ronald bachman, fsa, maaa president & ceo healthcare visions, inc

Ronald Bachman, FSA, MAAAPresident & CEO

Healthcare Visions, Inc.

Chairman, IHC Editorial Advisory Board and League of Leaders

[email protected]

A Roadmap for

Making Healthcare Consumerism Work

A Pre-Conference Session on how to structure your next healthcare consumerism strategic planning

session

Pre-conference BONUS: A Priimer on Government & Private Exchanges, and ACOs.

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

A 1.5 Day Agenda to Develop a Healthcare Consumerism Strategy

Day# 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 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 for 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

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

IHC WorkbookIHC Workbook ImplementationImplementation ResultsResults

15

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

16

Preliminary Actuarial Work & Issues

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

17

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

Saving Account Options / HRA, HSA, & Account Credits

Combinations and interactions of “Building Blocks”

Costsharing structure

Contribution strategies

Participation

18

Supply Controls or Demand Controls

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

1. Traditional 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.

19

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

20

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.

21

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

22

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)

23

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

24

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

25

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”

26

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

27

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

28

Consumerism Choices Involve Options for Behavioral Change

Consumerism Choices:

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

29

Consumer Driven Healthcare Traditional PPO Alignments

Building Blocks

Employer Plan Member(Consumer)

TPAs/Insurer

Providers

Personal Care Accts

Account Options

Create Savings

Admin. Accounts

N/A

Health Management

Worksite Wellness

Healthy Lifestyle

Benefit Designs

Prevention,Primary Care

Disease Management

Access to Specialists

Treatment Compliance

EBM & Protocols

Standards of Care

Decision Support

Communication Education Decision Tools

Medical Counsel

Incentives Financier Pay for Compliance

Admin. Pymts.

Negotiated Rates / P4P

CDHC Focus Facilitator, Coordinator

Empowered, Responsible

Enabler Care Manager

FOCUS on Behavior Change of Members

30

Healthcare ConsumerismIDS / ACO Alignments

Building Blocks

Employer Plan Member(Patient)

Provider TPAs/Insurer

Personal Care Accounts

Acct. Options

Create Savings

N/A Administer Accts.

Health Management

Worksite Support

Healthy Lifestyle

Prevention,Primary Care

Benefit Designs

Disease Management

Access to Specialists

Treatment Compliance

Standards of Care

EBM & Protocols

Decision Support

Communication Education Information Therapy

Tools

Incentives Pay for Risk

Pay for Compliance

Pay for Performance

Pay for Administration

Healthcare Consumerism

Accountable Plans

Acct’ble Health

Acct’ble Care

Acct’ble Administration

FOCUS on Patient - Provider Relationship

31

Consumerism – Much Broader than HDHP & Consumer-Driven Healthcare

Consumerism is Consumerism is A StrategyA Strategy

************************************It’s about moving from a “benefit” It’s about moving from a “benefit”

to an “accumulating asset. It’s to an “accumulating asset. It’s about increasing one’s human about increasing one’s human

capital”capital”

32

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 & Incentives

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, workplace health & safety

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

33

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

34

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

35




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 & services, info therapy,

social networking

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

36

Personal Accounts

Health MgmtWellness/Prevention

Condition Management

Information Decision Support

Incentives & Rewards

Longevity

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

“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)

2013 Monthly limit – 1/12th of lesser of deductible or $3,250 (self-only), $6,450 (family), indexed

Catch-up contributions, to $1,000 annually in 2013

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 20% penalty - 20% penalty waived in case of death or disability - 20% 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

2014 HSA Eligible HDHPHigh Deductible Health Plan – By Law

Self-only: a deductible of at least $1,250; maximum HSA is $3,300; no more than $6,350 maximum out-of pocket expenses (incl. Ded.)

Family coverage: a deductible of at least $2,500; maximum HSA is $6,550; no more than $12,700 on out-of pocket expenses (incl. Ded.)

2014 Age 55 and over catch up amount of $1,000

Preventive services are not subject to the deductible

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

THE ABOVE 2014 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 $1250-3250 Single

$2500-6450 Family 5. Non-substantiation

1 Must give Cash Option 2. Awards must be same $ amt or same % of deductible 3. HSA can be used (with 20% penalty) for non- healthcare expenses

1. All participants must receive same amount or same % of deductible 2. Difficult to use for Group Incentives

1. 100% Vested & Portable 2. Can use matching HRAs, 3. 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-based

Defined 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




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction

Genomics, predictive modeling push

technology



specific allowances


Work


Holistic care


Expenses




work data

Arrive in time info & services, info therapy.

Social networking





status related

The Consumerism

Grid

57

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

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

58

Task #5 - Wellness, Prevention, and Early Intervention

The Promise of Wellness

59

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.

60

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

61

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

62

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

63

Wellness – Examples for Employer Sponsored Programs

Common Programs Health Risk Appraisals 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)

64

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 Health Risk Appraisal (Wellness Assessment)* 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

65

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

66

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.

67

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

68

•A Quest Diagnostic report showed 60% of employees who participate in wellness programs report that the incentive is a deciding factor in their choice to participate.

•Incentives have been so successful in increasing participation that approximately two-thirds of the employers who invest in employee wellness use an incentive to drive employee participation.

•Bio-metrics (e.g. blood pressure, cholesterol, body mass index, waist size, and A1(c)) are popular as measuring standards for improved outcomes.

Quest Diagnostic Report

69

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

70




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data

Arrive in time info and services,

information therapy





status related

The Consumerism

Grid

71

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

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

72

Task #6 - Disease Management Programs

The Promise of Health

The “Holy Grail” of Cost and Quality Improvements

73

Disease or Condition Management – the Holy Grail of Potential Savings

Primary cost drivers are chronic disease and serious acute conditions.

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)

74

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

75

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.

76

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

77

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

78

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

79

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

80

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.

