A New Consumerism in Health Care
and
What It Means for Health Plans
Jon R. Gabel
Vice President
Health Research and Educational Trust
Objectives
• To review changes in employer-based health
insurance over the past decade
• To identify the forces setting the stage for
consumer-driven health care
• To examine the pros and cons of consumer-driven
health care
• To examine the experience of one pioneer employer
and health plan with consumer-driven health care
products
• To predict the future course of employer-based
health insurance
Premium Increases Compared to
Other Indicators, 1988-2001
14.0
Percentage
12.0
10.0
8.0
6.0
4.0
2.0
^
0.0
1988
1993
1995
Health Insurance Premiums
1996
1997
1998
Workers Earnings
1999
2000
2001
Overall Inflation
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999, 2000; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996, 1998; Bureau of Labor Statistics, 2000.
* Estimate is statistically different from the previous year for years 1997-1998, 1998-1999, 1999-2000. No tests were done on years prior to 1997 or for Workers Earnings or Overall Inflation.
^ Sample included firms with 200 or more workers only.
Chart #4
Percentage Change in Premiums,
by Firm Size, 2001
11.0%
All Firms
12.5%
All Small Firms (3-199 Workers)
(3-9 Workers)
16.5%
(10-24 Workers)
14.4%
(25-49 Workers)
11.5%
(50-199 Workers)
10.8%
10.2%
All Large Firms (200 or More Workers)
Midsize (200-999 Workers)
10.0%
Large (1,000-4,999 Workers)
9.0%
Jumbo (5,000+ Workers)
10.8%
0%
2%
4%
6%
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2001
8%
10%
12%
14%
16%
18%
Chart #5
Average Annual Premium Costs for
Covered Workers, 2001
All Plans
Single
$2,650
$7,053
Family
Conventional
Single
$2,851
$7,685
Family
HMO
Single
$2,402
Family
$6,538
PPO
Single
$2,730
Family
$7,202
POS
Single
$2,667
Family
$7,059
$0
$1,000
$2,000
$3,000
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2001
$4,000
$5,000
$6,000
$7,000
$8,000
Trends in Provider Revenues from
Non-Medicare Patients, 1991 – 2000,
(Annual Percent Change Per Capita)
20
15
10
5
0
-5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-10
Hosp. Inpat.
Hosp. Outpatient
Physician
Precription Drug
Blue Cross-Blue Shield Underwriting
Gains and Losses, 1990-1999
(in percentages of revenue)
2.5
2
1.5
2.2
1.5
1.1
1.3
1.1
1
0.6
0.5
0.1
0
-0.5
-1
-1.5
90
91
92
93
94
95
-0.2
96
-1
97
-1.2
98
99
-1
Source: Authorís analysis of unpublished data provided by the Blue Cross-Blue Shield Association
2000
% of Expenditures
Distribution of Health Expenditures
For the US Population
100
90
80
70
60
50
40
30
20
10
0
96
50
26
1970
96
97
97
55
56
55
29
28
27
1980
1987
Top 50%
Top 5%
Top 1%
1996
Source: Data for 1970 are from the National Center for Health Services Research tabulations of the 1970 Center for Health Administration
Studies (CHAS)/NORC survey; 1980 data is from the National Medical Care Utilization and Expenditure Survey; 1987 data is from the 1987
National Medical Expenditure Survey; 1996 data is from the 1996 Medical Expenditure Panel Survey
Health Plan Enrollments for Covered
Workers by Plan Type, 1988-2001
1988
73%
1993
16%
46%
1996
27%
9%
28%
2000
8%
29%
2001
7%
20%
14%
28%
25%
38%
22%
41%
23%
22%
48%
40%
Conventional
60%
HMO
7%
26%
31%
1999
0%
21%
11%
PPO
80%
100%
POS
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 1999, 2000, 2001; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996
Average Monthly Worker Contribution, 1988-2001
$160
$124
$120
$80
$40
$34
$37
$8
$28
$122
$138
$150
$52
$30
$0
Single Coverage
1988
Sources:
Family Coverage
1993
1996
2000
2001
Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2001; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996
Percentage of Premium Paid by Covered Workers, 1988-2001
35%
29%
30%
25%
20%
20%
15%
11%
32%
28%
27%
27%
21%
14%
15%
10%
5%
0%
Single Coverage
1988
Source:
Family Coverage
1993
1996
2000
2001
Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2001; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996
Average Annual Deductible for Coverage in
Conventional, PPO, and POS Plans, 1988 – 2001
$700
$600
$500
$400
$300
$200
$100
$0
600605
545528
495
407
361* *
315
313
289
375
267
222 245239195
163
170181190187201
106
406
359367
324
177
71 41 79* 84
^
^
Conventional Conventional PPO In-Plan
Single
Family
1988
1993
PPO OutPlan
1996
1999
POS In-Plan
2000
POS OutPlan
2001
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999, 2000, 2001; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996.
* Estimate is statistically different from the previous year for years 1999-2000, 2001-2001.^ Information was not obtained for POS plans in 1988.
