A Workbook
for
Developing a
Vision and Roadmap
to
2nd+ Generation
Healthcare
Consumerism
Ronald Bachman, FSA, MAAA
President & CEO
Healthcare Visions, Inc.
Senior Fellow, Center for Health Transformation
RonBachman@gingrichgroup.com
404-697-7376
Table of Contents
Page #
2
3
4
5
8
11
14
18
20
40
Topic
.
Agenda
Scope of Work
Background Info
Task #1 – Setting Principles for Change
Task #2 – Vision Statement Development
Task #3 – Identification of Acceptable Stategies
Change Formula
Actuarial Issues
Consumerism
Task #4 – Personal Care Accounts
65
78
93
102
111
Task #5 – Wellness, Prevention, & Early Intervention
Task #6 – Disease Management
Task #7 – Decision Support Tools
Task #8 – Incentives & Rewards
Task #9 – Viewing Consumerism by Generations
145
154
158
161
164
Task #10 – Create Consumerism Plans
Task #11 – Setting Time Frame for Implementation
Integrated Health Management
Potential Savings from Healthcare Consumerism
Actual Industry Experience Results
170
171
Task #12 (summary) – Potential Savings
Consumer-driven Healthcare Surveys of Growth
1
Agenda
Day#
1 Morning
1 Afternoon
2
Goal
Agenda, Scope of Work, Background, (T1-3),
Change Formula, Actuarial Issues, Consumerism,
Building Blocks (T4), Building Blocks (T5)
Building Blocks T(6-8), Multi-generational Issues (T9),
Create MSFT Plans (T10), Time Frame for Implementation
(T11)
Review Decisions from Tasks 1-11, Financials Task 12,
Final Input to Roadmap
Tasks To Be Completed During 1.5 Day “Extreme” Consumerism
1. Principles
7. Decision Support Tools
2. Consumerism Vision Statement 8. Incentives & Rewards
3. Strategies
9. Viewing by Generations
4. Personal Care Accounts
10. Create Consumerism Plans
5. Wellness
11. Time Frames
6. Disease Management
12. Financial Analysis
2
Scope of Work for Developing
the Roadmap and Beyond
Design
Perform
Benefits
Diagnostic
Financial
and
and
& Actuarial
Contrib.
Readiness
Analysis
Strategy
Assessment
(set
(The Road
metrics)
Map)
•Evaluate current
plans
•Interview
•stakeholders
•Develop
•Est. Rel. Value
baseline costs of Components
•HDHP & Accts
•Co.& Ee
contrib. level
•Wellness & DM
Develop
and
Evaluate,
Implement
Monitor
Select,
Education,
and
Implement
Comm.,
Evaluate
Vendors
Training,
etc.
•Vendors
•Technology
•Services
•Communication
Strategy
•Web-based
Training,
education
•Periodic
reevaluation of
baseline metrics
•Consumer
scorecards
•Performance
•Identify Basic
•Model options •Transition
•Print, video,
•Survey, measure
Principles for Change
strategy
other media uses success,
•Accountability
•Evaluate cost
acceptance
•Create Consumer
• Internal vs.
impact and
•Optional
•Reliability
Vision Stmt
Coverages
External Services •Vendor/supplier
revise
audits
•Select Strategies
•Carve-out Programs
•Develop
•Support services
measures of
•Reassess &
•Develop Obj. &
success
•Health vs. Healthcare
modify as
scope, set timeframe
•Debit/Credit Cards
appropriate
•Incentive Programs
•Match HR/business plan
3
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
4
Task #1 – Setting Principles for Change
Important…Not
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
Important
4
5
4
5
4
5
4
5
4
5
1.
2.
3.
4.
5.
Have the Right Vision & Vision Stmt
Have a 3-5 Year Roadmap/Strategic Plan
Consider Other Related Corporate Initiatives
Create plan as part of Employer of Choice
Consider other HR metrics impacted by Healthcare
6.
7.
8.
9.
10.
Provide Information on Rx Costs & Alternatives
Provide Information on Dr. & Medical Service Costs
Provide Information on Hospital Costs
Provide Information on the Quality of Dr. Care
Provide Information on the Quality of Hospital Care
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
4
4
4
4
4
5
5
5
5
5
11.
12.
13.
14.
15.
Focus on Discretionary Costs (Rx and OV)
Focus on High Cost Claims & Claimants
Focus on Wellness and Preventive Care
Focus on an Individual Behavior Changes
Focus on Group Behavior Changes
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
4
4
4
4
4
5
5
5
5
5
5
Task # 1 – Setting Principles for Change
16. Use Incentives and Compliance Rewards
17. Increase Costsharing to Change Behaviors
18. Increase Employee Contributions to Offset Costs
19. Focus on Overall Plan Cost Reduction
20. Set the Right Measurements for Monitoring Progress
Important…Not Important
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
21. Build Broad Employee Agreement for Change
22. Minimize Change from Current Plans
23. Make Choices and Plan Options available
24. Improve Access to Care
25. Maintain Existing Network of Providers
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
4
4
4
4
4
5
5
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5
5
26. Provide
27. Provide
28. Provide
29. Provide
30. Provide
1
1
1
1
1
2
2
2
2
2
3
3
3
3
3
4
4
4
4
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31. Alternative to cutting benefits or initiating contributions 1
2
3
4
5
$ for post-65 retirement healthcare
$ for pre-65 retirement healthcare
$ for non-plan medical
$ for terminated ee’s healthcare
$ for non-healthcare expenses
6
Task #2 – Sample Vision Statement
Positioning to Balance Cost, Quality, and Access
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.
Uncertain,
Clinically Oriented
Supply Driven
Controls
Third
Party
Reimbursement
Quality
Access
Cost
Consumer
Valued Quality
Demand Driven
Controls
Consumer
Involvement &
Transparency
7
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.
8
Task #2 - Key Words / Phrases for Consumerism
Vision Statement or Addition to Guiding Principles
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
9
Task #3 - Identification of Acceptable Strategies
High Priority...Low Priority
1.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
10
Task #3 - Identification of Acceptable Strategies
Continued
Important…Not Important
5. 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
programs 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
1
2
3
4
5
1
2
3
4
5
6. Focus on Preventive Care – Create incentive
7. Minimize Impact of Cost Shifting – Use consumerism
as an alternative to increased cost shifting or higher
contributions.
8. Implement Optional Consumerism – Provide new
programs and plan options on a voluntary basis.
11
Task #3 - Identification of Acceptable Strategies
Continued
High Priority…Low Priority
9. Implement Change on a Multi-Year Program –
Establish a consumer-centric program with a predetermined multi-year introduction of options and
use of accumulated HRAs and/or options.
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
2
3
4
5
10. Focus on Information Sharing Only– Provide ees
with decision support systems and information sources w/o
accounts or incentives to reward behavioural change.
11. Use Packaged Programs – use full integration of plan
design, information, disease management, and decision