81

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

82

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

83

Passive Assertive Aggressive Program Type: Phone and mail

outreach, 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

84

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

85




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


social networking





status related

The Consumerism

Grid

86

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

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

87

Task #7 - Decision Support Tools

The Promise of Transparency

&

The “Right to Know”

88

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

89

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%

90

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

91

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

92

A PricewaterhouseCoopers study found that nearly a third (32%) of consumers has used some form of social media for

healthcare purposes.

The self-absorbed “Me” generation is giving way to sharing communities on Facebook, Picassa, Linked-In, Plaxo, and

YouTube.

PwC Study

93

Consumerism – a new force

Consumerism

can be a force to address

quality and cost variations

in a given market

94

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

95




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


social networking





status related

The Consumerism

Grid

96

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

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

97

Task #8 - Incentives, Rewards,

The Promise of Shared Savings

Pay for Compliance&

Pay for Performance

“Two sides of the same coin”

98

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 20% of the cost of employee-only coverage; PPACA allows up to 30% in 2014). 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.

99

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 20% of the cost of coverage; 30% under PPACA in 2014).

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

100

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.


101

Rewards & Incentives for Smoking Cessation

The NGBH conducted a Quick Survey 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.


102

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

103

The Evolution of Encouraging Personal Responsibility

Plan DesignEducation

Incentives & RewardsParticipationEngagementComplianceOutcomes

Health Status

103

104

The National Business Group on Health and Fidelity Investments survey:

* 73% of Employers used incentives in 2011 in their health improvement programs.

* The average incentive value was $460 (2010:$430 and 2009: $260). * Incentives used by employers include cash, gift cards and contributions

to health savings accounts (HSA). * A small but growing percentage of employers link eligibility for

enrollment in their health care plans to participation in health improvement programs.

* 7% of employers in 2011 required completion of a health risk assessment for employees to be eligible for health care plan coverage, and

* 10% will link completion of an HRA to plan eligibility in 2012.

The survey is based on the responses of 139 employers, ranging in size from 1,000 employees to 100,000 employees.

NBGH Study

105

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


106




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


social networking





status related

The Consumerism

Grid

107

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

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

108

Review of

Plan Design Concepts

by

Generation

Task #9 – Viewing Healthcare Consumerism by Generations

109

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

110




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


Social Networking





status related

The Consumerism

Grid

111

A recent Rand study found that when people shifted into health insurance plans with deductibles of at least $1,000 per person, their health spending dropped an average of

14 %.

Health care spending also was lower among families enrolled in high-deductible plans that had HSAs.

Account based plans are a good start, but if the goal is to change member behaviors and to engage them to make

better informed health and healthcare decisions more than a new plan design is needed.

Rand Study

112

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

113

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

114

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

115

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

116

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

117

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

118

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

119

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

120




IntegratedHealth &

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Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


social networking





status related

The Consumerism

Grid

121

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

122

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”:

123

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

124

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

125

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

126

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

127

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”.

128

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:

129

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

130130130

3rd Generation Stress ManagementThe Corporate Costs of Mental Illness

Medical Intensity

Type of Condition

Direct MHCosts

Co-Morbid Conditions

Indirect Corporate Costs

LowCost

FrustrationAnxietyLow StressMinor Depression

LOWTobacco UseSleeplessnessColds/FluBlood Pressure

Moderate–HIGHIncreased ErrorsPresenteeismLoss of Teaming

MediumCost

Moderate StressDepressionAngerAttention Deficit PostTraumatic Stress

MEDIUMHypertensionMusculoskeletalDigestiveGastrointestinal

Moderate-HIGHUnsch AbsencesPoor MoraleRelation ConflictsLost Productivity

HighCost

High StressMajor DepressionSchizophreniaBipolar DisorderObsessive CompulsivePanic DisorderAnorexia-Bulimia

HIGHCardiovascularCancerDiabetesAsthmaBack PainAlcoholism

HIGH-VERY HIGHLow ProductivityDivorceTurnoverEarly RetirementWorker’s CompDisability

Catastrophic ViolenceSuicide

HIGH AccidentsBurns

VERY HIGHDeathWork ViolenceDisaster Recovery

131




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data


Social Networking





status related

The Consumerism

Grid

132

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.

133

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.

134

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.

135

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)

136

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

137

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.

138

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

139




IntegratedHealth &

Performance



Spending












Rewards


Rewards




programs


reduction


technology



specific allowances


Work


Holistic care


Expenses




work data

Arrive in time info and services,

information therapy





status related

The Consumerism

Grid

140

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

PCAs ______________________________________________________________ ________________________________________________________________________________________________________________________________________

Wellness____________________________________________________________________________________________________________________________________________________________________________________________________

Disease Management _________________________________________________ ________________________________________________________________________________________________________________________________________

Decision Support ____________________________________________________ ________________________________________________________________________________________________________________________________________

Incentives _________________________________________________________ ________________________________________________________________________________________________________________________________________

141

Task #10 – Create/Design Basic Framework o 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

142

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%

143

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?

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?

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

144

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 $_______

145

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?

146

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 Arrangements (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

147

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

148

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 $1250

$1250 HRA Er Match to HSA to cover part of:

20% Coins to a Maximum OOP of $4,800


PPO 80% Coverage


Er HRA $1000

Deductible Gap $1,000



PPO 80% Coverage


Deductible $500



PPO 80% Coverage

Max OOP = $6000Max OOP = $6000

Max Ee Cost = $6000+PremMax Ee Cost = $6000+Prem

Max OOP = $6000Max OOP = $6000

Max Ee Cost = $6000+Max Ee Cost = $6000+Lower PremLower Prem

Max OOP = $6000Max OOP = $6000Min OOP = $4800 w/ HRA MatchMin OOP = $4800 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

149

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

150

Task #11 – Implementation Planning & Time Frames

The Challenges and

A framework for Implementation

151

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

152

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

153


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& services, info therapy, Social Networking

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__-__


154




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

Arrive in time info & services,

info therapy, social networking

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


155

Revealing the 5th Generation

A New Developing Generation of Healthcare

Consumerism

156

Personal Accounts

Health MgmtWellness/Prevention

Condition Management

Information Decision Support


Longevity

157

A PricewaterhouseCoopers study found that nearly a third (32%) of consumers has used some form of social media for

healthcare purposes.

