Path to Transparency

5201 Johnson Drive Suite 305 Mission, KS 913.236.3090 800.304.9852 SRABenefits.com

Transparency…

The Path to the True Cost of Healthcare

Overview

Healthcare – A Major Problem for Business

Healthcare Plan Design

New Paradigm Needed

Deductibles and Copays Case Study: Cigna Choice Fund

Cultivate Savvy ConsumersHealthcare Marketplace Lower-cost Medications

Assist in Coordinating Care Information on Provider Quality

Transparency Brings Value to Employers and Employees

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For Real?

___ Martians

___ Flying Saucers

___ Controlling Healthcare Costs

___ Time Travel

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As a Business, You Have Two Choices

Healthcare – A Major Problem for Business 4

Healthcare Costs: Major Problem for Business

The old model does not work– Employees don’t understand the true cost of healthcare or know where to find the best care

Employer benefit plans are overpriced and underappreciated– Routinely costs $4,000 more annually per employee than necessary– Employee health plan satisfaction < 50%

Unlimited care management and ill-designed wellness programs have failed

Medical inflation will continue to rise in 2013– 3-4 times the rate of all other consumer goods (7.5%)

Healthcare is expensive– One month of cholesterol medicine - $250 – CT scan - $3,500– Outpatient surgery - $52,000 Healthcare – A Major Problem for Business 5

– Healthcare is complex– It is disorganized– It’s not focused on customer

satisfaction

Employees are Confused by Healthcare Issues

Healthcare – A Major Problem for Business 6

New Paradigm Helps Control Rising Healthcare Costs

Avoid the mistakes and gain a competitive edge

By dodging these pitfalls, you will:– Improve your margins– Raise your employee benefit satisfaction– Create employee-friendly benefits

Healthcare – A Major Problem for Business 7

New Paradigms Starts with Fresh Perspective

Employer benefit decisions are influenced by those who specialize in insurance and paying medical claims– Knowing how to negotiate insurance rates and discounts has very little to do with how

people actually receive care and make decisions

Traditional insurance models distortthe reality of health care for its mostimportant consumer: The Patient

Healthcare – A Major Problem for Business 8

Help Patients See the Light

When patients become powerful consumers, they can clearly see:

– Many health care services are truly commodities– Cost varies by provider– Only patients and physicians make healthcare decisions– Patients educated as savvy consumers can reduce costs

What is the solution?– A multi-step process that starts by aligning your benefit design

with value-based decisions and behaviors

Healthcare – A Major Problem for Business 9

AffordabilityShared Financial Responsibility for Medical Services

Coverage for Catastrophic Events

Employee Tools and Support

Key Principles for Effective Health Plan Design

Healthcare Plan Design 10

Health Plan Design

The goal: Selecting a plan that provides effective “coverage” for the employee at a cost the employer can afford

To many companies, the design process simply means various tweaks in coverage that curtail premium growth or shift more cost to employees

Instead, benefits design should focus on solutions that drive down costs today while educating employees on how to achieve lower costs tomorrow

Core Design Principle – shared financial responsibility is a powerful motivator for patient behavior change

Healthcare Plan Design 11

Low Deductibles and Copays Separate Employees from the True Cost of Care

Healthcare Plan Design 12

Common Procedures Average Cost Can Be as High As

Imaging

X-Ray Chest $41 $340

CT Chest $530 $1,725

MRI Brain $1,370 $4,631

Diagnostic Procedures

Colonoscopy $2,147 $4,661

Endoscopy $2,117 $4,245

Surgical Procedures

Arthroscopic Knee Surgery $3,793 $6,949

Labor & Vaginal Delivery $8,720 $13,908

Disc Surgery $7,137 $28,545

Current employee perspective:

Solution: Raise the deductible and add Health Reimbursement Account (HRA)

Eliminate Low Deductibles

Healthcare Plan Design 13

“Once I spend my $500 deductible, I could not care less how much my healthcare costs.”