support systems from single vendor.
12. Use Existing Vendors – develop consumerist programs
through current vendor relationships only.
13. Use “Best of Class” Programs – use selected vendors that
May overlay core benefit designs as long as integration is
Non-disruptive and transparent to members
1
12
A Reason To Consider Change
The Definition of Insanity:
“Endlessly repeating the same process,
hoping for a different result.”
- Albert Einstein
13
Employee Perceptions
Lead to a sense of entitlement…
Employees underestimate total premium cost
63%
Underestimate
16%
Close
21%
Overestimate
Employees overestimate their share of cost
20%
Underestimate
11%
Close
69%
Overestimate
Source: Watson Wyatt
14
Stages of Change
Requirements &
Stages of Change
NO CHANGE
Without Desire – “Back Burner”
Without Vision – False Starts
Without Process – Frustration
- - - - - - - Alignment - - - - - - -
C
H
A
N
G
E
Threshold
No
Gather Info
C
H
A
N
G
E
Pros & Cons
Awareness
Desire for
Change
Comfort Level
Cautious Doing
CHANGE
CHANGE
Threshhold
Gather Info
Pros & Cons
Awareness
+ Vision + Process = Change
Requirements for Change
15
The Formula for Making Change Happen
Set by Mgmt’s
Direction
Task at Hand
Later - Next Steps
Results
Desire for
Change
+
Vision /
Roadmap
+
Process for
Change
=
POSITIVE
CHANGE
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
16
Preliminary Actuarial Work & Issues
(NOT performed by CHT)
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
Savings Elements / HRA, HSA, & Account Credits
Combinations and interactions of “Building Blocks”
Costsharing structure
Contribution strategies
Participation
18
Consumerism
Supply Controls vs. Demand Controls
“Them” or “You”
Reform is Not Enough,
Transformation is Required
19
Supply Controls or Demand Controls
Plan Sponsors and Members have two basic choices to control
costs:
1. 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.
20
Supply Controls Are Failing
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
“Every
System is
perfectly
designed for
the results
achieved.”
Patients don’t understand healthcare costs
– costs are not transparent
21
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)
22
Healthcare Consumerism - Defined
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.
“The job of a leader is to create the possible” –
Condi Rice
23
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)
24
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
25
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
26
The Core of Consumerism
The Unifying Theme
for a
Health and Healthcare Strategy is:
Behavioral Change
“Implement only if it supports
behavioral change consistent with
the strategy”
27
Healthcare Consumerism
Roles & 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
28
Healthcare Consumerism
Roles & 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
29
Consumerism Choices Involve
Options for Behavioral Change
Consumerism Choices:
Wellness
Preventive care
Early Intervention
Lifestyle Options (diet, exercise, smoking, safety)
Self-help, self care
Discretionary Expenses (e.g. OV, ER, Rx)
Value purchasing (e.g. DXL, o/p vs. in/p)
Participation in Disease Management Programs
Compliance with Evidence Based Medicine
Treatment Plans
30
Consumerism – Much Broader than
HDHP & Consumer-Driven Healthcare
Consumerism is
A Strategy
******************
It’s about moving from a
“benefit” to an “accumulating
asset.”
31
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
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
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
32
The Evolution
of Healthcare Consumerism
Future Generations of Healthcare Consumerism
Traditional
Plans
Traditional
Plans
with
Consumer
Information
1st Generation nd
2 Generation 3rd Generation 4th Generation
Consumerism
Consumerism Consumerism Consumerism
/CDHC
Focus on
Discretionary
Spending
Focus on
Behavior
Changes
Integrated
Health &
Performance
Personalized
Health &
Healthcare
Behavioral Change and Cost Management Potential
Low Impact
---- ---- ---- ---- ---- ---- ---- ---- ----
High Impact
33
The Promises of Consumerism
Major Building Blocks
of Consumerism
Personal Care
Accounts
Wellness/Prevention
The Promise of Demand Control & Savings
The Promise of Wellness
Early Intervention
Disease and Case
Management
Information
Decision Support
Incentives &
Rewards
The Promise of Health
The Promise of Transparency
The Promise of Shared Savings
It is the creative
development,
efficient delivery,
efficacy, and
successful
integration of these
elements that will
prove the success or
failure of
consumerism.
34
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
35
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
36
Basic Plan Design Options
& Healthcare Consumerism
Traditional
Health Plans
Personal Accounts
Most Healthcare
Consumerism Plan Designs
Typical
CDHP
Wellness/Prevention
Early Intervention
HMO
&
PPO
&
PPO
&
FSAs
FSAs
FSAs
with
Disease Management
Case Management
Information
Decision Support
Incentives &
Rewards
HRAs? HRAs?
HRAs
Must Meet HSA /
HDHP Legal
Definition
HDHP
PPO
&
HDHP
PPO
&
Ltd
FSAs
&
HSAs
Ltd
FSAs
&
HSAs
&
Ltd
HRAs
37
Potential Use of PCAs to Support
Consumerism Plan Designs
Traditional
Health Plans
Personal Accounts
HMO
PPO
Most Healthcare
Consumerism Plan Designs
Typical
CDHP
Wellness/Prevention
Early Intervention
Disease and Case
Management
Information
Decision Support
Incentives & Rewards
Minimum
Co-Payment
Designs
PPO
Health
Incentive
Accounts?
Initial
$500$1000
HRA
with
Incentive
HRAs
Must Meet HSA / HDHP
Legal Definition
HDHP
PPO
HDHP
PPO
High Ded & Co-Insurance
Designs
Initial Er HSA
Contribution
Initial Er HSA
Contribution
With
HRA
Match
&
Incentive
HRAs &
HSAs
38
PPO/HRA and PPO/HSA
High Deductible Health Plans
Four components that work together to improve quality, outcomes,
and lower cost.
Preventive 100%
Coverage
Health Accounts
(HRAs or HSAs)
Health Tools
and Resources
HRA – ER provided $s
Health
Account (HRA/HSA)
Deductible Gap
Personalized
Health
Care
3.
Web- and HSA - ER and/or EE
PhoneProvided $s
Based
Tools
HRA/HSA –
Individual & Group
Reward $s
PPO
“Benefit dollars” to
pay for healthcare
expenses.
1.
Additional
Health Coverage
beyond the HRA/
HSA.
2.
Wellness, Condition care
Programs, Information and
Decision Support Tools and
Resources.
Incentives
and Rewards
4.
39
Task #4 - Personal Care Accounts
The Promise of Demand Control & Savings
HSAs, HRAs, FSAs, FHSAs
“Of the 5 building blocks, the greatest among
them is the Personal Care Account”
40
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
41
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
42
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
43
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)