The self-absorbed “Me” generation is giving way to sharing communities on Facebook, Picassa, Linked-In, Plaxo, and

YouTube.

PwC Study

158

5th Generation Healthcare Consumerism

1. From Personalized (self) to Community (others)2. From Health to Productive Longevity 3. From Self-help to helping Others4. From Being Served to Sharing

5. From Taking to Giving6. From Secular to Spiritual7. From Monetary to Emotional8. From Head (logic) to Heart

159

5th Generation Consumerism Longevity Basics

1. Move Naturally – Be Active Without Thinking About It2. Painlessly Cut Calories by 20%3. Avoid Meat & Processed Foods4. Drink Red Wine in Moderation5. Take Time to See the Big Picture

6. Take Time to Relieve Stress7. Participate in a Spiritual Community8. Make Family a Priority9. Surround with Others who Share Values

Adapted from Blue Zone by Peter Buettner

160

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

161

Potential Savings & Actual Industry Results from Early Generation Implementations

More than just Theory and Promises

““To achieve transformation to a future model To achieve transformation to a future model of healthcare consumerism, all participants of healthcare consumerism, all participants

must advance in a consistent way to the must advance in a consistent way to the future model.”future model.”

162

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%

163

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

164

Healthcare Consumerism

Experience Results

165

American Academy of Actuaries 2009 Non-partisan CDH Consumerism Studies

• 1st Year Savings: The total savings generated could be as much as 12 percent to 20 percent in the first year.

– All studies showed a drop in costs in the first year of a CDH plan from -4 percent to -15 percent. A control population of traditional plans experienced increases of +8 percent to +9 percent.

• 2+ Year Savings: At least two of the studies indicate trend rates lower than traditional PPO plans by approximately 3 percent to 5 percent.

– If these lower trends can be further validated, it will represent a substantial cost-reduction strategy for employers and employees.

• Cost Shifting: The studies indicated that while the possibility for employer cost-shifting exists with CDH plans, (as it does with traditional plans) most employers are not doing so, and might even be reducing employee cost-sharing under certain circumstances.

165

166

2011 Rand Study of CDHCs

The largest-ever assessment of high-deductible health plans finds that while such plans significantly cut health spending, they alsoprompt patients to cut back on preventive health care, according to a 2011 RAND Corporation study.

Studying more than 800,000 families from across the United States, researchers found that when people shifted into healthinsurance plans with high deductibles, their health spending dropped an average of 14 percent when compared to families in healthplans with lower deductibles.

Health care spending also was lower among families enrolled in high-deductible plans that had moderate health savings accounts sponsored by employers.

167

Experience Results

• Aetna reported in 2011 that employers who switched to account-based health plans as their only plan option had saved $21.8 million per 10,000 members over the past five years.

• Cigna published a 2012 study concluding that employers can save an average of $9,700 per employee over five years by switching to account-based health plans.• According to Towers Watson and the NBGH, companies that successfully move their employees into account-based health plans can achieve significant savings on their health benefit costs. For example, companies with at least half of their workers enrolled in an account-based health plan report that their per-employee costs are over $1,000 lower than companies without an account-based health plan.

168

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 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 $_______ _____%

169

Ronald E. BachmanChairman

IHC Editorial Advisory Board

President & CEOHealthcare Visions, Inc.

[email protected]

Government Exchanges

170

Gov’t (Public) HealthInformation Exchanges

(GHIEs) &

Gov’t (Public) Health Insurance Marketplaces

(GHIXs)

171

Government Health Information Exchanges (GHIEs)

Typically transmit healthcare-related data among: facilities, health information organizations, and agencies according to state or federal standards.

The purpose of these Exchanges is to improve healthcare delivery, information gathering, and transparency.

These Exchanges are an integral component of the health information technology infrastructure under development in the United States.

172

PPACA Health Insurance Exchanges(Overview)

The Patient Protection & Affordable Care Act (PPACA) established government (public) health insurance exchanges.

Who: Government Health Insurance Exchanges are for:1. individual purchasers of health insurance, and 2. small groups (small group exchanges are defined by states and can be up to 50 employees or 100 employees).

When: Effective January 1, 20141. American Health Benefit Exchange (AHBE for individuals), and 2. Small Business Option Program (SHOP for groups).

The word “Exchange” can be confusing. PPACA defines gov’t health insurance exchanges (both federal and state-based). However, “Exchange” can refer to a “Health Information Exchange” (HIE), a “Health Insurance Exchange” (HIX).

Because of the confusion “Marketplace” has generally replaced the original use for Insurance Exchanges. There are both government (public) and private forms of Information Exchanges and Insurance Exchanges (Marketplaces).

173

Employer Mandate for Large Group Employers(50 or more)

Employer Shared Responsibility PaymentsA penalty of $2,000 times the number of full-time employees minus

30 employees if the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange.

If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and gets a tax credit subsidy to buy insurance through an Exchange, then the annual penalty is the lesser of (a) the penalty for the employer mandate, or (b) $3,000 times the number of full-time employees who received a tax credit to buy insurance through the Exchange.

173

174

Employer & Individual Mandate(Fewer than 50 employees)

Employers with fewer than 50 employees are exempt from the employer mandate to provide insurance.

Small Employers can provide a tax advantaged “Defined Contribution” through a state allowed Health Reimbursement Arrangement.

Individuals are mandated to buy insurance (can purchase from public or private exchanges or directly from insurers).

If individuals don’t buy health insurance the minimum tax is $95 per person in 2014 and going to $695 in 2016 (up to 3-times for a family indexed for inflation in subsequent years). The maximum penalty is 2.5 percent of taxable income.