“Looks like I have spent my entire deductible…I guess I need to go get some more work done before the end of the year.”

Eliminate Copays

A copay is a fixed fee for a particular service or medicine– They create the same fundamental psychological impact on employees as low

deductibles and first dollar coverage

Copays can be expensive for both employers and employees– A cardiologist visit with in-office testing will cost your employee a $30 copayment, but

the cost to your company $1,000

Solution: Eliminate copays – They destroy the connection between price of healthcare and cost to the employee– They can even penalize employees when they meet their out-of-pocket maximums. Take

copays out of your health plan and actually save your employees up to 30% on out-of-pocket costs

Healthcare Plan Design 14

Sixth annual study reaffirms that:– Choice Fund consumer-driven health plans save money without compromising care – Customers are increasingly engaged and smarter about their health and health spending

Cigna Choice Fund plan combined a Preferred Provider Organization (PPO) medical benefit plan with a consumer health care account.

Options– Health Reimbursement Account (HRA)– Health Savings Account (HSA)

Case Study: Cigna Choice Fund

Healthcare Plan Design 15

Case Study: Cigna Choice Fund

Savings achieved without cost shifting to customers – Analysis of customers’ out-of-pocket health expenses showed that those in Cigna Choice

Fund HRA paid nearly the same percentage as customers in traditional plans –regardless of their health status

Benefits- When compared to customers in traditional plans, Cigna Choice Fund customers– Spend less on overall medical services– Receive equal or better quality care – Are more engaged in their health and health spending– Are more satisfied with their health care experience – Over five years, Choice Fund plans could save up to $9,700 more per employee when

compared to traditional plans.– 14% lower overall pharmacy cost trend in the first year– 72% of Cigna Choice Fund customers used generic equivalents over brand-name medications

Even Better health risk profiles on full-replacement casesHealthcare Plan Design 16

Healthcare Reform’s Impact on Healthcare Design

Growth of high-deductible consumer-directed health plans (CDHPs)– Provide the most affordable option and on average satisfy more than the coverage

mandate requires

Bronze Plan is minimum coverage requirement – Actuarial value of 60%

Congressional Study confirmed that CDHPs had 72% actuarial value

Healthcare Plan Design 17

Cultivate Savvy Consumers

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Factors to consider– Price– Quality– Convenience

The Healthcare Market Varies Widely

Cultivate Savvy Consumers 19

A B C D$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000$2,580

$1,292$980

$544

Cost Variation – Upper GI Endoscopy in Kansas City

Cost

374%

Almost every employer is surprised to learn that where its employee receives treatment could affect its bottom line by $40,000 or more

No need for medical tourism - you can send your employees down the street

The Healthcare Market Varies Widely

Cultivate Savvy Consumers 20

Responses to the Price Differential

That statement is an assumption and often false– In fact, better facilities are usually more

efficient and can often have the lowest price.

– Almost no hospital or surgery center can justify higher prices based on objective evidence of superior quality.

Solution: Provide incentives to your employees to use lower-cost healthcare when possible.

Cultivate Savvy Consumers 21

“Well, the more expensive facility is of higher quality.”

Where Are the Prices Listed?

Providers and insurers agree not to share price information with the public so it will not become available to its competition

However, forcing providers to compete on price is the best way for employers to push the healthcare market in the direction of higher quality and most cost-effective care

Utilize a third party database of over 20 million claim pricing points for all types of procedures in the U.S. (Compass Professional Health Services– compassphs.com)

Solution: Provide comparative price information for employees that is: – Targeted to their specific needs– Timely– Easy to access– Given in conjunction with other support services that allow them to take advantage of the

potential savings Cultivate Savvy Consumers 22

Example of Pricing Recommendation

Dear Mr. Smith,We researched the facilities where your two preferred doctors perform knee replacement surgery. Below is the cost comparisons for the surgery at the hospital, appointments, and other associated charges.