2005 Monthly limit – 1/12th of lesser of deductible or
$2,650 (self-only), $5,250 (family), indexed

Catch-up contributions, age 55 to 64, $600 in 2005,
phased up to $1,000 annually in 2009
44
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 10% penalty
- 10% penalty waived in case of death or disability
- 10% 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
45
HSA Eligible HDHP
High Deductible Health Plan – By Law

Self-only: a deductible of at least $1,000; maximum HSA is $2,650; no
more than $5,100 maximum out-of pocket expenses (incl. Ded.)

Family coverage: a deductible of at least $2,000; maximum HSA is
$5250; no more than $10,200 on out-of pocket expenses (incl. Ded.)

2005 Age 55 and over catch up amount of $600

Preventive services are not subject to the deductible

OK for out of network costs to exceed maximum out-of pocket limits
THE ABOVE 2005 AMOUNTS ARE SUBJECT TO
ANNUAL INDEXING
46
HRAs- Advantage Employers
National 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
47
Important Differences between Use of HRAs
and HSAs for Supporting Behavioral Change
Personal
Care
Accounts
Health
Reimbursement
Arrangements
Health Savings
Accounts
Generation 1
Initial
Account Only
Generation 2
Generation 3
Activity &
Indiv. & Group Corporate
Compliance Rewards
Metric Rewards
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. Amounts Set by law
2. Real Dollars in Acct
3. Er or Ee Contrib
4. Contributions up to
plan deductible of
$1000-2650 Single
$2000-5250 Family
5. Non-substantiation
1. Ltd Potential –
1. Ltd Potential –
(But For Rule)
(But For Rule)
2. Must give Cash Option 2. All participants must
3. Awards must be same
receive same amount or
$ amt or same % of
same % of deductible
deductible
3. Difficult to use for Group
3. HSA can be used (with
Incentives
10% penalty) for nonhealthcare expenses
Generation 4
Specialized Accts,
Matching HRAs,
Expanded QME
1. Flexible Indiv & Group
1. Specialized Notional
Rewards
Accts,
2. Employer Determined
2. Can terminate by
3. Can not be cashed out
employer rules
4. Must be used for healthcare 3. Potential IRS Expanded
QME
1. Ltd Potential –
(But For Rule)
2. 100% Vested &
Portable
3. Can use matching
HRAs,
4. Potential IRS
Expanded QME
48
HRAs – Best for Larger Groups?
HSAs – Best for Individuals and Small Groups?
Current State
Combination
Accounts
Employerbased
healthcare
Special
Purpose
Accounts
Incentive
Matching
HRAs
Employerbased
Healthcare
with Individual
Accountability
HSAs
Individual-based
Healthcare
Er-Based with HSA
Contributions
Employer-based
Defined
Contribution
Developments
FSAs
Employerbased
Healthcare
Traditional (Ltd
Carry-over)
Special
Purpose NonPlan
49
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
50
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
51
Summary - PCA Comparisons
52
Summary - PCA Comparisons (cont)
53
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.
54
- The Answer Flexible Health Savings Accounts (FHSAs)
FHSAs would have the tax advantages of
HSAs and the key flexibilities of HRAs.
Basic Principles:
1.
Retain personal responsibility goal of HSA/HDHPs
2.
Focus on Behavior Change
3.
Recognize value of Pay for Compliance as a driver
for behavior change and shared savings with
personal responsibility
4.
Expand adoption and funding of HSAs by large
employers
55
Flexible Health Savings Accounts (FHSAs)
The Next Generation
Four needs that would allow FHSAs the flexibility
to:
1.
Provide financial Rewards and Incentives for
Behavioral Change.
2. Encourage Employer/Carrier FHSA contributions
towards healthcare
3. Be provided with plan designs other than HDHPs
4. Address FHSA/HSA Technical Issues
56
FHSA Flexibilty to Provide Financial Rewards
and Incentives for Behavioral Change
1. Allow for compliance incentives under disease
management programs (e.g. diabetes, asthma, CHF)
and wellness initiatives (e.g. wellness assessments,
smoking cessation, etc.).
2. Change Comparability Rule to mean all members
under a given program of care or treatment, such as, a
disease management or wellness program.
3. Rewards and/or incentives should not be limited by
the deductible limit, but should be consistent with
expected savings from programs for which participation
is being rewarded.
57
FHSA Flexibility to Encourage
Employer Contributions to Healthcare
1. Allow employers/carriers to voluntarily contract
with employees to require employer/carrier funded
FHSAs to be used only for healthcare expenses while
employed and covered under the plan.
2. Remove cap on employer/carrier funded FHSA
contributions or expand to at least the plan’s
Maximum Out-Of-Pocket total exposure in a given
calendar year.
58
FHSAs Flexibility to be Provided with Plan
Designs Other than HDHPs
1. Preventive drugs include maintenance drugs. Drugs now defined as
preventive by the Treasury Dept. can be covered below the
deductible, while the cost of maintenance drugs is now included in
the deductible.
2. Allow Rx to exist as carve out benefits at least for prescription drugs
associated with chronic and persistent disease states
3. Allow “incentive only based” FHSAs for employer/carrier only
funding under non-HDHPs (i.e. no initial FHSA funding or employee
funding)
4. Allow some mental health and substance abuse benefits (besides
EAPs) to be included under preventive care.
5. Allow use of HSA to pay for pre-65 Retiree and Individual Healthcare
premiums
59
FHSA Flexibility - Technical Issues
1.
Allow FHSA/HSAs to go into effect on the first day of coverage
is effective.
2. Allow FHSA/HSA contributions for a full calendar year
regardless of when a plan is effective.
3. Allow FHSA/HSAs to be used to pay for health coverage
premiums (other than current limited use for (1) Premiums for
coverage under the Consolidated Omnibus Budget
Reconciliation Act (COBRA), and (2) premiums for HDHP
coverage for those who receive federal or state unemployment
compensation).
4. Allow Flexibility to "post-date" the FHSA/HSA effective date so
that FHSA/HSA dollars can cover expenses incurred before the
account was established. Allow the account to be opened
under a "provisional status" until the necessary paperwork is
filed, at which time the account becomes active.
60
Growth of Personal Care Accounts
2000*
2001*
2002*
2003*
2004(est)
2005(est)
2006(est)
2007(est)
* Deliotte Consulting
HRAs
None
19,000
53,000
394,000
1-1.5M
3.2M
6.0+M
12-15M
HSAs
None
None
None
None
400,000
1,000,000
???
???
61
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
62
Task #4 - Discussion on Type(s) and
Use of Personal Care Accounts
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
63
Task #5 - Wellness, Prevention, and Early
Intervention
The Promise of Wellness
64
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.
65
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
66
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