175

Government Health Insurance Exchange Marketplaces (GHIXs)

GHIXs are the entities for PPACA mandated private insurance, mandated coverage, provide premium subsidies, control plan designs, set premium levels (or require approval of rate increases), shift funds among carriers through risk adjusters, and establish state or nationwide insurance mandates.

Subsidies may be available to individuals purchasing insurance thru GHIXs. Small employers may also be eligible for a tax credit to offset the costs of group insurance.

Used to identify individuals eligible for gov’t programs such as Medicaid, High Risk Pool coverage, and Children’s Health Insurance Plans.

176

PPACA Exchanges Defined (GHIXs)

A central provision of PPACA requires the establishment of exchanges in each state—online marketplaces through which eligible individuals and small business employers can compare and select health insurance coverage from participating health plans.

Begin enrollment by October 1, 2013, with coverage to commence January 1, 2014.

States have some flexibility with respect to exchanges by choosing to establish and operate an exchange themselves (i.e., state-based), or by ceding this authority to Health & Human Services (HHS) – (i.e. federally facilitated).

177

Governance Models of State-based GHIXs

States may run one statewide exchange, regional exchanges within the state, or participate in a multi-state exchange.

Can be governed by a state agency (new or existing), a quasi-governmental agency, or a non-profit entity.

GHIX ModelsActive purchaser: Exchange uses the market leverage of enrollees to evaluate plan bids and selectively offer plans, and/or negotiate to restrict cost growth of plan offerings.

The Massachusetts Health Connector is an example of an active purchaser.

178

Governance of State-based GHIXs(Continued)

Market Facilitator or Open Marketplace: Exchange relies solely on qualified health plans meeting minimum standards for entrance into the exchange, and allows market forces to set plan premiums.

The Utah Health Exchange is based on the market facilitator model.

179

State Plan Management: Plan management functions include the collection and analysis of plan information, plan monitoring and oversight, and data collection and analysis. Health & Human Service (HHS) will coordinate with the state regarding plan oversight, including consumer complaints and issues with enrollment reconciliation.

State Consumer Assistance: A state would oversee in-person consumer assistance, manage direct assistance helping people sign up for insurance, and conduct outreach. HHS would be responsible for other consumer assistance functions including call center operations, managing the consumer website, and written correspondence with consumers to support eligibility and enrollment.

Both Plan Management & Consumer Assistance: If electing this option, states would perform both these functions.

GHIX Partnerships

180

GHIX Implementation

48 States and D.C. were eligible to establish GHIXs. HHS provided grants of $1 M to each state for research and planning to determine how Exchanges could be operated and governed.

Add’l funds were provided to develop state-based GHIXs.

Exchanges under the PPACA are government agencies or non-profit organizations where private health insurance policies are offered to individuals and small groups with PPACA eligibility and coverage mandates, including premium subsidies for low income individuals.

181

GHIX Implementation

GHIXs with fully insured individual plans will be available in 2014.

Fully service SHOP GHIXs with multiple insurer options have been delayed until 2015. Single insurer option may be available 2014.

States needed to show progress in establishing GHIXs by January 1, 2013 or a federal Exchange may be implemented in those states.

Until 2016, states can set Exchange eligibility at 50 or 100 employees.

In 2017, states may include employers with more than 100 employees.

183

Percent of FPL (2013)Family Size 100% 133% 150% 200% 300% 400%

1 11,490 15,282 17,235 22,980 34,470 45,960

2 15,510 20,628 23,265 31,020 46,530 62,040

3 19,530 25,975 29,295 39,060 58,590 78,120

4 23,550 31,322 35,325 47,100 70,650 94,200

5 27,570 36,668 41,355 55,140 82,710 110,280

6 31,590 42,015 47,385 63,180 94,770 126,360

7 35,610 47,361 53,415 71,220 106,830 142,440

8 39,630 52,708 59,445 79,260 118,890 158,520

Federal Poverty Level (FPL) Charts48 Contiguous States and DC

For family units of more than 8 members, add $4,020 per person

184

Essential Benefits

PPACA defines required essential benefits as ten broad categories of coverage:

(1) Ambulatory Services, (2) Emergency Services, (3) Hospitalization, (4) maternity and Newborn Care, (5) Mental Health and Substance Abuse Services, (6) Prescription Drugs,

(7) Rehabilitative Services, (8) laboratory Services, (9) Preventive and Wellness and Chronic Disease

management Services, & (10) Pediatric, including oral and vision care.

185

Essential Benefits by State (State selected Reference Plan)

New HHS guidelines have proposed the adoption of a state-based “benchmark” approach. Rather than HHS defining essential benefits for all, each state can choose a “reference” plan from the following:

•The largest plan by enrollment for any of the three largest small group insurance products in the state;•Any of the largest three state employee benefit plans;•Any of the largest three national Federal Employee Health Benefits Program plans; or•The largest commercial HMO plan in the state.

186

If a state does not choose a reference plan, HHS will use the largest plan by enrollment in the small group market. The chosen benchmark must satisfy coverage requirements in all ten essential benefit categories.

A health plan will be required to offer benefits that are “substantially equal” to the state reference plan. Plans can adjust benefits, including both the specific services covered and any quantitative limits, provided all ten categories of the essential benefits are covered.

The variations by state could produce problems for self-funded plans operating in multiple states, as every state could have different mandates for essential benefits.

