-up Meetings 45 days & 120 days after implementation on-site or via web cast/conference call
Call Center (“Independent Patient Advocate”) Staffed by experienced benefits professionals Working for employees, not insurance company Delivering concierge level service to each plan member
Measuring Results
Repeat employee survey annually Note changes in attitudes, priorities & reported behaviors Measure changes in employee satisfaction Solicit and respect design or service suggestions
Measure changes in claims distribution curve Compare actual claims cost & plan cost vs. projections Compare insurer’s renewal vs. prior & national trend Tweak plan design to optimize future year results
Part IV: Interactive Design
Actual Benemax Cases industry, company size, benefits in force current costs & employee cost share proposed renewal & benefit/cost history labor market & employer’s objectives
Interactive Solution Designed by Workshop Group Compare with client’s actual decision
Evaluation of Client’s Plan Client’s implementation problems/issues (if any) Client’s results to date Comparison of client’s experience with Group’s proposal
CDHC: It’s all about Incentives
Incentives for employers to promote employees’ health Incentives for employees to optimize their own health Incentives for patients to avoid unnecessary care Incentives for patients to shop for high value care Incentives for providers to compete for patients
Summary
There are many styles of CDHC CDHC does not mean cost shifting Introducing CDHC can be a gradual process Every employer can take at least one step toward CDHC.
Thank you for your time today. David Cowles Benemax 800-528-1530 X17 Dave@Benemax.com
Version 2.0 12/02/02 10:25am
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