Consumer Driven Health Plans: Early Findings from the Field and Future Directions Stephen T. Parente, Roger Feldman, Jon B. Christianson University of Minnesota December, 2003 Funded by the Robert Wood Johnson Foundation Health Care Organization and Financing Initiative For more information: [email protected]
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Consumer Driven Health Plans: Early Findings from the Field and Future Directions Stephen T. Parente, Roger Feldman, Jon B. Christianson University of.
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Consumer Driven Health Plans:
Early Findings from the Field
and Future DirectionsStephen T. Parente, Roger Feldman, Jon B.
ChristiansonUniversity of Minnesota
December, 2003
Funded by the Robert Wood Johnson Foundation Health Care Organization
• Describe the CDHP business model. • Illustrate the mechanics of a CDHP
using Definity Health as an example. • Provide an Overview of our RWJ
evaluation of Definity.• Present current analysis results. • Opportunities and conundrums of
CDHPs.
Issues Driving CDHP CreationPatients
Dissatisfaction with provider access Patient incentives are to consume Limited choices of benefits and providers Combative relationship with managed care companies
Providers Loss of autonomy Erosion of physician/patient relationship Misalignment of physician reimbursement and incentives
Employers Plan costs are increasing Employees are not happy Increase of employer administration burdens
CDHP Business Enablers
–‘Ready to Lease’ Components of Health Insurance:• Electronic claims processing • National panel of physicians• National pharmaceutical benefits management firms• Consumer-friendly health data web portals• Disease management vendors
–Internet • Transaction medium for claims processing• 2-way communication with members
–ERISA-exemption• Lack of state oversight• Half the US commercial health insurance market is self-
insured.
Early CDHPs in Operation
– Definity•Concept developed in 1998, Funded in April, 2000•Minnesota based•Clear first mover & dot-bomb survivor
– Lumenos•Started in 2000•Based in Virgina•Havard B-School inspired (Regina Herzlinger)
– Destinty•Operating as Medical Savings Account model•In operation for 10 years in South Africa
Definity Health Component Details
Definity Definity HealthHealthCareCare
AdvantageAdvantage
Web- and Web- and Phone-Phone-Based Based ToolsTools
Health ToolsHealth Toolsand Resourcesand Resources
Health Tools and Resources• Care management
program• Extensive easy-to-use
information and services
Health Coverage• Preventive care covered
100%• Annual deductible• Expenses beyond the
PCA• Nationwide provider
access• No referrals required
Personal Care Account (PCA)• Employer allocates PCA1
• Member directs PCA• Section 213(d) “scope”• Roll over at year-end • Apply toward deductible2
Annual Annual DeductibleDeductible
Annual Annual DeductibleDeductible
Pre
ven
tive
Care
10
0%
Pre
ven
tive
Care
10
0%
Health Health CoverageCoverage
An
nu
al
Ded
uct
ible
1 Employer selects which expense apply toward the Health Coverage annual deductible.2 Paid out of employer’s general assets.
PCAPCAPCAPCA
$$
New RWJ-Funded Research
Key Research Questions1. Is there an ‘adverse selection’ problem?
Traditionally, adverse selection is defined as the situation when healthy individuals choose Definity leaving the sick in a traditional plan that will soon implode its premiums because of disproportionate share of sick individuals in the insurance pool.
2. What is the impact on cost and utilization? Definity has been chosen as a response to rising premium prices in an attempt to make the consumer ‘drive the market’ be examining price variations and constraining their personal consumption, if possible.
Research Design– 2 Year study (11/1/2002 - 10/31/2004)– Six employers examined:
• University of Minnesota, MN• Medtronic, National• Ridgeview Medical Center, MN• Hannaford Bros, New England• Welch-Allyn, Upstate NY (tentative)• To be Named (New England or South Atlantic firm)
– Data collected• Claims data of all utilization for all health plan choices, pre (2001)
and post (2002-2003) Definity.• Employer info on flexible spending accounts and employee income
• Survey information on Definity choices in 2002 & 2003 from U of M.
Early Results #1:
Employee Choice of a Consumer Driven Health
Plan in a Multi-Plan, Multi-Product Setting
Health Plan Choices
1. Health Partners: Staff model HMO with direct capitation contracting at a limited number of group practices.
2. Patient Choice: A ‘Tiered-direct contracting’ descendent of Minnesota’s Buyers Health Care Action Group health benefit design experiment.