Essential Benefits Default Plan

187

Location EHB Benchmark Plan Name Plan Type Pediatric

DentalPediatric Vision

Mental Health

Includes Habilitative Services

United States

26 Recom’ed 25 Default

NA2 State Ee plan 45 Small grp plan 4 Commerc’l HMO

21 CHIP 29 FEDVIP 1 Incl’d

3 CHIP 42 FEDVIP6 Incl’d

48 Incl’d 3 FEHBP

30 Yes 21 No

Alabama Default BCBS of AL- 320 Plan, PPO Small group plan FEDVIP FEDVIP Included Yes

Alaska DefaultBCBS of AK- Alaska Heritage Select Envoy, PPO

Small group plan FEDVIP FEDVIP FEHBP Yes

Arizona Recom’edState of Az Self-Insure (Admin by United), EPO

State employee plan FEDVIP FEDVIP Included No

Arkansas Recom’edHMO Partners Open Access POS

Small group plan CHIP FEDVIP FEHBP No

California Recom’ed Kaiser- Sm Grp, HMO Small group plan CHIP FEDVIP Included Yes

Colorado Recom’edKaiser- Ded/CO HMO 1200D

Small group plan CHIP Included Included No

Conn Recom’ed ConnectiCare, HMO Commercial HMO CHIP FEDVIP Included No

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013

188


Dental Pediatric Vision

Mental Health


Delaware Recom’dHighmark (BCBS of DE)- Simply Blue, EPO

Small group plan

CHIP FEDVIP Included No

District of Columbia

Recom’d

Group Hospitalization and Medical Services (CareFirst BCBS)- BluePreferred, PPO

Small group plan

FEDVIP FEDVIP Included Yes

Florida DefaultBCBS of FL- BlueOptions, PPO

Small group plan

FEDVIP FEDVIP Included No

Georgia DefaultBCBS of GA- HMO Urgent Care 60 Copay

Small group plan


Hawaii Recom’d

Hawaii Medical Service Association (BCBS)- Preferred Provider Plan 2010, PPO

Small group plan



189

Location EHB Benchmark Plan Name Plan

Type Pediatric Dental

Pediatric Vision

Mental Health


Idaho DefaultBlue Cross of ID- Preferred Blue, PPO

Small group plan


Illinois Recom’dBCBS of IL- BlueAdvantage Entrepreneur, PPO

Small group plan


Indiana DefaultAnthem (BCBS)- Blue Access, PPO

Small group plan


Iowa DefaultWellmark (BCBS)- Alliance Select, PPO

Small group plan


Kansas Default

BCBS of KS- Comprehensive Major Medical, PPO

Small group plan

CHIP CHIP Included No

Kentucky Recom’dAnthem (BCBS), PPO

Small group plan

CHIP CHIP Included Yes


190



Mental Health


Louisiana DefaultBCBS of LA- GroupCare, PPO

Small group plan


Maine DefaultAnthem (BCBS of ME), Blue Choice, PPO

Small group plan

FEDVIP Included Included Yes

MarylandRecommended

CareFirst (BCBS)- HMO HSA Open Access

Small group plan

CHIP FEDVIP FEHBP Yes

Mass.Recommended

BCBS of MA- HMO Blue

Small group plan

CHIP Included Included Yes

MichiganRecommended

Priority Health, HMO

Commercial HMO


Minnesota DefaultHealth Partners- Small Group Product, PPO

Small group plan



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Mental Health


Mississippi Recom’dBCBS- Network Blue, PPO

Small grp plan

CHIP FEDVIP Incl’d Yes

Missouri DefaultHealthy Alliance (BCBS)- Blue Access Choice PPO

Small grp plan

FEDVIP FEDVIP Incl’d Yes

Montana DefaultBCBS of MT- Blue Dimensions, PPO

Small grp plan


Nebraska DefaultBCBS of NE- Blue Pride PPO

Small grp plan


Nevada Recom’dHealth Plan of Nevada UHC- POS C-XV-500-HCR

Small grp plan

CHIP FEDVIP Incl’d No

New Hampshire

Recom’dAnthem (BCBS)- Matthew Thornton Blue, HMO

Small grp plan



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Mental Health


New Jersey DefaultHorizon (BCBS)- HMO Access

Small grp plan


New Mexico

Recom’dLovelace- Classic, PPO

Small grp plan

CHIP Included Incl’d Yes

New York Recom’d Oxford, EPOSmall grp plan

CHIP Included Incl’d Yes

North Carolina

Recom’d1BCBS of NC- Blue Options, PPO

Small group plan

FEDVIP FEDVIP Incl’d No

North Dakota

Recom’dSanford Health, HMO

Comm’l HMO

CHIP CHIP Incl’d No

Ohio Default

Community Insurance Company (Anthem BCBS)- Blue Access, PPO

Small grp plan



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Pediatric Vision

Mental Health


Oklahoma DefaultBCBS of OK- BlueOptions, PPO

Small group plan

FEDVIP FEDVIPIncluded

Yes

OregonRecommended

PacificSource- Preferred CoDeduct Value, PPO

Small group plan

CHIP FEDVIPIncluded

No

Pennsylvania Default Aetna, POSSmall group plan


No

Rhode IslandRecommended

BCBS of RI- Vantage Blue PPO

Small group plan


No

South Carolina

DefaultBCBS of SC- Business Blue Complete, PPO

Small group plan


No


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Mental Health


South Dakota

Recom’dWellmark (BCBS)- Blue Select, PPO

Small group plan


Tennessee DefaultBCBS of TN, PPO

Small group plan


Texas DefaultBCBS of TX- BestChoice, PPO

Small group plan


Utah Recom’dUtah Basic Plus State Employee Plan, HMO

State employee plan

Included Included Included Yes

Vermont Recom’d

The Vermont Health Plan (BCBS of VT) - BlueCare, HMO

Commercial HMO



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Pediatric Vision

Mental Health


Virginia Recom’dAnthem (BCBS)- KeyCare, PPO

Small group plan


Washington Recom’dBlue Shield- Regence Innova, PPO

Small group plan


West Virginia

Default

Highmark (BCBS of WV)- Super Blue Plus 2000, PPO

Small group plan


Wisconsin DefaultUnited- Choice Plus, POS

Small group plan


Wyoming DefaultBCBS of WY- Blue Choice Business, PPO

Small group plan



196

Ronald E. BachmanChairman

IHC Editorial Advisory Board

President & CEOHealthcare Visions, Inc.

