©2018 ARTHUR J. GALLAGHER & CO. | AJG.COM
The Empowered Consumer: Out of the Box Thinking for
Controlling Healthcare CostGraham Thompson | Client Consultant
Charnique Walker, MBA | HR & Benefits Technology Leader, Western Region
2©2018 ARTHUR J. GALLAGHER & CO. | AJG.COM
Agenda
• Rising Cost of Healthcare
• Emerging Changes in the Healthcare Market
‒ Centers of Excellence
‒ Tiered Networks
‒ Value Added Plans
‒ Exclusionary Pharmacy
• Consumer Communication and Engagement
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Unsustainable Healthcare Cost
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Rising Healthcare Costs Factors
Unhealthy Lifestyles
Wasteful Spending
Medical Technology
Pharmacy CostAging Workforce
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Effects of Rising Healthcare Cost
For the
Employer
• Rising cost force employers to repurpose
healthcare spend
• Cost management tactics may disrupt
“destination employer” reputation
For the
Employee
• Healthcare cost shifted to employees
‒ Higher deductibles
‒ Higher co pays
‒ Higher premiums
• Healthcare cost rising faster than inflation
and employee wages
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Destination Employer
65% of employees are
more likely to recommend
their employer as a good
place to work because of
the benefits offeredLodestar
Benefits in the Workplace
Source: Career 1 Source
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Emerging Changes in Healthcare MarketStrategies and Tactics
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Employer Strategies
56%56% of employers have an
effective strategy to
manage healthcare cost
74%
74% of employers say
managing the cost of health
benefits is a top priority for
their organization
Gallagher
2017 Benefits Strategy and Benchmarking Survey
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Centers of Excellence
A facility recognized for providing the highest levels of leadership, quality, service
and best practices in certain fields
Centers
Evaluation
Criteria
Procedure Success and Survival
Rates
Quality of Medical Professionals
Involvement in Clinical Research
Patient Satisfaction
Number of Patients Treated
Treatment Planning &
Coordination
Program Depth and Breadth
Quality of Patient Services
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Healthcare Savings
Hig
her
Qualit
y C
are
Low
er H
ealth
care
Cost O
vera
ll
Center of Excellence Facility's
Outcomes
• Fewer procedure
complications
• Avoid preventable patient
readmissions
• Shorter hospital length of stay
• Higher survival rates
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$38,251
$33,544
$23,013 $24,308
$5,710
$21,664 $21,664
$15,729 $13,179
$3,459
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
HipReplacement
KneeReplacement
Lap Band Hysterectomy KneeArthoscopy
Cost Comparison
Non Centers of Excellence Centers of Excellence
Center of Excellence Case Study
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Domestic Tourism
• Narrow Center of Excellence network out of
state for specialized surgeries
• Lower cost, better care
• Compensation package offered to utilize
programs
• Walmart & LowesINC, Magazine “Domestic Medical Tourism”
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Value-Based Designs
quality of care, healthcare cost by,
Traditional Fee-for-service medicine
$ incentives to promote cost-efficient
care and consumer choices
Increased quality, decreased cost
TRANSTITING FROM
IMPLEMENTING
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Program Fundamentals
Increase level of integration between health plans and healthcare providers
Value Outcomes Preventative care
Volume Outputs Emergency care
Promoting educated healthcare spend by
reducing barriers for improving health by
lowering consumer cost for “high value”
services and providers
Fee-For-
Service
Focus
Value
Based
Plans
Focus
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Program Incentives
Empowering employees to take charge of personal health &
wellbeing requires program transparency and education
Incentives for “high value care”
• Deductible adjustment
• Reduced Copays
• Fund-based plan contributions
• Reduced out-of-pocket spend
Disincentives for “low value care”
• Higher cost sharing
• Increased cost for non-evidence
based treatments/services
• Increased cost for non-formulary/non-
preferred brand Rx
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Health Management Case Study
Annual Physical Incentive: $50 Per Month
• Overall 17% reduction in ER utilization
• Large Claims:
o Participants large claimants per 1000 are half the
incidence rate on Nonparticipants
• Prescription Costs:
o Participants trending at 3%
o Nonparticipants trending at 35%
• Inpatient Admissions:
o Participants down 5%
o Nonparticipants up 50%
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Health Management Case StudyPharmacy Cost Per Employee Per Year Medical Cost Per Employee Per Year
High Cost Claimants per
1000 participants
Arthur J. Gallagher and Kirby Corporation
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• Narrow: Less provider choice, lower premium
• Tiered: Broad network of providers and more flexibility for
members
– Differing cost-sharing between tiers
– Incentivize preferred providers with low cost sharing
• Consumer directed healthcare
Narrow & Tiered Networks
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How Tiered Networks Work
Incentivize members to utilize preferred providers
while not limiting their choice of providers
$ $$ $$$
Source: Premera Blue Cross
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Healthcare Savings
Source: The Commonwealth Fund, 2017
On average, tiered
networks decrease
healthcare
spending by 5%
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Pharmacy
20%
RX cost contributes to
nearly 20% of
healthcare cost
Percentage of Americans Using
Prescription Drugs by Age
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Exclusionary Pharmacy
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Wellness Programs
Education & activities organizations can do to promote healthy lifestyles
Source: Gallup “State of the American Workplace”, 2016.
