the benefit management company consumer driven healthcare “unleashing the power of free market...
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The Benefit Management Company
Consumer Driven Healthcare
“Unleashing the Power of Free Market Economics on the Healthcare
Industry”
The Benefit Management Company
The Principles of CDHC
• #1: Patients have the freedom to choose their providers and to direct their care
• #2: Patients share in the economic consequences of their healthcare choices
• #3: Patients get tools to improve health and assess healthcare options: e.g. fitness programs, provider “report cards”
The Benefit Management Company
The Claim Cost Curve
8%
24%
69%
60%
26%
13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Healthy Transitional Chronically Ill/High Risk
% Members % of Dollars
($1-$999) ($1,000-$4,999) ($5,000-$100,000)
$30 pmpm
$176 pmpm
$1,259 pmpm
The Benefit Management Company
Designing a CDHP: Level #1
• A “Wrap” Plan
• Employer buys high deductible plan
• HMO, POS or PPO
• Employer “self-funds” deductible to desired ultimate benefit level
• Net savings vs. Traditional = 10% to 20%
The Benefit Management Company
Advantages of Wrap Strategy
• Not Self-funded/Not Fully-insured
• Substantial Rate Relief/Limited Claim Risk
• Claim Risk per Patient from $1k to $5k
• Employer has stake in Employees’ Health
• Employer gets Credit for Good Experience– vs. Community Rate (Small Group Reform)
• Unlimited Plan Design Flexibility
The Benefit Management Company
Designing a CDHP: Level #2
• Add a Flexible Spending Account (FSA)
• Employees take on some claims liability
• Employees can pre-fund with pre-tax $$
• Funds not used for medical can be spent on vision, dental or alternative therapies
• Unused funds are forfeited at year end
• Employer may “seed” employees’ FSAs
The Benefit Management Company
Designing a CDHP: Level #3
• A Health Reimbursement Account (HRA)
• Employer creates a virtual benefit bank for each employee (e.g. $500/ee, $1k/family)
• Employee’s out-of-pocket medical costs are paid from bank until exhausted
• Any unused “bank balance” can be rolled over into the next plan year
The Benefit Management Company
Designing a CDHP: Level #4
• One high deductible base plan
• Multiple employee benefit options– options include FSA & HRA tools
• Employees pay cost differentials with pre-tax $$; employer cost same for all options
• Employer cost is fixed, regardless of which option an employee selects