[email protected]

Private Exchanges & ACOs

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Private Health Information Exchanges(PHIE)

Typically web-based portals providing consumer health and health care information.

These Exchanges provide individuals and company health plans with medical and clinical education, treatment options, care costs, provider quality metrics, repositories for personal medical records, and much more.

Others may provide medical information and online clinical care.

Examples: WebMD, MDLiveCare

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Comparison of Public & Private Insurance Exchanges

Public Exchange Private Exchange

Sponsor Gov’l Entity – either state or fed’l government (the default if no state-based exchange)

Private Company

Product/Service Offerings

PPACA qualified medical benefits: Medical, Dental, Vision through multiple carriers

Medical, Dental, Vision and other products: Life insurance, disability, supplemental products (e.g. cancer, legal, HO, Auto) through a single or multiple carriers

Target Market Individuals and Small Groups up to 50 or 100 Ees (varies by state)

Small & Large Groups: Active employees and retirees of companies plus dependents

Financing Individual, small employer, federal gov’t with subsidies up to 400% of FPL

Consumer and employer

Mercer’s Private Exchange Pulse Survey, 2013

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Private Health Exchanges (PHIXs)

When: Some local exchanges have been operating for many years.

New regional and national private exchanges may start operating in 2013 and 2014.

PPACA increased awareness and the need for a new health insurance purchasing system.

In addition, some of the private exchange developers hope to get a share of the PPACA government exchange business.

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Private Health Insurance Marketplaces(PHIXs)

What: Typically are web-based portals focusing on consumer guidance and information for the private purchase of health insurance.

These Exchanges serve as marketing and lead generation sites for brokers/agents.

Individual and group product descriptions, premium estimates, and purchases can be made online or by follow up with an agent.

Private sites may also provide information and guidance for those eligible for government insurance options (Medicaid, CHIP, or Social Security Disability).

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Employer Mandate for Large Group Employers(50 or more)

If the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange the penalty is $2,000 times the number of full-time employees minus 30 employees .

If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and gets a tax credit subsidy to buy insurance through an Exchange, then the annual penalty is the lesser of (a) the penalty for the employer mandate, or (b) $3,000 times the number of full-time employees who received a tax credit to buy insurance through the Exchange.

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Employer & Individual Mandate(Fewer than 50 employees)

Employers with fewer than 50 employees are exempt from the employer mandate to provide insurance.

Small Employers can provide a tax advantaged “Defined Contribution” through a state allowed HRA.

Employees are mandated to buy insurance (can purchase from public or private exchanges or directly from insurers).

If employee doesn’t buy health insurance the minimum tax is $95 per person in 2014 and going to $695 in 2016 (up to 3-times for a family indexed for inflation in subsequent years). The maximum penalty is 2.5 percent of taxable income.

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Types of PHIXsby Sponsor

Business group PHIXs: developed from existing employer associations. Typically will ensure portability for ees, but only when the ee moves between participating ers and health plans.

Insurer-sponsored PHIXs: developed for insured policyholder, making it easy to move current small es into an exchange and allow individual ees a wider choice of health plan design. The portability (the ability of a consumer to keep the same coverage as they move between jobs) is available to individuals moving companies covered by the same insurer.

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Types of PHIXs (continued)by Sponsor

Independent companies: developed with various sponsorships, existing relationships, and business models.

These companies include existing information technology vendors, consultants/brokers, and entrepreneurs.

These players seek to meet the needs of existing health industry customers, employer groups, and broker clients. They see the opportunity to expand on existing services and technology to create new businesses in a growing market.

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Types of PHIXs by Carrier Offering

Single-carrier Exchanges: These exchanges are promoted by a single payor. They target employers that wish to maintain some role in choosing both the insurance carrier and plan design

Multi-carrier Exchanges: Promoted by brokers or benefits consultants to provide a broad range of payor and plan design options. Multi-carrier exchanges typically list individual products on a menu of offerings.

206206

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Potential for PHIXs

• The mid- and large-group markets that will not be involved in the state-based federal PPACA exchanges.

• Er costs: fixed and controllable using HRAs (Defined Contributions).

• Ees: will be able to choose their plan design.

• Coverage will eventually be portable, so employees can keep the same coverage as they change or lose jobs.

• Unlike individual coverage today, the Ee contributions may be made tax free through using a Sec. 125 payroll deduction.

• Two-income families may be able to use contributions from different Ers to purchase a single plan for the whole family.

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Value of PHIXs

Employers Employees

Cost Reduced Cost &/or Defined Contribution

Cost Efficient, Convenient Purchasing

Convenience Simplified Administration

Comprehensive Coverage

Choice Empowered Employees

Personalized Coverage,

Supplemental Products

Mercer’s Private Exchange Pulse Survey, 2013

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PHIX and Voluntary Products

% Employers offering Supplemental Products

Accident Insurance 43%

Cancer / Critical Illness Policies 38%

Auto / Homeowners Insurance 3%

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% Employees wanting to Increase Some Benefits and Decrease Others

Group Size

1-499 35%

500-999 45%

1000-4999 42%

5000 or more 39%Mercer’s Private Exchange Pulse Survey, 2013

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Types of PHIX by Business Model

The Group Model: there may be as many as 20 different health plans for an employee to choose from but they’re all in a group platform and they are generally from just one carrier.

Individual Model: Individual insurance policies. Especially good for smaller groups that have not been offering group insurance and can’t meet the minimum participation of funding requirements of the group model.

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Business Model Concerns for Carriers

• Margin compression: Greater choice of health plans may reduce overall payor margins. Multi-carrier exchanges may commoditize products and lead to higher transaction fees (e.g. individual commissions)

• Administrative burden: Employees will need more support to select their plans. Payors and PHIXs will need to integrate products, member and billing data (i.e. increased administrative costs and complexity).

• Disintermediation: The exchange administrator may control the sales and marketing process, diluting a payor’s contact with the customer and thus its ability to manage the relationship.