Members with higher
overall well-being have
41% lower health
related cost than
members struggling
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0Suffering Struggling Thriving
$11,709
$7,388
$4,395
ANNUAL HEALTH-RELATED COSTS TO
EMPLYER, BY WELLBEING CATEGORY
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Short-term vs. Long-term ROI
• Smoking
• Poor eating habits
• Lack of exercise
• Emotional health
• Cancer
• Pre-diabetes
• Obesity
• Depression
• Diabetes
• Heart Disease
• Emphysema
• Amputation
• Heart Attack
• Hospitalization
Intervention Can Avoid Intervention Can Avoid
Lifestyle Management Programs Disease Management Programs
Benefits are realized in longer term Benefits are realized in shorter term
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Communication & Engagement
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Consumer Centric Healthcare
Engaging the consumer as a partner in healthcare can be cost
effective and improve outcomes.
Doctor knows best Consumer Knows Best
Shifting to
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Action and
Engagement
Rational Understanding
Emotional Connection
Employee Engagement
Employer communication is key
in employees Healthcare
engagement journey
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Education is Essential
50% of employees do not
understand their employee
benefit materials
Source: International Foundation of Employee Benefit Plans
2016 Benefits Communication Survey Results
50%
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Decision Support Tools
• Cost and quality transparency
tools
• Find providers that fits individual
needs
• Break decisions down in easy steps
• Make plan information easy to
evaluate
Help Me Use Tools
Help Me Choose Tools
Empowered Consumer
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• Educate employees on the
“buying” process
• Help them make educated
decisions
• Right coverage for employee
and employee’s family
How to Choose
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How to Choose: Case Study
New hire; paper enrollment with side-by-side comparison plan
Employee picks HDHP with HSA; learns nothing
about how plan works
Ski weekend disaster!
Bills start arriving
HDHP deductible kicks in; no contribution to HSA
Unhappy & frustrated employee
© 2018 GALLAGHER BENEFIT SERVICES, INC.
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How to Choose: Case Study
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How to Choose: Decision Support
Video-based platforms
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How to Choose: Decision Support
• Existing platforms
• Standalone platforms
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****
**
*****
Option C
*****
****
**
Option D
***
**
*****
Option A
*****
***
**
Option B
How to Choose: Decision Support
• Interactive questionnaire:
– Risk tolerance
– Current financial
situation
– Current health
– Current provider
relationships
35
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How to Choose: Product Bundle
• Employee
demographic data
• Input from the
employee
• Recommended
bundled productsBUNDLEDPRODUCT
HSA
Critical
Illness
HDHP
Vision
Dental
Life
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How to Choose: CDHPs
• Low cost-sharing / high
deductible
• Requires active engagement in
purchasing decisions
• Attractive to:
– Healthy individuals with
higher health literacy &
desire to control spending
• Employees will still need help!!
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How to Use: Transparency Tools
• Cost
• Quality
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How to Use: Transparency Tools
• Geolocation
– Personalized plan information
– Claims data
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How to Use
• Real time cost & quality
• Real time comparison
history
• Carrot or stick strategy
• Personalization through
advocacy
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How to Use: Location, Price, Cost & More
• Beyond location and
price
• Real-time experiences
– Treatment options
• EOB-like tools
– Total cost understanding
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How to Use: Health Organizer
• Online EOBs
• Obeo tool– Itemized expenses
– Flags overcharges
– Decision support
• Education challenges still apply
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How to Use: Financial Optimization
• Your FSA and HSA vendor
• Interactive tools
– Mine data
– Uncover insights
– Identify opportunities
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How to Use: Improving Healthcare Outcomes
• Navigating health care
ecosystem
– Established, personalized
digital relationship
– Gaps in care
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How to Use: Healthcare Outcomes
• Aggregators
‒ Programs
‒ Service providers
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App-based
Uses all available data to provide personal, digital
outreach
Consistent, comprehensive messaging
Administrator ease of adding / removing programs
Holistic administrator view
How to Use: Healthcare Outcomes
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User Interface
• Simplifies learning
process
• User experience based on
frequency
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$$
BIG DATA
Big Data
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The Future: Pulling it all Together!
• Big data
• Cognitive reasoning
• Artificial intelligence
• Personalized responses
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Recruitment
Benefits Enrollment
Leveraging Big Data
HR & Benefits Technology
Administrative Strategic
Impact of Technology
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In Review
• Understand emerging changes in the healthcare market
• How other employers, healthcare providers and insurance companies are
implementing consumer focused plan designs
• Tactics for integrating these approaches in your benefit program strategy.
©2018 ARTHUR J. GALLAGHER & CO. | AJG.COM
Questions?
Graham Thompson | Client [email protected]
425.974.4427
Charnique Walker, MBA | HR & Benefits Technology Leader, Western Region
415.536.8606