Consumer-Driven Health Plans: Are They More Than Talk Now?

1. Consumer-Driven Health Plans: Are They More Than Talk Now? Jon Gabel Anthony Losasso Thomas Rice

2. How Did We Get to Consumer-Driven Health Care? • Managed care backlash • Reemergence of health care inflation

3. Increases in Health Insurance Premiums Compared to Other Indicators, 1988-2002

4. Percentage Increase in Underlying Health Care Spending, 1991-2001, for All Services

5. Consumer-Driven Health Care and Defined Contribution Plans: What is the Difference? • Defined contribution – refers to employer contribution formula • Cash out of health benefits business • Managed competition model of fixed absolute contributions for health insurance • Consumer Driven Health Care – refers to plan design • “Stakeholder empowerment to improve value”

6. Common Elements of Consumer-Driven Products • Increased financial risk for consumers • Increased choice of providers and/or benefit design • Use of e-health insurance medical information products

7. Consumer Driven Health Care • Three models • MSA type plans (Personal Spending Accounts) • Personalized plans i.e., Vivius • Customized plans i.e., Health Partners • The upgrade is a tiered network • More than start-ups today • Cash-out is a non-starter

8. An Overview of Consumer Driven Health Plans • Total enrollment – 1.5 million • The Upstart Startups (100,000) • PSA plans – Definity, Lumenos • Personalized plans – Vivius, MyHealthBank • The Health Plans Cometh (1.4 million) • PSA plans • Customized plans – most of enrollment

9. Six Viewpoints of Consultants • The most successful model will be the MSA type plans. Vivius type plans are too complex for consumers. • Cash-out approach is non-starter. • The market is ready for consumer-choice plans. Employers don’t want to be pioneers. • We need to enlist the consumer in the crusade against high health care costs. • Plans will be additional options for large employers, not replacement products. • The key to the success of the plans is the extent consumers use web-based medical information.

10. The Case for Consumer Driven-Health Care • Political failure of managed care requires a new strategy. • Without cost-sharing, consumers view cost-control as “taking away my benefits.” • Cost-sharing reduces the use of services. • Cost-sharing does not reduce health status for healthy people. • More choice is associated with higher plan and provider satisfaction. Public equates choice with quality. • Internet provides the tools to improve the knowledge and decision-making ability of consumers. • Some insurer-based plans will increase pooling.

11. The Case Against Consumer-Driven Health Care • Cost-sharing is a blunt instrument. • Impairs access to care for low-income populations. • “Tax” on sick persons. • Does not improve the appropriateness of care. • Impairs health status for some chronic conditions • Plans less able to secure discounts. • Could raise administrative expenses. • Who will hold providers accountable for quality of health care? • Breaks down risk-pools; MSA plans may end up transferring income from sick to healthy. In multi-plan settings, it may raise total outlays. • We need more rather than less co-ordination in health care, particularly for chronic care.

12. Key Issues • Use of information • Will consumers use the web tools? • Can we provide information on individual physicians? • Can consumers understand the information? • Cost control • Access to care • Effect on take-up rate • Effect on percentage of firms offering coverage • Will patients delay needed care? • Selection bias • Effect of PSAs • Contribution formulas

13. Key Issues (Continued) • Legal and legislative issues • IRS guidance allows employers to fund individual spending accounts with pretax dollars. • Plans would like PSAs to be portable. • Quality of care • Will plans no longer monitor quality and compliance with guidelines?