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HRAs for Small Employers & Limited Use by Large Employers

U.S. Department of Labor ruled that HRAs are group health plans and therefore cannot have annual limits.

HRAs can be used by small employers (under 50 Ees) to assist funding of health insurance since they have no mandate.

The DOL guidance means that a large employer would be subject to substantial penalties if they use stand alone HRAs for funding Ee purchses of QHPs.

Any size Er can use HRAs for retirees or for the purchase of Supplemental products such as dental or vision.

213213

Defined Contribution & Functions of Private Exchanges

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Projected Growth of Private Exchanges:Mercer

Mercer: The % of US employers considering offering a private exchange for active and/or retired employees has tripled in the past year to 56%.

Mercer said that 10 major insurance carriers—including Aetna, Cigna, Humana, UnitedHealthcare and a number of Blue Cross and Blue Shield plans—have signed on to the firm’s private exchange for 2014 enrollment.

Mercer’s exchange will be available to employers with at least 100 employees

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Projected Growth of Private Exchanges:Aon

Aon Hewitt said all of the new clients have at least 5,000 employees and represent a range of industries.

With the additional clients, Aon Hewitt said 330,000 employees will be receiving coverage through its exchange.

In total, Aon Hewitt anticipates more than 600,000 U.S. employees and their families will be covered under plans in the Aon Hewitt Corporate Health Exchange in 2014.

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Self-Insured Plans

PPACA creates significant mandate differences and cost implications between fully insured and self-insured plans. Self-insured employer plans are explicitly exempted from some PPACA requirements. Self-Insured Plans are NOT:

• Required to provide minimum essential benefits (required to meet the cost-sharing limits, benefit levels, and “minimum essential coverage” but are not required to provide the “minimum essential benefits”).

• Required to participate in a risk-adjustment system, • Subject to single risk pool standards, • Subject to 3-1 age pricing compression and other rating mandates, • Subject to medical loss ratio (MLR) mandates,• Subject to review of premium increases, and• Subject to the annual insurance fee that starts in 2014 for fully insured plans.

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Self-Insured Plans

The existing benefits of self-insured are retained. They are NOT:Subject to state premium taxes,Subject to state coverage mandates, andSubject to insurance reserve requirements.

Under PPACA, employers will retain the choice of fully insured and self-insured arrangements. However, fully insured plans will mostly be offered through health exchanges because federal employee premium subsidies (up to 400% of the federal poverty level) will only be available through exchanges. The size of groups eligible for participation in an exchange may vary by state and can increase over time based on PPACA requirements.

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Self-Insured Plans

Because PPACA exempts self-insured plans from some costly requirements, it may be financially beneficial for an employer (regardless of size) to consider self-insurance.

As PPACA is implemented, self-insuring may become a better value than fully insured plans for small firms with good historical experience and a good risk profile.

In 2009, self-insured plans were offered to 13.5% of plans with fewer than 100 employees, 25.7% of Plans with 100-499 employees, and 82.1% of plans with more than 500 employees (Agency for Healthcare Research and Quality),

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Self-Insured Plans

Cost competitive reinsurance arrangements are available. High claims risks can be mitigated with specific and aggregate stop-loss coverage.

Courts have consistently upheld ERISA federal exemptions from state insurance laws and the use of reinsurance for small groups, even as states have tried to restrict them. It is uncertain at this time if federal laws or regulations will change to prohibit this gambit.

Under PPACA, if the health of self-insured groups deteriorates they can then join an exchange. In the exchange, their experience is spread over the entire exchange pool as part of a single risk pool.

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Index of PHIXs(A-B)

Alegeus WealthCare Marketplace Aon Hewitt Corporate Health ExchangeArray Health Private Health ExchangeAssurex Global Marketplace Platform Benefitfocus HR InTouch Marketplace Edition BeneFit Marketplace™ from Empowered BenefitsBenefitMall Individual Exchange Bloom Private Exchange Platform for EmployersBloom Private Exchange Platform for Health Plans

221

Index of PHIXs(H-M)

hCentive WebInsure Private Exchange Health Partners America Insurance ExchangeHorizon Select (Horizon BCBS of New Jersey) InsureXSolutions Private Exchange Lawley Marketplace from Lawley Benefits GroupLiazon Bright Choices Exchange Mercer MarketplaceMyCieloChoice (Individual Exchange)MyPlanSource

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Index of PHIXs(C-E)

Capital BlueCross MyCoverage Selector™CHOICE Adminstrators Exchange SolutionsCielostar Private Exchange SolutionConnectedHealth Smart Choices Exchange ConnectedHealth Consumer MarketplaceConnectedHealth Smart Choices Platform™ Digital Benefits Marketplace ExtendRetiree

223

Index of PHIXs(P-W)

PeopLease Benefits Marketplace RightOpt, a Private Health Insurance Exchange Solstice Marketplace Towers Watson OneExchange Virtus Benefits Private Marketplace

Willis Advantage

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Accountable Care Organizations(ACOs)

1. An accountable care organization is a group of payers, physicians, hospitals and other healthcare providers that voluntarily collaborate to provide efficient, high-quality and coordinated care to an assigned population of patients.

2. If providers reduce costs and/or improve specified quality metrics in a certain timeframe, they are able to receive financial rewards from or share in the savings with Medicare or a commercial payer.

3. ACO arrangements can also involve risk, in which the provider would have to pay back a portion or all of the costs that exceeded the payer's established benchmark.

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7. As of August 2013, 488 healthcare entities are practicing accountable care, according to a Leavitt Partners report.

8. Medicare ACOs now represent 52 percent of all ACOs, as there are 253 organizations contracting with CMS for accountable care, according to the August 2013 Leavitt Partners report.

9. Unlike a health maintenance organization, beneficiaries do not join ACOs — their providers do. Patients are notified of their providers' participation in a commercial or Medicare ACO. Patients can decline having their protected health information shared within the ACO, or choose to receive care from another physician if they do not wish to participate.