3. Definity Health: Consumer-driven Health Plan 4. Preferred One: Preferred Provider
Organization
UPlan Options/Enrollment
Total CostLess UM
contributionEmployee
contribution EnrollmentHealthPartners Classic $137.84 $137.84 $0.00 5,027Patient Choice Cost Group I $137.84 $137.84 $0.80 Patient Choice Cost Group II $147.15 $137.84 $9.31 2,091Patient Choice Cost Group III $157.90 $137.84 $20.06PreferredOne National $189.51 $137.84 $51.77 731
Definity Health Option 1 $150.52 $137.84 $12.68 349Definity Health Option 2 $150.48 $137.84 $12.64
Total 8,198
Employee-only coverage
Total CostLess UM
contributionEmployee
contribution EnrollmentHealthPartners Classic $344.59 $323.92 $20.67 3,967Patient Choice Cost Group I $329.60 $323.92 $20.67Patient Choice Cost Group II $351.30 $323.92 $39.23 2,808Patient Choice Cost Group III $376.80 $323.92 $65.73PreferredOne National $448.40 $323.92 $143.91 997
Definity Health Option 1 $353.00 $323.92 $51.63 346Definity Health Option 2 $327.50 $323.92 $51.55
Total 8,118Single & Family Total 16,316
Family coverage
Early UM Definity ExperienceYear 2002
54%46%Option 1Option 2 51%49% Family
Single
49% 51% FemaleMale
51%49%Employee
Dependents
Definity Age/Gender Distribution
2002 University of Minnesota
0
10
20
30
40
50
60
70
<25 25-34 35-44 55-64 >65
Definity Male
Definity Total
Other Plans
All RespondentsSatisfaction with Plan
OverallYes No
How would you rate your overall experience with your health plan in 2002? (1=worst possible, 10=best possible)
Definity 7.47 7.41 7.50Other Plans 7.55 7.64 7.49
For Definity respondents, would you recommend Definity to a friend, family member or colleague? (%)
Yes 85.0 87.4 83.6No 12.4 9.3 14.1
Don't know/refused 2.6 3.3 2.2
By Whether Respondent or Dependent Has Chronic Condition
Health Plan Features Most Preferred
50
36.7
29.8
6.9312
1516
46.4
76.44
0 20 40 60 80 100
My doctors in health plan
No referral authorizations
Has preventive care
National provider panel
PCA balance rolls over
Small out-of-pocket $$
Small paycheck deduction
No copayments
Online tools
Percent agreement
Other Health Plans Definity
Results: Premium Sensitivity • Employees are sensitive to out-of-pocket
premiums, and surprisingly, employees with chronic conditions are more premium-sensitive
•If Definity raised its premium by 1% it would lose 4.6 % of healthy single enrollees and 5.4% of healthy families
•1% premium boost would cause 6.9% of singles and 10.7% of families with chronic condition to leave Definity
•The results depend on 100% of the premium hike being passed along to the employee (i.e, defined contribution), as is the case for the UM
Results: Health Status and Other Employee Characteristics
• Employees and families with chronic conditions prefer the PPO, but otherwise, there is no evidence of adverse selection•Having a chronic condition is associated with a 3.2% increase
in the probability of choosing PreferredOne vs. HealthPartners•Note that PreferredOne had the highest premiums ($189.51
for single coverage and $448.40 for family coverage per pay period), suggesting that the plan is experiencing adverse selection
• Higher income employees chose Definity or Choice Plus, suggesting these plans may evolve as favorites of the ‘well-to-do’
• Older employees chose PreferredOne or Choice Plus
Early Results #2:
Consumer-Driven Health Plans:
Early Evidence about Utilization, Spending and
Cost
What was the gross impact on provider and patient payment?
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full PMPM expenditures. Also note: 1) Patient expenditures from the Personal Care Account (PCA) are included in the employer payment category. 2) Consumer payment reflects deductibles, copayments, and coinsurance expenses.
What was the impact on provider & patient payment by different
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full PMPM expenditures.
Was service use different for CDHPs?
Physician visits
*Utilization data presented are per member averages.
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full physician visit experience.
*Utilization data presented are per member averages.
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full admissions and prescription drug experience.
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full illness burden..
