Download - Kinder, Gentler CDHC Plans - Strategies for Gradual Implementation & Minimal Cost Shifting
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Kinder, Gentler CDHC Plans -Strategies for Gradual Implementation &
Minimal Cost ShiftingPresented by: David CowlesVice-President
Benemax - The Benefit Management Co.
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Seven West Mill St.
Medfield, MA 02052
1-800-528-1530
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Benemax Founded in 1975
First Consumer Directed Health Plan: 1986
First Consumer Directed Dental Plan: 1988
Independent Patient Advocate: 1995
Web Based Benefit Management: 1998
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Who is “The Consumer” in a CDHC Plan?
* Employee> Own Health> Own Money
* Employer> Majority of employee health care cost> Lost productivity (15%) due to disability
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What Makes CDHC Work?
* Consumerism* Tools & Incentives
> to stay healthy or get healthier> to consume cost effectively
* The Claim Cost Curve
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The Claim Cost Curve
* 20% of claims = 1/2% of members* 47% of claims = 3% of members* 87% of claims = 31% of members
* 69% of members = 13% of all claims
* Median non-Rx claim cost = $500
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8%
24%
69%
60%
26%
13%
0%
10%
20%
30%
40%
50%
60%
70%
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
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The Impact of Disability
* 10% of all employees file a disability claim* 55% of all claims come from disabled ees* Absence Management = Return to Work
> 30% reduction in average length of disability> 40% reduction in average health claim cost
* Only employer can manage disability claims
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The Impact of Employee AbsenceFact: 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)
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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 per iod 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)
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Kinder, Gentler CDHCStep #1 - The Wrap
* Employer adds a High Deductible to Plan> HMO, POS or PPO> $500 to $5,000
* Employer Self-funds that Deductible
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The Wrap - Results
* Reduces premium by 20% to 50%* Reduces net cost by 10% to 20% * ER benefits from good experience* ER incented to promote health* ER incented to promote consumerism* ER has greater plan design flexibility
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* Employer funds HRAs = New Deductible
* Employer sets Employees’ Expectations:> Deductible increase or HRA decrease in year 2+
* Employer introduces tools:> Promote health> Educate consumption
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Virtual HRA - Results
* 10% to 20% net savings year one* Employees become cost conscious year one* Year of grace before any cost shifting* Year to improve health (using tools)* Year to adjust consumption (using tools)* Year to build-up benefit bank (HRA balance)
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Step #3: FSA
* Employer adds corridor of employee liability* Employer contributes to employees’ FSAs* Employees may also contribute: pre-tax $$* Employer introduces health tools* Funds may be used to pay for:
> employee’s health plan claims liability> dental, vision & alternative care expenses
* Funds unused at year end are forfeited
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Employer Funded FSA - Case Study
* HMO Renewal = +15%; Goal = +5%* Add $500 (2x fam) deductible; Renewal = 0%* Contribute 5% to employees’ FSAs ($300 ea)* Employees may fund additional cost pre-tax* FSA may pay any IRC 213 expenses
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Kinder, Gentler CDHC Step #4: Triple Option Plan (TOP)
* Employer buys a base high deductible plan* Employer self-funds options below deductible* Employees choose: Gold, Silver, Bronze* Employees pay more for richer options* Employer cost = same for all options
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TOP - Sample Employee Options
* Gold = Virtual Indemnity Plan (100% benefit)
* Silver = Base Plan + HRA + FSA
* Bronze = Base Plan + FSA only
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TOP - Case Study
* Renewal = 20%; Goal = 0%; EEs pay 20%* Add $1,000 deductible; Renewal = 0%* Gold: EE cost up 100%; no benefit change* Silver: EE cost up 50%; $500 HRA* Bronze: No EE cost change; $1k deductible
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Kinder, Gentler CDHC Step #5: The Blend
* Employer buys high deductible base plan* Employer sets lower employee deductible* Employer “wraps” the deductible difference* Employer funds HRA @ 50% of ee deduct* Employees may fund net claims cost via FSA
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The Blend - Case Study
* Renewal Rates = $370/980* Employer buys plan with $3,000 deductible* Member deductible = $1,000 (2x family)* Employer “wraps” the $2,000 difference* Employer funds HRA @ $500 ($1k family)* Employees may fund net claims cost via FSA
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The Blend - Case Study Results
* Premiums reduced 40%: $222/588* “Wrap” cost = $0 on 69% of members* HRA pays 100% of cost for median member* HRA + FSA tax savings = 65% of deductible* Wrap + 1st year HRA + Admin = $60/160* Net Plan Cost Savings: 24%
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Summary
* Employers can save $ without shifting cost:> Take maximum advantage of claim cost curve> Provide health & health care tools> Manage absence toward “back to work”> Incent employees to measure health care behavior> Provide employees health & health care incentives
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David CowlesVice President
Benemax – The Benefit Management Company
1-800-528-1530