Both St. Ringo Hospital and St. George Hospital perform a significant number of procedures each year. However, St. Ringo is the newer facility with updated facilities and operating rooms.

One of the most expensive parts of a knee replacement is the implant. While the implant is typically provided by the hospital and included in the hospital bill, physicians will sometimes order these at cost for patients which are almost always cheaper than having the implant provided by the hospital. This practice, in part, explains the difference in cost between St. Ringo and St. George.

Cultivate Savvy Consumers 23

Component Saint Ringo Hospital George

Hospital Charges $20,500 $34,600

Anesthesia $2,100 $2,100

Total $22,600 $36,700

Example of Pricing Recommendation

Our data also suggest the physicians you requested are on similar contracts which have estimated costs as follows:

Cultivate Savvy Consumers 24

Component Dr. Feelgood Dr. Strangelove

Office Visit – New Patient

$120 $100

Office Visit- Existing Patient

$115 $115

Office Consult $215 $215

Physical Therapy $86 $86

Surgical Procedure $2,000 $2,400

Total $2,546 $2,926

Show Employees Lower Cost Medication Options

The prescribing habits of most physicians are not rooted in clinical and cost-effectiveness

Although in some cases, the brand name medication may be the best option, there are every effective generic medications to treat a number of issues

Some PBM’s have on-line cost comparison tools, but fail to interact with the patient and doctor in a meaningful way to actually change the prescription to a lower cost option – leading to unnecessarily large pharmacy spending.

Solution: Provide employee with medication cost comparisons and work with the patient and doctor office to get the prescription changed to the higher value.

Cultivate Savvy Consumers 25

Show Employees Lower Cost Medication Options

Cultivate Savvy Consumers 26

Annual Savings: $3,922

Current Medication

Generic Equivalent

Clinical Alternatives

Monthly Savings

Lipitor$120

Pravastatin$4 Generic

Lovastatin$4 Generic

$116

Effexor XR$105

Venlafaxine$36

Amitriptyline$4 Generic

Nortiptyline$4 Generic

Generic$68

Alternatives$101

Protonix$125

None Omeprazole$15

$109

Eliminate the “revolving door” approach to care

Employers must find a health pro who can focus on care coordination

Solution: Provide your employees a medical home that includes everything from cost and quality guidance, doctor selection, explanation of care options, scheduling appointments, obtaining medical records and reviewing bills.

Don’t Leave Employees to Coordinate Care by Themselves

Cultivate Savvy Consumers 27

= better care for less money

Provide Relevant Provider Quality Information

Cultivate Savvy Consumers 28

“But my doctor recommended him…”

Combine cost comparisons with quality of service data

Ensure that a physician is board certified, associated with reputable hospitals, and not part of a pending or adverse malpractice lawsuit

Encourage employees to go beyond these baseline checks to understand referral patterns, past customer experiences, and personality fit

Solution: Provide profiles of physicians who can meet your employees’ specific needs – board certified, free of disciplinary action, good bed manners, competent, courteous office staff, same day/next day appointments

Provide Relevant Provider Quality Information

Cultivate Savvy Consumers 29

= satisfied patient

Steps Along the Path to Transparency

If You Follow the Path to Transparency 30

Prepare Choose Treat Pay

Understand Insurance Benefits

Create Health Summary

Compare Costs

Select Doctors

Explain Options

Schedule Appointments

Assist with Communications

Obtain Medical Records

Review Bills & Charges

By using the cost comparison and provider-quality data, you will cut your healthcare spending by at least 10% and $625 per employee per year.

If You Follow the Path to Transparency 31

Yes, For Real

___ Martians

___ Flying Saucers

___ Controlling Healthcare Costs

___ Time Travel

If You Follow the Path to Transparency 32

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David WetzlerPresident, SRA [email protected]

srabenefits.com

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