Kaiser Family Foundation Survey, 9/03
67
Wellness - How Does It Impact Employees and
Family Members?
Well
At-Risk / Acute Condition
e.g., Inactivity, High Stress,
Overweight, High Blood
Pressure, Smoking
e.g., Low Risk, Good
Nutrition, Active
Lifestyle
No Claims
% Ee
15%
Generally
Healthy
O/P (Low)
48%
14%
Prevention
%$
0%
In/P
(High)
Maternity
3%
3%
Wellness – Lifestyle
12%
15%
12%
5%
Minimize Acute Episodes
% Ee
63%
20%
Maximize Recoveries
% $
12%
32%
Early Intervention
Chronically-Ill
Catastrophic
e.g., Diabetes, Musculoskeletal,
Heart Disease, Asthma, MH/SA
e.g., Cancer, Rare
Diseases,
Head Trauma
O/P (Low)
12%
In/P (High)
In/P (High)
4%
1%
Wellness - Lifestyle
21%
20%
15%
Minimize Complications
17%
Maximize Stabilization
56%
Wellness - Clinical
Wellness - Clinical
Traditional Wellness Programs
68
Wellness – Examples for Employer
Sponsored Programs
Common Programs



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)

69
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 Wellness Appraisal
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
70
Consumerism - Programs and Services
Prescription 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
Stress Management
 Assessment Tools
 Self Help Tools
Depression Screening
Preventive Care – Lifestyle
Early Prevention
Wellness
 Online News
Safety




Lifestyle
Pre-Natal
Nutrition
Well Baby Care
Fitness
Personal Health Management
New Mom Programs
Preventive Care – Clinical
Medical Services Support
 Immunizations
Self Care Management Information
 Hypertension Screening
 FAQ, Preparation for In/P
 Cholesterol Testing
On-Line Health Risk Assessment
End of Life Care
 Mammograms
 Pap Smears
 Personal and Family Tracking
Provider Cost/Quality
 Blood Pressure Checks
Incentives
 Colorectal Cancer Testing
Health & Performance
 Population Management
 Diabetes Testing
Regional Centers of Excellence
 Case Management
 Osteoporosis Testing
 Cost & Quality Management
 Chlamydia Tests
71
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.
72
HSA Safe Harbor
Preventive Care Screening Services
Cancer Screening
Breast Cancer (e.g., Mammogram)
Cervical Cancer (e.g., Pap Smear)
Colorectal Cancer
Prostate Cancer (e.g., PSA Test)
Skin Cancer
Oral Cancer
Ovarian Cancer
Testicular Cancer
Thyroid Cancer
Infectious Disease Screening
• Bacteriuria
• Chlamydial Infection
• Gonorrhea
• Hepatitis B Virus Infection
• Hepatitis C
• Human Immunodeficiency Virus
(HIV)
• Syphilis
• Tuberculosis Infection
Heart and Vascular Diseases Screening
Abdominal Aortic Aneurysm
Carotid Artery Stenosis
Coronary Heart Disease
Hemoglobinopathies
Hypertension
Lipid Disorders
Mental Health/Subst. Abuse Screening
• Dementia
• Depression
• Drug Abuse
• Problem Drinking
• Suicide Risk
• Family Violence
73
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, prenatal care, well child care, etc.)

Consider in conjunction with worksite programs (safety,
ergonomics, work-life programs, etc.)


Incentives/rewards provided for compliance
74
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
75
Task #5 - Discussion on Type(s) and
Use of Wellness and Prevention
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
76
Task #6 - Disease Management Programs
The Promise of Health
The “Holy Grail” of Cost and Quality
Improvements
77
Disease or Condition Management –
the Holy Grail of Potential Savings
Primary cost drivers are chronic disease and serious acute
conditions.
80%
of
costs
Driven by
20% of
claimants
For a typical employer, 15-30% of costs are
driven by controllable health risks
50%
of
costs
Have a
behavioral
root cause
(CDC 1999)
 The direct impact on productivity is comparable to the direct cost of health care
78
Disease Management Potential
Focus on Hi-Volume / Hi-Cost Users
Cost Curve
% Members
% Costs
1%
-> 20%
15%
-> 68%
50%
-> 95%
EBRI -Stakeholders in Consumer-Driven
Health Care
79
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.
80
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
81
Today’s Health Care Environment and Trends
Determinants of Health
60%
50%
40%
30%
20%
10%
0%
Determinants
Access to
Care
Genetics
Environment
Behavior
10%
20%
20%
50%
Source: IFTF, Centers or Disease Control and Prevention
82
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

83
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 outcomebased 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
84
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.
85
20 Priority Areas
per the Institute of Medicine
11. Major depression, which currently
has a much lower treatment rate that
other major diseases.
16. Pregnancy and childbirth,
especially improving the quality of
prenatal care.
12. Medication management to
prevent errors.
17. Self-management and health
literacy, using public and private
organizations to increase the level of
health education.
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.
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.
15. Pain control in advanced cancer.
20. Tobacco-dependence treatment for
adults.
86
Disease Mgmt - How Does It Impact
Employees and Family Members?
Well
Chronically-Ill
Catastrophic
e.g., Inactivity, High Stress,
Overweight, High Blood
Pressure, Smoking
At-Risk / Acute Condition
e.g., Diabetes, Musculoskeletal,
Heart Disease, Asthma, MH/SA
e.g., Cancer, Rare
Diseases,
Head Trauma
Generally
Healthy
O/P (Low)
O/P (Low)
48%
14%
e.g., Low Risk, Good
Nutrition, Active
Lifestyle
No Claims
% Ee
15%
Prevention
%$
0%
In/P
(High)
Maternity
3%
3%
Wellness – Lifestyle
12%
15%
12%
5%
Minimize Acute Episodes
% Ee
63%
20%
Maximize Recoveries
% $
12%
32%
12%
In/P (High)
4%
In/P (High)
1%
Wellness - Lifestyle
21%
20%
15%
Minimize Complications
17%
Maximize Stabilization
56%
Early Intervention
Wellness - Clinical
Wellness - Clinical
Disease Management Program
87
Disease Management Programs
Designed and Financially Aligned for Success
Program Type:
DM vendor pricing
method
Percentage of chronic
diseased
participating in
program
Return on investment
of disease
management
programs
Passive
Phone and mail
out- reach, no
incentives
Assertive
Incentives (i.e.,
waiving Rx copays)
Aggressive
Incentives (i.e,
waiving Rx copays,
premium
differential
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)
10%
50%
75%
0 - .5
1.5 - 2
1.5 - 3
88
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

