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1、,Consumer Driven Health Care Pricing and DesignSession 51The Conference and Academy2004 Annual Meeting,October 20,2004,Tom TomczykSander DomaszewiczEric Blumberg,Economics&Change,“Nobody spends somebody elses money as carefully as they spend their own.”-Milton Friedman“We always over estimate the ch
2、ange that will happen in two years and under estimate the change that will happen in ten.”-Bill Gates“Healthcare is a failed marketplace today because the person paying the bill isnt the one choosing the service.”-Howard Wizig,Vivius“I am convinced that if the rate of change within an organization i
3、s less than the rate of change outside,the end of the company is in sight.”-Jack Welch,Mercer Human Resource Consulting,ConsumerismWhat is it?,A benefit plan design(CDHP)A silver bulletFundamental“change”A“holistic”strategyGreater accountability and control for employeesAn essential element for heal
4、th care program strategyCritical to transforming the health care systemA sustainable market based solution for containing costs andimproving quality,True,False,Consumerism is:,Mercer Human Resource Consulting,Employer Characteristics What employer characteristics make adoption of consumer strategies
5、 easier?,Well-educated,self-sufficient employeesExisting meaningful employee contribution to health care costsHigh overall employer health care costLow union membershipCorporate culture and support of independent employee choiceEmployee dissatisfaction with current options,Good intranet infrastructu
6、re and high internet use among employeesSelf-funded health planLarge cost increases with existing plans(to create the incentive to move),Mercer Human Resource Consulting,CDHP,Basic coverage for routine and preventive servicesSupport services for people with chronic illnessesAccounts for discretionar
7、y medical spending(HRA/HSA)Coverage for catastrophic coverageMember cost sharing features,Mercer Human Resource Consulting,In-NetworkInsurance,AnnualInsuranceDeductible,CDHPOne Approach to Consumerist Design,Mercer Human Resource Consulting,Consumer Directed Health PlansMulti-year Results-driven Pro
8、gram Design,Account-Based Plans Accelerating,Source:9/24/2004 Inside Consumer-Directed Care and Mercer,Mercer Human Resource Consulting,CDHP Designs EvolvingAccount Amounts&Incentives,Early Industry Standard HRA,Current Industry Standard HRA,Adding Behavior Incentives,Expanding Behavior Incentives,P
9、articipating in DM programs“Graduating”from DM/care management programsReceiving preventive careUsing tools and supportComplying with chronic illness regimen(Rx),Mercer Human Resource Consulting,CDHP Designs Get More ComplexCost Sharing,Coinsurance Along Side HRA,Mostly smaller employers exploring i
10、nnovative cost-sharing designs that include accountMany administrators and insurers cant handle this complexityIf offered along side traditional plans,very tough to“sell”advantages of CDHCommunication becomes more involvedAs CDH full replacements expand,so will a variety of cost-sharing designs,Rein
11、serting the Upfront Deductible,?,?,Mercer Human Resource Consulting,CDHP Designs Get More ComplexMultiple Designs,Multiple Plans for Employee Choice,Many employers begin offering more than one CDH plan to employees(especially full replacements)Multiple plans show commitment to CDH from employer and
12、allow for greater employee choiceSalary-tiered design smooth out“affordability”factors and low paid worker concerns,but add significant administration and communication complexity,Single CDH Plan,Various Designs by Salary,?,Mercer Human Resource Consulting,Along Come Health Savings AccountsHRA or HS
13、A:Decisions,Decisions,Mercer has worked with approaching 60 organizations to offer an account-based CDHPs effective 2004 and earlierAll but one of these was HRA-based(1 HSA-based program effective 9/1/2004)Mercer is working with approaching 50 additional organizations to add an account-based CDHP(HR
14、A or HSA)offering effective in 2005.Over 1/2 of these clients will be using HRAs as their funding vehicle for their CDHPMany more organizations are planning for 1/1/06 and beyond to offer HSAsAs they evaluated HSAs in their typical large group planning cycle(January 2004 through June 2004),they foun