Percentage
80
Percentage of Covered Workers Facing HMO Co-payments
for Physician Visits, 1996 - 2001
54
60
40
20
23 20 25
10 7
4 6 5
0
No copay
61 59
55
50
19*
13 11
24
10 9 10
1 2 0 0 0
1 1 1 3 2
$2 per visit $5 per visit $10 per visit $15 per visit $20 per visit
1996
1998
1999
2000
2 1 2 3 3
5
0 0 0 2
Other
Don't know
2001
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999, 2000, 2001; KPMG Survey of Employer-Sponsored Health Benefits: 1996, 1998.
* Estimate is statistically different from the previous year for years 1999-2000, 2000-2001.
Frightening Factoids
¾ 51 percent of adults with diabetes did not have an
eye exam with pupil dilation in 1997.
¾ 60 percent of Kentucky Medicaid patients diagnosed
with a cold filled a prescription for an antibiotic.
¾ Preventable adverse drug events occur in 1.8% of
hospital admissions.
¾ One-third of hospitalized elderly patients discharged
with an antidepressant were taking a dose below the
recommended level.
Source: J. Eisenberg and E. Power, JAMA, Oct 25, 2000
The Political Defeat of Managed Care
¾ Caught in the political crossfire, 1993-1995
¾ The media turns on managed care, 1995
¾ Backlash continues as evidenced by debate on
Patient Bill of Rights
¾ Non-price rationing – Shielded from the cost of
care, consumers view plans as limiting necessary
services.
Consumer-Driven Health Care and
Defined Contribution Plans: What is
the Difference?
¾ Defined contribution – refers to employer
contribution formula
¾ Cash out of health benefits business
¾ Managed competition model of fixed absolute
contributions for health insurance
¾ Consumer Driven Health Care – refers to plan
design
¾ “Stakeholder empowerment to improve value”
Common Elements of ConsumerDriven Products
¾ Increased financial risk for consumers
¾ Increased choice of providers and/or benefit design
¾ Use of e-health insurance medical information
products
Lessons from the RAND Health
Insurance Experiment
¾ Increased coinsurance and deductibles substantially
reduce the use of services
¾ Persons with no coinsurance use 23 percent more
services than persons with 0 coinsurance.
¾ Out-of-pocket maximums had little effect on use of
services
¾ Cost-sharing reduced services by reducing the number of
episodes of care.
Lessons from RAND Health Insurance
Experiment (Continued)
¾Increased cost-sharing had:
¾Little effect on health status for healthy people.
¾High cost-sharing had negative effects on low-income
and persons with certain chronic conditions.
¾Cost-sharing had no affect on the percentage of
care that was medically necessary.
The Case for Consumer Driven-Health
Care
¾ Political failure of managed care requires a new strategy.
¾ Without cost-sharing, consumers view cost-control as
“taking away my benefits.”
¾ Cost-sharing reduces the use of services.
¾ Cost-sharing does not reduce health status for healthy
people.
¾ More choice is associated with higher plan and provider
satisfaction. Public equates choice with quality.
¾ Internet provides the tools to improve the knowledge and
decision-making ability of consumers.
¾ Some insurer-based plans will increase pooling.
The Case Against Consumer-Driven
Health Care
¾ Cost-sharing is a blunt instrument.
¾ Impairs access to care for low-income populations.
¾ “Tax” on sick persons.
¾ Does not improve the appropriateness of care.
¾ Impairs health status for some chronic conditions
¾ Plans less able to secure discounts.
¾ Could raise administrative expenses.
¾ Who will hold providers accountable for quality of health
care?
¾ Breaks down risk-pools; MSA plans may end up transferring
income from sick to healthy. In multi-plan settings, it may
raise total outlays.
¾ We need more rather than less co-ordination in health care,
particularly for chronic care.
Early Experience: Medtronics
¾ Medical technology company with 25,000 employees
¾ Plan design
¾Three options for deductibles
¾Personal health accounts of $1,000 for single
coverage and $2,000 for family coverage
¾ 13 percent of employees chose Definity in first year,
up 25 percent in second year.
¾ 30 percent of new employees choose Definity
Medtronics (Continued)
¾ Greater use of “nurse line”
¾ Increase in use of generic drugs
¾ Three catastrophic cases in first year of plan
¾ About 52 percent of enrollees ‘turned over” their
personal savings accounts
Early Experience: Highmark BC/BS
¾ BlueChoice product allows businesses to select
among 43 configured products
¾ Employer determines funding level and employee
buys up or down
¾ 25 accounts with 21,000 members
¾ Employer pool is the risk unit
¾ POS plans are most popular
¾ Renewal increases are similar to remaining book of
business.
Immediate Future of Employer-Based
Health Benefits
¾ Increased patient cost-sharing
¾ Consumer-driven products take-off as new options,
not replacement products
¾ Look for tiered network products to gain
prominence.
¾ Look for personal spending account products to
grab market share.
¾ New products will:
¾ Reduce rate of growth in prescription drug expenses
¾ Have little impact in controlling hospital expenses
Conclusion
¾ Plea to policymakers to evaluate these new products in the
spirit of problem-solving, not ideology
¾ Key evaluative measures
¾ Use of medical information tools
¾ Risk selection
¾ Enrollment and plan satisfaction
¾ Altered use of health care services
¾Use of services for low-income and sick employees
¾Use of generic drugs
¾ Compliance with clinical guidelines
¾ Total claims costs
¾ Plea to Health Plans – experiment and evaluate
¾ Work with research community to disclose performance of
your products