89
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
90
Task #6 - Discussion on Type(s) and
Use of Disease Management Programs
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
91
Task #7 - Decision Support Tools
The Promise of Transparency
&
The “Right to Know”
92
Healthcare Consumerism –
Already Active Consumers
Consumers Search Internet
for Medical Content
Consumers Ask Physicians
for Genetic Testing
Consumers Work with Providers
on Personalized Health Plans
Consumers Monitor and Track
Their Own Medical Status Regularly
Consumers and Providers Coordinate Care and
Understanding through Integrated Clinical and
Information Therapies
93
Decision Support Tools
Survey of Attitudes
Patient decision making preferences
“INFORMED”
PARENTAL
17.1%
INTERMEDIATE SHARED
DECISION MAKING
45%
11%
PATIENT AS DECISIONMAKER
22.5%
4.8%
Employer Role:
Recognize the “consumer-preference spectrum”
Provide consumer-focused decision support tools for:
Choice of Health Plan
Choice of Provider
Choice of Treatment
Current and Future Financial Considerations
94
Decision Support Tools for Consumerism
Basic Design Information
Provider Selection Support
HRA Fund Accounting
Physician Quality Comparison
Underlying PPO Plan Design
Physician Cost Comparison
Disease and/or Medical Management
Hospital Quality Comparison
HSA Fund Accounting
Hospital Cost Comparison
Debit/Credit Card
Personal Benefit Support
Plan Comparison Cost Estimator
Account Balance
On-line Claim Inquiry
SPD
Care Support
On-line Provider Directory
Provider Scheduling
On-line Rx Comparisons
On-line Patient Decision Support
24/7 Nurse Line
Personal Health Management
Health Risk Appraisal
Health & Wellness Information
Targeted Health Content
Medical Record, History
Health Coach
95
Decision Support Tools
Employer 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
96
Consumerism – a new force
Consumerism
can be a force to address
quality and cost variations
in a given market
97
Decision Support
Tools for Cost & Quality Information
 Lower LOS
 Lower Cost
 Episodes of Care
Variation in Cost & Quality
Hospitals – CABG*
Align Strategy
with the “Value
Purchasing”
 Awareness
 Pay for
Performance
 Tiered
Networks
 Regional
Centers of
Excellence
Cost
Efficiency
Quality
 Fewer Adverse Affects
 Lower Complication Rates
 Lower Mortality
* Healthshare/SelectQualityCare weighted averages
98
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
99
Task #7 - Discussion on Type(s) and
Use of Decision Support Tools
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
100
Task #8 - Incentives, Rewards,
The Promise of Shared Savings
Pay for Compliance
&
Pay for Performance
“Two sides of the same coin”
101
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 10%-20% of
the cost of employee-only coverage).

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.

102
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 10%-20% of the
cost of employee-only coverage).
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
103
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.
- National Business Group on Health
104
Rewards & Incentives for Smoking Cessation
The NGBH conducted a Quick Survey in December 2003 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.

- National Business Group on Health
105
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
106
Using Information & Incentives
To Address Wellness & Disease Management
Behavioral Changes
Low Users
No
Claims
Mediu
m
Users
Generally
Healthy
Acute Episodic Conditions
O/P, Low In/P, High
Maternity
% Mem Prevention
15%
- Lifestyle
48% Wellness
14%
3%
3%
%
Dollars
12%Minimize
15%
5%
% Mem
%
Dollars
0%
63%
Maximize
12%
32%
Early Intervention
12%
32%
Wellness - Clinical
High
Users
Very High
Users
Chronic & ersistent
.
Conditions .
O/P, Low In/P,High
Catastrophic
Wellness
- Lifestyle
12%
4%
Minimize20%
21%
1%
15%
Maximize
17%
Wellness - Clinical
56%
107
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
108
Task #8 - Discussion on Type(s) and
Use of Incentives & Rewards
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
109
Task #9 – Viewing Healthcare Consumerism by
Generations
Review of
Plan Design Concepts
by
Generation
110
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
111
1st Generation HRA Prototype
• Employer Funds Only
• Notional Account
• Participant responsibility
• Can fund thru Section
125 plan
S.M.M.
Insurance
Deductible Gap
•
Ensures good health
•
Neutralizes
“hoarding”
•
Part of the Insurance
Plan
• Section 105 Plan
• Balance rolls over year to year
• Employer controls growth %
• Employer controls exit rules
• Vesting
• COBRA
• Retiree medical
• Qualified long-term care
Health Reimbursement
Arrangement
Preventive Care (Insurance)
• Consumer education
• Chronic disease
management
• Health Promotion
• Online tools
• Telephonic support
Education and Decision-Support Tools
112
1st Generation HSA/HDHP Prototype
• Employer HSA &/or Ee
Contributions
• Participant responsibility
• Can funded thru
Employee Tax Advantaged
HSA Contributions
• Can Not be Funded by
FSA, HRA or other
Insurance
•
•
•
•
Ensures good health
Neutralizes
“hoarding”
Part of the Insurance
Plan
Defined by IRS
• Interest earning Real Dollars
in Real Accounts
S.M.M.
Insurance
• Legally Defined by 2003 MMA
• Balance rolls over year to year
• 100% Vested at Point of
Contribution by Er
Deductible Gap
• 10% Penalty and Taxable
Income for W/D for Non-health
if <65
• Non-substantiation W/Ds
Health Savings Account
Preventive Care (Insurance)
• Consumer education
• Chronic disease
management
• Health Promotion
• Online tools
• Telephonic support
Education and Decision-Support Tools
113
HRA/HSA Healthcare Consumerism –
Multiple Options
$$$ Option
Ins.
Year 1: Employee elects $$$ Option
with $1,000 risk corridor. Employee
has $1,000 in claims, allowing
Personal Account to carry $500
over.
Year 1
Deductible
$1000
Personal Acct
$1,500
$$ Option
Ins.
Deductible
$1500
$ Option
Ins.
Year 2
Deductible
$1,500
Personal Acct
$1,500
Personal Acct
$1,500 + $500
Ins.
Ins.
Deductible
$2,000
Personal Acct
$1500
Year 1
Year 3
Deductible
$2,000
Year 2: Employee elects $$ Option,
maintaining $1,000 risk corridor.
Employee has $1,000 in claims, allowing
Personal Account to carry over $1,000.
Year 3: Employee elects $ Option, again
maintaining $1,000 risk corridor.
Employee no longer has a need for the
$$$ Option.
Personal Acct
$1500 +$1,000
114
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
115
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
116
2nd Generation Healthcare Consumerism
with 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
Benefit Consumerism
Access to
Health Care Education
Behavior
Information &
Information
Support Decision Support
117
2nd Generation Behavioral Change a Key
Determinant of Health
Today’s Health Care Environment and Trends
Determinants of Health
60%
50%
40%
30%
20%
10%
0%
Determinants
Access to
Care
Genetics
Environment
Behavior
10%
20%
20%
50%
Source: IFTF, Centers or Disease Control and Prevention
118
Healthcare Consumerism
Drives New Behaviors from All Participants
Employee
Passive Participant
Active & Empowered
Patient/Consumer, P4C
Employer
Primary Purchaser
Plan Facilitator Financial
Contributor
Barrier
Enabler / Education
& Information
Contracted Supplier
Clinical and Service
Standards, Care
Manager, P4P
Health Plan
Provider
119
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
120
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
121
2nd Generation
Programs to Change Behaviors
Well
e.g., Low Risk, Good
Nutrition, Active
Lifestyle
At Risk / Acute Condition
Chronic
Conditions
e.g., Inactivity, High Stress,
e.g., Diabetes,
Overweight, High Blood Pressure,
Depression, Heart
Lacerations, Infections
Acute Conditions
Disease, Asthma,
e.g., Infections, Respiratory, Lacerations
MS/SA
Catastrophic
Conditions
e.g., Cancer,
Hepatitis C, Head
Trauma
Health
Promotion
Health Management
Chronic Disease
Management
Website
Wellness Appraisal
Patient Identification
and enrollment
Navigational Support
Address Comorbid
Conditions
Patient Advocacy
Healthy Lifestyle
Promotion
Targeted Behavior
Modification
Physical Activity
Campaign
Practice Guidelines
Care Coordination
High Cost Case
Management
Care Coordination
Address Comorbid
Conditions
Integrated Services, Communications, Measurement and Evaluation
122
2nd Generation Consumerism – Improving Health
and Lowering Costs with Behavioral Changes
Low Users
No
Claims
% Mem
%
Dollars
11%
0%
Generally
Healthy
29%
2%
% Mem
40%
%
Dollars
2%
Medium
Users
High
Users
Acute Episodic
.
Conditions
.
O/P, Low In/P, High Maternity
Chronic & Persistent
.
Conditions
.
O/P, Low
In/P, High
17%
9%
Evidence
Based
11% Medicine
17%
4%
PreNatal
care
3%
18%
Very High
Users
11%
Evidence
Based
18%
Medicine 35%
Catastrophic
1%
Safety
14%
Programs,
Regional
Disease
Discretionary
Management30% Centers of
Expenses
30%
Excellence
Stress Management / Health & Performance
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
123
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
124
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
125
What are “Manageable Employment Costs”?
Five components of “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 nonoccupational disability.
5.
Unscheduled Manageable Absence: the cost of absence that could be
positively influenced with proactive intervention.
126
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
127
3rd Generation –
Incentives and Rewards
Optimizing Individual and Organizational
Health & Performance
3rd Generation “Account Based” Benefits and Incentives Platform
•
•Holistic Health & Productivity Focus
• Culture of Health & Wellbeing
• Seamless Population Management
• Shared Responsibility/Accountability
• Organizational Alignment & Support
• Data Driven Process Excellence
128
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
129
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
130
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”.
131
3rd Generation – Stress Management and
Corporate Impact
Research suggests that stress has been directly
attributed to:
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
132
Related / Imbedded Health Costs From Stress
Source of Demand
And Pressure
Major Body Systems
Affected by Stress
Job
Family
Personal
Social
Financial
Environment
Muscular System
Digestive System
Cardiovascular
Emotional
Endocrine, Immune
Cognitive
133
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
134
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.
135
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.
136
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.
137
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)