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4. The goals of ACOs are known as "the triple aim.“ (1) improving the experience of care, (2) improving the health of populations and (3) reducing per capita costs of healthcare.

5. Physician groups are the largest leaders of ACOs, although hospital systems are a close second, according to a 2013 Leavitt Partners report.

6. As of February 2013, ACOs covered 37 million to 43 million Medicare and commercial patients, according to an Oliver Wyman report.

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Index of ACOs(Becker's Hospital Review: "100 Accountable Care Organizations to Know.“)

Abington (Pa.) Health. Adventist Health-Portland (Ore.).Advocare Walgreens Well Network (Marlton, N.J.).Advocate Health Care (Oakbrook, Ill.). Alexian Brothers Accountable Care Organization (Arlington

Heights, Ill.). Allina Health (Minneapolis).Arizona Connected Care (Tucson). Atlantic Accountable Care Organization (Morristown, N.J.)..Atrius Health (Newton, Mass). Aurora Accountable Care Organization (Milwaukee).

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Banner Health Network (Phoenix). Baptist Health System (San Antonio).Barnabas Health ACO-North (West Orange, N.J.).BayCare Health System (Clearwater, Fla.). Baylor Quality Alliance (Dallas).Beacon Health (Brewer, Maine).Bellin-Thedacare Healthcare Partners (Green Bay, Wis.)..Beth Israel Deaconess Care Organization (Westwood, MassBillings (Mont.) Clinic. BJC HealthCare ACO (St. Louis). Brown & Toland Physicians (San Francisco).

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Cape Cod Health Network ACO (Hyannis, Mass.).Carolinas HealthCare System (Charlotte, N.C.). Cedars-Sinai Accountable Care (Beverly Hills, Calif.). Chicago Health System ACO.Children's Hospital of Philadelphia. Cleveland Clinic Florida (Weston).Cornerstone Health Care (High Point, N.C.).Crystal Run Healthcare ACO (Middletown, N.Y.).Dartmouth-Hitchcock (Lebanon, N.H.). Dean Clinic and St. Mary's Hospital ACO (Madison).Diagnostic Clinic Walgreens Well Network (Tampa Bay, Fla.). Dignity Health (San Francisco).

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Essentia Health (Duluth, Minn.).Everett (Wash.) Clinic.Fairview Health Systems (Minneapolis). Franciscan Alliance (Mishawaka, Ind.).Genesys Physician Hospital Organization (Flint, Mich.)Greater Baltimore Health Alliance (Towson, Md)Hackensack (N.J.) Alliance ACO..Health4 (Columbus). HealthCare Partners California ACO (Torrance, Calif.).HealthCare Partners of Nevada (Las Vegas). HealthPartners (Bloomington, Minn.). Health Management Associates (Naples, Fla.).

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Heartland Health (St. Joseph, Mo.). Heritage California ACO (Northridge). Hoag Memorial Hospital Presbyterian (Newport Beach, Calif.). Holy Cross Hospital (Fort Lauderdale, Fla.). Hunterdon Healthcare Partners (Flemington, N.J.). Indiana University Health (Indianapolis). John Muir Health (Walnut Creek, Calif.). JSA Medical Group (Saint Petersburg, Fla.). Kelsey-Seybold Clinic (Houston). KentuckyOne Health Partners (Louisville, Ky.). Key Physicians (Chapel Hill, N.C.).

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Lahey Clinical Performance ACO (Beverly, Mass.).MaineHealth Accountable Care Organization (Portland). Memorial Hermann Health System (Houston).Mercy Health Select (Cincinnati).Methodist Le Bonheur Healthcare (Memphis, Tenn.).Methodist Patient-Centered ACO (Dallas). Michigan Pioneer ACO (Detroit). MissionPoint Health Partners (Nashville, Tenn.). Moffitt Cancer Center (Tampa, Fla.). Monarch Healthcare (Irvine, Calif.). Montefiore ACO (New York City). Mount Auburn Cambridge Independent Practice Association (Brighton,

Mass.).

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Index of ACOs(Becker's Hospital Review: "100 Accountable Care Organizations to

Know.“)

NCH Healthcare System (Naples, Fla.). Northwest Ohio ACO (Toledo). Novant Health (Winston-Salem, N.C.). Ochsner Accountable Care Network (New Orleans). OneCare Vermont (Colchester, Vt.). Optimus Healthcare Partners (Summit, N.J.). Orlando (Fla.) Health. OSF Healthcare System (Peoria, Ill.).Park Nicollet Health Services (St. Louis Park, Minn.). Partners HealthCare (Boston). Penn Medicine (Phila.) Physician Health Partners (Denver). Physician Organization of Michigan ACO (Ann Arbor).

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Know.“)

Plus (Fort Worth and Arlington, Texas).PrimeCare Medical Network (Ontario, Calif.). ProHealth Physicians (Farmington, Conn.). ProMedica (Toledo). Providence Health & Services, Southern California (S.F.) Renaissance Health Network (Wayne, Pa.). Scott & White Healthcare Walgreens Well Network (Temple, Texas). Seton Health Alliance (Austin, Texas). Sharp HealthCare (San Diego).St. Luke's Clinic Coordinated Care (Boise, Idaho). Steward Promise (Boston).

235


Know.“)

Texas Health Resources (Arlington). Triad HealthCare Network (Greensboro, N.C.). UCLA Health ACO (Los Angeles). UnityPoint Health (Des Moines, Iowa). University of Michigan Health System (Ann Arbor). VirtuaCare ACO (Marlton, N.J.). Wellmont Integrated Network (Kingsport, Tenn.). Wilmington (N.C.) Health.

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Exchange InfoCast Website

www.theihcc-hcv.com

ronald bachman, fsa, maaa president & ceo healthcare visions, inc

Documents

financials task

viewing consumerism

consumerism plans5

consumerism vision statement8

actuarial issues

service issues

design issues

change formula