What was the ADJUSTED impact on provider and patient
payment?
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full PMPM expenditures. Also note: 1) Patient expenditures from the Personal Care Account (PCA) are included in the employer payment category. 2) Consumer payment reflects deductibles, copayments, and coinsurance expenses.
What was the ADJUSTED impact on provider & patient payment by different
services?
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full PMPM expenditures.
Health Plan Cohorts MeanDeviationMean MeanDeviation
NOTE: These are results from a restricted continuously enrolled sample of 50% to 60% of the total employee population and are not a reflection of the plans’ full admissions and prescription drug experience.
LevelsPCA MAP 2001 2002Under PCA Limit 40% 28%Ended Within Gap 13% 15%Above Deductible 47% 57%
Continuously enrolled population
Conclusions• The most important factor affecting choice is
income.• The consumer drive health plan was not
disproportionately chosen by the young and the healthy (for this population).
• In unadjusted dollars, CDHP cost is lower relative to a PPO, but maybe not a HMO in the long term.
• In adjusted dollars, CDHP cost is the lowest of all, but only after favorable expenditure selection.
• Year 3 of CDHP experience will reveal if they can stem high cost growth trajectory from years 1 & 2.
Policy Conundrums
• How does a employer-based personal care account move with an employee?
• How should CDHPs be treated in the non-ERISA marketplace?
• What if CDHPs accelerate the consumer’s burden of health care spending ‘too’ quickly?
Policy Opportunities
• Innovative means to bring consumer choice into the medical marketplace as well as consumer awareness of the trade-offs of liberal medical insurance coverage policies.
• Creates foundations for infrastructure for personal, portable health care coverage.
• Hybrid variants could be crafted to serve low income and part time workers.
CDHP Health Information Technology
Enablement:
A Personal, Portable Medical Record How-to
Opportunity
Health IT Fantasies Goals
• Linked medical records – womb to tomb• Access medical results online (patient &
• Real time – adjudication, care tracking• Personal medical resource calculator• Customized treatment/care prompts• Personalized new technology opportunity
finder
A Look Inside the “Health IT Sausage” of one Integrated
Delivery System
LifeSupport
Data
Hardware
DecisionSupport
What’s Wrong With Today’s Health IT Picture?
TOO MANY SILOES!
15% ofCare
25% ofCare
15% ofCare
10% ofCare
35% ofCare
Data Available to the Average Medical Provider About a Patient’s Care
Physicians
Congress Main Street Biotechnology
Courts
Federal Government
<90% Income
Insurers 99% Income 91-99% Income
Big Business
Hospitals
Actual eLinks To Build
Today’s Health IT Realities
• +400 IT-siloed insurers• +6000 IT-siloed hospitals• +600,000 IT-siloed practicing physicians• data does not connect by person• cost to transition from one a platform is
huge• capital investment is substantial to change• lack of standards• little digital data present• niche firms/vendors with turf not willing to
yield
One CDHP Future to Accelerate Creating Personal, Portable
Medical Records2004: CDHPs requires links to
outpatient laboratory results data at the provider encounter level.
2006: CDHPs requires links to pharmaceutical prescription orders at the provider encounter level.
2008: CDHPs requires data from practices from ‘approved’ EMR/CPOE software applications.
Why Should CDHPs Take Initiative
• Demonstrates an ability to give patients and providers better data as part of the regular health care system.
• Living innovation to meet the challenge of the IOM ‘Quality Chasm/Patient Safety’ Call to Arms.
• It fits the evolution, not revolution, mantra of CDHPs.
• Gives CDHPs a marketing edge.• Encourages patients to develop a brand taste
for information packaging via their CDHP – which could make possible employer ‘cash-out’ of health benefits easier to take.
Why Care?
How might you gain/lose from this?
Health Reform Circa 2005-2006• Nation Health Opportunity Act Legislation
introduced to reform system by:– Mandatory health insurance coverage for all adults and
their dependents. Enforced through combination of DMV highway construction pork and IRS tax law rules.
– Voucher system provided by employers to employees for 30 hour to full-time employees.
– Government voucher system to all others of low option CDHP or price equivalent of a staff model HMO.
– Small business and single contract co-ops created regional catastrophic insurance using TriCare bidding model.
– All consumers own their electronic medical transactions and have a default agency that manages them as a government program (much like we all have a default DMV).