138
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
139
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 statusrelated 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.
140
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
141
The
Consumerism
Grid
Personal Accounts
Wellness/Prevention
Early Intervention
Disease Management
1st Generation
Consumerism
Focus on
Discretionary
Spending
Initial
Account Only
2nd Generation
Consumerism
3rd Generation
Consumerism
Focus on
Behavior
Changes
Integrated
Health &
Performance
Activity &
Compliance
Rewards
100% Basic
Web-based behavior Worksite wellness,
Preventive Care
change support
safety, stress & error
programs
reduction
Decision Support
Incentives &
Rewards
Personalized
Health &
Healthcare
Specialized Accts,
Matching HRAs,
Expanded QME
Genomics, predictive
modeling push
technology
Information, Compliance Awards, Population Mgmt, IHM, Wireless cyber –
disease specific
Integrated Back-to- support, cultural DM,
health coach
allowances
Information
Indiv. & Group
Corporate Metric
Rewards
4th Generation
Consumerism
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Work
Holistic care
Personal health
Health & performance Arrive in time info
mgmt, info with
info, integrated health
and services,
incentives to access
work data
information therapy
Personal development
Health Incentive
Non-health corporate
plan incentives,
Accounts, activity metric driven incentives
health status related
based incentives
142
Task #9 - Additional Considerations for
Building Blocks of Healthcare Consumerism
PCAs ______________________________________________________________
____________________________________________________________________
____________________________________________________________________
Wellness____________________________________________________________
____________________________________________________________________
____________________________________________________________________
Disease Management _________________________________________________
____________________________________________________________________
____________________________________________________________________
Decision Support ____________________________________________________
____________________________________________________________________
____________________________________________________________________
Incentives _________________________________________________________
____________________________________________________________________
____________________________________________________________________
143
Task #10 – Create/Design Basic Framework of
MSFT 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
144
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
% Members
Participating
Clms/Part.Mbr. Vs
Clms/All Mbrs.
Remaining
Members
Clms/Part.Mbr. Vs
Clms/All Mbrs.
10%
75%
90%
103%
30%
85%
70%
106%
50%
100%
50%
100%
145
Design a PPO Plan
Traditional PPO
Desirable
PPO
Preventive
Preventive
Deductible
Deductible
20% Coins to
a Maximum
OOP
PPO 80%
Coverage
In-Network
100% Coverage
20% Coins to
a Maximum
OOP
What would you Include?
Any Coinsurance?
PPO 80%
Coverage
In-Network
100% Coverage
How large of a Deductible?
In-Network Coins?
In-Network Max OOP?
OON Coins?
OON Max OOP?
Plan Maximum?
Other:
Carve-out Vision, Dental?
146
Design a High Deductible PPO/HRA Option
PPO / HRA
Preventive
Sample
PPO / HRA
Preventive
HRA
Deductible Gap ($500-1000)
Deductible Gap
20% Coins to
a Maximum
OOP $2-5,000
100% Coverage
__% Coins to
a Maximum
OOP of $_______
How Much in Initial HRA?
How Large of a
Deductible Gap?
HRA ($500-$1000)
PPO 80%
Coverage
PPO 80%
In Network
Coverage
In-Network
What would you Include?
Any Coinsurance?
PPO __%
Coverage In
Network OOP
of $______
100% Coverage
In-Network Coins?
In-Network Max OOP?
OON Coins?
OON Max OOP?
Plan Maximum?
Other:
Carve-out or Incl.?: Rx, MH & SA,
Vision, Dental
HRA Incentives?
Wellness, DM. Other?
147
Design a High Deductible PPO/HSA Option
PPO / HSA
Preventive
Sample
PPO / HSA
How Much in Initial HSA?
Preventive
HSA=($1000=2600)
What would you Include?
Any Coinsurance?
HSA = _____
In-Network Coins?
In-Network Max OOP?
OON Coins?
OON Max OOP?
20% Coins to
a Maximum
OOP $5000 (incl
deductible)
PPO 80%
Coverage
In Network
100% Coverage
___% Coins to
a Maximum
OOP _______
PPO __%
Coverage
In Network
100% Coverage
Plan Maximum?
Other:
Carve-out or Incl.?: Rx, MH & SA,
Vision, Dental
HSA Incentives?
HRA Incentive?
Wellness, DM. Other?
148
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 Accounts (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
149
PPO Plans Differ Mainly in the Way
Initial Dollars are financed
Traditional PPO
Insurance Funding
of Early Expenses
Preventive
PPO with
HRA Funding of
Early Expenses
Preventive
Deductible
PPO with
HSA Funding of
Early Expenses
Preventive
HRA
HSA
Deductible Gap
20% Coins to
a Maximum OOP
PPO 80%
Coverage
100% Coverage
20% Coins to
a Maximum OOP
PPO 80%
Coverage
100% Coverage
20% Coins to
a Maximum OOP
PPO 80%
Coverage
100% Coverage
Similar Catastrophic Protection
150
Sample Consumerism PPO Plan Designs
Traditional PPO