15、d the administration and regulatory guidance to still lacking,Mercer Human Resource Consulting,employer funded,(example:60%),In-Network Insurance,(example:80%),Member Responsibility,Preventive Care,Pharmacy(integrated only),Out-of-NetworkInsurance,100%After Out-of-Pocket Maximum,In,-,Network,Insuran
16、ce,(example:80%),(employer funded),(example:$500),Health ReimbursementAccount,employer funded,Member Responsibility,Out,-,of,-,Out-of-NetworkInsurance,(example:60%),In-Network Insurance,(example:80%),Preventive Care,Pharmacy(integrated or non-integrated),100%After Out-of-Pocket Maximum,$150,(30%),$1
17、,000 Deductible,$500,$500,$1,000 Deductible,$350,$650,HealthSavingsAccount,CDHP,HRA,HSA,with:,The HSA DilemmaOptics of Employee&Employer Risk,Mercer Human Resource Consulting,Case Study:Generic CompanyPathways to Consumerism,Basic CharacteristicsAbout 7,500 US employeesGeographically disperse workfo
18、rce in USNon-unionized,no/low unionization potential82%401k participation(7%average deferral rate);17%FSA participationAverage salary$53,000;Average age 43$6,600/pepy average spend on medical;No retiree medicalDesired ResultsCompany costs at least flat compared to status quo in year one3 to 5%compan
19、y savings over 2-3 years due to“consumerism”,additional savings through traditional effortsNo negative attraction&retention from medical redesign would like this to be a+if possibleHigher satisfaction rating of medical plan as benefit currently 72%“satisfied”,Mercer Human Resource Consulting,Generic
20、 Employer2004 Medical Plan Designs,Mercer Human Resource Consulting,Generic Employer2005 Medical Plan Designs Modify Existing Plans,Mercer Human Resource Consulting,Generic EmployerModerate with HSA,Mercer Human Resource Consulting,Generic EmployerSignificant with HSA,Mercer Human Resource Consultin
21、g,Generic EmployerAggressive with HSA,Mercer Human Resource Consulting,Generic EmployerModerate with HRA,Mercer Human Resource Consulting,Generic EmployerSignificant with HRA,Mercer Human Resource Consulting,Generic EmployerAggressive with HRA,Mercer Human Resource Consulting,Take Aways,There are as
22、 many ways to design a consumer directed health plan as there are plan sponsorsEvery plan sponsor is coming from a different starting point and has different goals,thus every program is unique in some wayCDHP design,administrative capabilities and regulations will continue to evolve rapidly what wer
23、e doing today may or may not look anything like the designs of 5 years from now(unified accounts,point of service adjudication)The tactics of CDHP design are important(HRA vs.HSA,$in the account,bridges/gaps,OOPs,contributions,incentives,etc.etc.)Aligning the overall CDH program design with what a p
24、lan sponsor wants to achieve is critical,Mercer Human Resource Consulting,Consumer Directed Health PlansPricing and Design,Example:HSA Design,Hewitt Associates,HSA versus HRA Features,Hewitt Associates,Financial Summary and Risk of Adverse Selection,Hewitt Associates,Trailblazers Enrollment Results,
25、Hewitt Associates,Trailblazer Key Measures,Hewitts early same population analysis found behaviors are changing15%Rx,6%professional reductionLarge change in discretionary spendingWide variation in online tools,risk assessment,and Nurse line usage.Much higher with incentives(Co.4 and Co.5),Hewitt Asso
26、ciates,Trailblazer Key Measures,There was a clear correlation of HNI and first year PEPM claims at each of the Trailblazer companies18 months of claims shows results similar to traditional plan,but there could be a 10 to 15%“newness”factor.Through Sept.,HRA YTD balances are in line with expectations
27、(25%carry forward),Hewitt Associates,Trailblazer Key Measures,If designed correctly,“Core+”plans are seeing 40%-60%downward elections(i.e.,migration in the right direction)However,adverse selection is an issue that must be properly pricedDiscounts and medical management remain important to lower costs,Employer Enrollment:Core Rx vs.Buy-Up Rx,Hewitt Associates,
