Value Based Health Plans: The Wave of the Future?

Jim Wisdom, CFPJames L. Wisdom Insurance Services

June, 2012

Skyrocketing health care costs Unaffordable rate hikes Diminished quality of life for employees Less hopeful health outcomes Less perceived value in health plan

Issues with Traditional Plans

Fewer employees monitoring their health and lifestyle◦ Over 50% of all health care costs are due to

lifestyle Chronic illnesses aren’t detected until the

later stages, driving up costs and lowering employee’s overall health and productivity

Higher absenteeism and presenteeism Lower employer profitability

The Result?

Allow employees to enjoy better health and a better quality of life

Employers to have a healthier, more productive workforce

Lower, more stable premiums over the short and long-term

Employers gain happier, more loyal clients

Profile of an Ideal Health Plan…

Like typical health plans, a Value Based Plans pays an insured’s claim when he/she is sick or injured

Unlike typical health plans, Value Based Plans go further, rewarding members to take actions to improve and manage their health

The Difference? Health Insurance vs. Healthy Insurance

The Solution: Value Based Benefit Plans:

Remember this formula: The # of detected conditions + the # of undiagnosed conditions = The # of actual health conditions in a group.

It’s not uncommon for the # of detected conditions to equal about one third of the total, which means two thirds of conditions are undiagnosed.

See Client Example ( SeeChange Health)

Identifying undiagnosed conditions

Undiagnosed conditions, if left undiagnosed until later stages, result in far higher health care claims

The impact of undiagnosed conditions

Cervical Cancer Claims Costs◦ Early Stage Treatment: $16,000/yr.◦ Late Stage Treatment: $84,000◦ Annual Difference: $68,000

SeeChange Health Claims Examples

Breast Cancer Claims Costs Early Stage Treatment: $16,000/yr. Late Stage Treatment: $108,000/yr. Annual Difference: $92,000/yr.

Health Claims Examples ( Cont’d)

Prostate Cancer Claims Costs Early Stage Treatment: $13,000/yr. Late Stage Treatment: $54,000/yr. Annual Difference: $41,000/yr.

Health Claims Examples (Cont’d.)

Colon Cancer Claims Costs Early Stage Treatment: $12,000/yr. Late Stage Treatment: $126,000/yr. Annual Difference: $114,000/yr.

Health Claims Examples ( cont’d.)

Lower claims costs Lower health care premiums Early detection saves lives Early, smart intervention increases

employee health and productivity

The benefits of early detection

1,100 undiagnosed conditions times $50,000 annual savings when treated early equals $55 Million in annual savings.

Note: From a group with 75,000 employees

SeeChange Example: The Math

Promote early detection and treatment of serious conditions

Encourage members to see their doctor and reward them for taking “Health Actions”

Value Based Plans: A New Perspective

Subscriber and Spouse voluntarily complete Preventive Health Actions to receive financial incentives

Online Health Questionnaire Biometric Screening

◦ Phlebotomist ( blood draw)- 15 minute exam Preventive Care Exams

◦ Preventive Health Actions covered at 100% based on age/gender specific guidelines

Health Actions and Financial Incentives

Female Compliance Criteria◦ 4 Age Categories ( 18-20; 21-39; 40-49; 50+)◦ 6 Health Actions

Online Health Questionnaire Biometric Screening Preventive Exam Pap Smear Mammogram Colorectal Cancer Screening

Health Actions are Personalized

Male Compliance Criteria 2 Age Categories ( Age 18-49; 50+) 5 Health Actions Total

◦ Online Health Questionnaire◦ Biometric Screening◦ Preventive Exam◦ Colorectal Cancer Screening◦ Prostate Cancer Screening

Health Actions are Personalized

American Heart Assn. American Diabetes Assn. American Cancer Society American Lung Assn. Nat’l Cholesterol Education Program U.S. Preventive Services Task Force Nat’l Asthma Education and Prevention

Program Nat’l Heart, Lung and Blood Institute

Health Actions Recommended By:

Personal Dashboard allows employees to track progress online.

Results of Health Actions may reveal chronic health conditions◦ Pre-Diabetic Health Actions◦ Diabetes Health Actions◦ Asthma Health Actions◦ Cardiovascular Disease Health Actions◦ Coronary Artery Disease Health Actions

Members Monitor Health Actions Online

Health Questionnaire + Biometric Screening + Preventive Examination =

1. Enhanced Benefits 2. Health Incentive Account Deposits 3. Deductible Credit

Financial Incentives

Some plans reward members by lowering members’ coinsurance and annual Out-of-Pocket Maximum

Children also get enhanced benefits when employee and spouse ( if any) complete Health Actions

Added Bonus: Once employee and spouse ( if any) complete Health Actions, all prior claims for the calendar year are re-adjudicated at the Enhanced benefit level.

Financial Incentives

Some plans offer HIA’s $200-$500 in HIA funds available to both

Employee and Spouse/Domestic Partner Add’l financial rewards for completing Health

Actions related to specific conditions Available to reduce the deductible or IRS

approved medical expenses Unused amount may be carried over from

year to year Unlike HSA’s, account balance forfeited if

employee or employer leaves plan.

Financial Incentives: Health Incentive Accounts ( HIA’s)

Health Coaching◦ Coaching Targets:

Depression Smoking Diabetes Stress Exercise Activity Weight

Additional Benefits of Value Based Plans

Value Based Plans have offered rate increases averaging 1.5% over the last two years ( far below industry norms)

For groups of 51+, some are offering two year rate guarantees

Value Based Plans may be attracting a healthier risk pool

If this happens, Value Based Plans may continue to experience lower rate increases

Conversely, traditional plans may experience higher than average rate increases

Future Potential Benefits- Value Based Plans

Value Based Plans may be the right approach for today’s challenges

Other carriers are trying to catch up Employee choice is key with any group

health plan. Work with an Employee Benefits Broker who

has experience in all types of health plans ( HMO/PPO, HSA, HRA, Value Based Plans)

Don’t forget Senior Planning ( for employees 65+)

Summary

Jim Wisdom, CFP President James L. Wisdom Insurance Services 4607 Lakeview Canyon Road- Suite 482 Westlake Village, CA 91361 Work: (805) 497-9264 Cell: (818)469-6640 Fax: (805) 435-3636 www.wisdomhealthplans.com CA License #0699524

Thank You!