Insurance Funding
of Early Expenses
Preventive
100% coverage
Deductible $250
20% Coins to
a Maximum
OOP of $4,750
PPO with
Er HRA Funding of
Early Expenses
Preventive
100% coverage
Er HRA $1000
Deductible Gap
PPO 80%
Coverage
100% Coverage
20% Coins to
a Maximum
OOP of $4,000
PPO with
Voluntary Ee HSA Funding of
Early Expenses and Er HRA Match
Preventive
100% coverage
Voluntary Ee Funded
HSA up to $1000
$1,000
PPO 80%
Coverage
100% Coverage
$1000 HRA Er
Match to HSA to
cover part of:
PPO 80%
Coverage
20% Coins to
a Maximum
OOP of $4,000
100% Coverage
Max OOP = $5000
Max OOP = $5000
Max Ee Cost = $5000+Prem
Max Ee Cost = $5000+
Lower Prem
Max OOP = $5000
Min OOP = $4000 w/ HRA Match
Max Ee Cost = OOP+
+HSA+Lowest Premium
Incentive HRAs from
Initial “$0” Balance
Incentive HRAs from
Initial $1000 Balance
Incentive HRAs for
CY Co-Insurance Only
151
Task #10 – Create/Design Basic Framework of
Healthcare Consumerism Options
PPO
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
152
Task #11 –
Implementation Planning & Time Frames
The Challenges and
A framework for Implementation
153
Employer Challenges in Developing a
Healthcare Consumerism Strategy
Lower Costs,
Increased Employee Satisfaction,
Quality/Value Driven Healthcare,
Improved Access to Care
Enterprise-wide Impact of Health & Healthcare
Collaboration
Standardize IT Platforms
Focus on High Cost / High Volume Users
Building the
Future Employer
Benefits Program
Pay-for-Performance
Consumerism
Healthcare Consumerism
Demand-Driven Healthcare
154
Communication Milestones
Accept Health Plan as
an Accumulating
Asset Rather than a
Short Term Benefit
Acceptance
I accept the
changes
Practical
Application
What does it
mean to me?
Education
Awareness
How does it work?
What is it?
Employee Decision-Making Cycle
155
Time Frame for
Implementation of
Consumerism (may
be Dependent Upon
Vendor Capabilities)
Personal Care
Accounts
Wellness/Prevention
Early Intervention
Disease and Case
Management
Information
Decision Support
Incentives &
Rewards
Yr__- __
Yr__-__
Yr__-__
1st Generation
Consumerism
2nd Generation 3rd Generation
Consumerism Consumerism
Focus on
Discretionary
Spending
Focus on
Behavior
Changes
Initial
Account Only
100% Basic
Preventive
Care
Information,
health coach
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Activity &
Compliance
Rewards
Integrated
Health &
Performance
4th Generation
Consumerism
Personalized
Health &
Healthcare
Indiv. & Group Specialized Accts,
Corporate Metric Matching HRAs,
Rewards
Expanded QME
Worksite wellness,
Web-based
behavior change safety, stress &
error reduction
support
programs
Compliance
Awards, disease
specific
allowances
Personal health
mgmt, info with
incentives to
access
Health Incentive
Accts, activity
based incentives
Yr__-__
Genomics,
predictive
modeling push
technology
Integrated Hlth
Wireless cyber –
Mgmt, Population support, cultural
Mgmt, Integrated DM, Holistic care
Back-to-Work
Arrive in time info
Health &
and services,
performance info,
information
integrated health
Therapy
work data
Non-health
Personal dev. plan
corporate metric incentives, health
driven incentives
status related
156
Integrated Health
Management
1st Generation
Consumerism
2nd Generation
Consumerism
3rd Generation
Consumerism
A Logical Stake in
the Ground ?
Focus on
Discretionary
Spending
Focus on
Behavior
Changes
Integrated
Health &
Performance
Personal Care
Accounts
Wellness / Prevention
Early Intervention
Disease Mgmt &
Case Management
Information &
Decision Support
Tools
Incentives &
Rewards
Initial
Account Only
100% Basic
Preventive
Care
Information,
health coach
Passive Info
Discretionary
Expenses
Cash, tickets,
Trinkets
Activity &
Compliance
Rewards
Web-based
behavior change
support
programs
Compliance
Awards, disease
specific
allowances
Personal health
mgmt, info with
incentives to
access
Zero balance
acct, activity
based incentives
4th Generation
Consumerism
Personalized
Health &
Healthcare
Indiv. & Group Specialized Accts,
Corporate Metric Matching HRAs,
Rewards
Expanded QME
Worksite wellness,
safety, stress &
error reduction
Genomics,
predictive
modeling push
technology
Integrated Hlth
Wireless cyber –
Mgmt, Population support, cultural
Mgmt, Integrated DM, Holistic care
Back-to-Work
Health &
Arrive in time
performance info, info and services,
integrated health
information
work data
therapy
Non-health
Personal dev. plan
corporate metric incentives, health
driven incentives
status related
157
Integrated Health Management Program
Implementation Option for Multiple Generations
General Manager
Personal Care Accts.
FSAs, HRAs, HSAs
Integrated Absence Mgmt
Acute Case Mgmt
Disease Mgmt Programs
The secret is
cooperation and
synergy between
components supporting
the corporate strategies
Demand Management
Prevention
Wellness
Utilization and Case Management
Communication
Education
NETWORK A / TPA A
NETWORK B / TPA B
158
Potential Savings & Actual Industry Results
from Early Generation Implementations
More than just Theory and Promises
“To achieve transformation to a 21st Century
Intelligent Health System, all participants
must advance in a consistent way to the
future model.”
159
The Value Proposition

5-8% Savings over 5 years with 2% lower trends
 Low Range of Savings
5% x 5 years + 2% x 5 years = 35%
 High Range of Savings
8% x 5 years + 2% x 5 years = 50%

20-35% lower Rx costs
Low Range: 20% x 20% = 4%
High Range: 35% x 20% = 7%
160
Potential Savings from
Full Implementation of Consumerism
Achievement 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)
Traditional plans
Effective
Programs
Implemented
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
161
Healthcare Consumerism
Experience Results
162
Aetna Health Fund (AHF)
Product Type:
Study by:
Study Basis:
HRA with high deductible PPO
Aetna
13,800 members (19 groups) enrolled in AHF vs. “randomly selected similar
population” in traditional PPO
Comparison of Jan-Sept, 2003 to Jan-Sept, 2002 experience
Released March, 2004
Results - 2003 Experience vs. 2002 Experience for Members Enrolled in AHF in 2003
1. 30% increase in preventive care office visits vs. 14% for traditional group
2. 1.5% medical cost increase per employee per month vs. 15.7% for traditional group
3. 5.1% decrease in ER visits, 10.3% decrease in outpatient visits, and 14.5% decrease in inpatient
admits
4. 51% with HRA balances left over
5. 31% of total HRA dollars rolled over
6. 48%+ more use (than traditional group) of consumer health info (e.g. Intellihealth)
7. 100% more use (than traditional group) of pharmacy price and generic substitution information
8. 13%+ more use (than traditional group) of online provider directories
Results - One Group with Integrated Pharmacy in the High Deductible Plan
11.1% decrease in prescriptions per 1000 for AHF members vs. 1.8% increase for traditional plans
34-44% increase (2002 to 2003) in generic usage for AHF vs. 40-45% increase for traditional plans
163
United Healthcare
Product Type: HRA with high deductible PPO
Study by:
United Healthcare
Study Basis:
Two years experience for 20,000 members enrolled in traditional plan year
one
and in iPlan year two
Two years experience for 25,000 members enrolled in traditional plans for two
years
Released June, 2004
Results for iPlan Members
1. Higher registration rate on myuch.com than non-iPlan members
2. Higher use of preventive services than non-iPlan members
3. Decrease in total emergency room visits; indication of more selective,
responsible use of emergency services after enrollment in AHF (in year two)
4. Reductions in the use of specialists, outpatient procedures, and radiology and
lab in year two
5. Less than 1% (per member/per month) year-over-year cost increase when iPlan
was a full replacement
6. Most iPlan members carried an HRA balance into 2004
7. In-network utilization was in the 90th percentile
8. Satisfaction ratings greater than 90% with customer service and decisionsupport tools
164
Humana
Product Type:
Study by:
Study Basis:
SmartSuite Multi-Option plans
Humana
10,000 Humana employees in 2001-2002; 5.6% enrolled in consumerism plan
(SmartSuite), remainder in traditional HMO/PPO
Released December, 2002
Results
1. 5.6% enrollment in SmartSuite (consumerism) products
2. Early adopters of consumerism were “super-healthy”, of average age, and of higher average
salary than non-adopters
3. More SmartSuite enrollees waived dependent coverage
4. Apparent “spillover” of behavioral changes to traditional products due to communications and
tools resulted in a 4.9% cost increase for 2003 for entire group (10,000 employees) vs. 19.2%
projected trend
Plan Option
PMPM: 7/1/01 – 6/30/02
Expected (Trended)
PMPM: 7/1/01 – 6/30/02
Actual
HMO
$127
$139
Tiered PPO
$163
$141
PPO Standard
$101
$110
SmartSuite Option 1
$64
$39
SmartSuite Option 2
$78
$51
165
Definity Health (Now United Health Care)
Product Type:
HRA or HSA with high deductible PPO
Study by:
Galen Institute Briefing on Consumer Choice Health Care
Study Basis:
85 self-insured clients with 300,000 consumer-driven members,
experience for Jan-Nov, 2003
Released February, 2004
Results
1. 10% enrollment average for first year clients where Definity is an option
2. Enrollment from a broad demographic cross-section of the population, no
apparent favorable demographic selection
3. Large claim (> $50K)incidence rate of 4.6 per 1,000 members compared to
standard claim distribution incidence rate of about 2.3 per 1,000 members
4. 95% re-enrollment rate
5. 90% member satisfaction
6. Overall renewal increase over Definity book of business of 0% in 2003 and 3.2% in
2004
7. Average pharmacy utilization rate for groups range from .57 to .69 prescriptions
per member per month (12% below the low industry benchmark and 34% below
the high industry benchmark)
8. Generic drug substitution rate of 95%, compared to “norm” of 85%
9. Hospital admits of 44.3 per 1000 vs. “norm” of 59.0 per 1000
10. Hospital days of 162.1 per 1000 vs. “norm” of 200.0 per 1000
166
Actual Published Consumerism Experience
In 2004, Aetna consumerism plans showed cost increases of
only 1.5% versus increases of more than 10% for traditional
health plans. Employers that offered only consumerism plans
had an average decrease in premiums of 2.9%.
In 2004, United Health Care showed average cost increases of
less than 1% for consumerism plans. Humana, Blue Cross
Blue Shield, and other health insurers are finding similar
results from their new consumerism products.
Forrester Research predicts 24% of Americans will be covered
under such plans by 2010.
167
Task #12 (Summary) - Medical Plan Costs and
Potential Consumerism Savings Worksheet
Well
At-Risk
e.g., Low Risk, Good
Nutrition, Active
Lifestyle
Chronically-Ill
e.g., Inactivity, High Stress,
Overweight, High Blood
Pressure, Smoking
e.g., Diabetes,
Musculoskeletal, Heart
Disease
O/P (Low)
No Claims
Generally
Healthy
O/P (Low)
In/P (High)
Maternity
Distribution of
MSFT Med Costs
___%
___%
___%
___%
___%
___%
___%
___%
Avg $ Cost (000’s)
$0
$____
$____
$____
$____
$______
$_____
$______
Est. CDHC
Savings Pct.
0%
15%
12.5%
8%
5%
15%
20%
8%
$ CDHC Savings
(000’s)
$0
$____
$____
$____
$_____
$______
$______
$______
Incremental HRA
Costs
$____
$____
$____
$____
$_____
$______
$______
$______
Amount
In/P (High)
Catas-trophic
e.g., Cancer,
Rare Diseases
In/P (High)
Pct.
Est. CDHC Savings
$_______
_____%
Incremental HRA Costs
$_______
_____%
Net Annual Savings
$_______
_____%
168
Consumer-Driven Healthcare Surveys
A Fad or Exponential Growth ?
169
Milliman 10/2004 CDHC Survey
89% of those responding expect to offer a CDHC plan to employers
within the next year, up from 29% in last year's survey. Specifically,
these 89% currently offer or plan to offer within the next year a high
deductible plan with an integrated employee account (i.e., HRA or
HSA).
Milliman Group Health Insurance Survey
CDHC Available Currently or Within 2005
Offer a Tiered
Provider Network
2004 Survey
42%
2003 Survey
17%
Offer a High
Deductible Plan
96%
48%
Offer a
CDHC Plan
89%
29%
% Prem
From CDHC
7.8% (in 2005)
3.4% (in 2004)
Percentage of Respondents
170
Survey Information on CDHC
Mercer 4/2004
Nearly three-quarters (73%) of employers asked by Mercer Human Resource
Consulting said they were likely to offer the new accounts to their workers by 2006,
according to a survey to be released this week.
"We're looking at a major market change," says Linda Havlin, Mercer's Midwest
health care practice leader, noting that a 73% interest in adopting a new program
within two years "is unprecedented.“
Forrester
Research
9/2003
171
172