Consumer Driven Health (CDH): Stacking The Deck In Your Favor

1. Consumer Driven Health (CDH): Stacking The Deck In Your Favor PEBA 2006 ForumApril 20, 2006

2. What We’ll Cover Today • Perspective on CDHP • Evaluating the Drivers for CDH • Education/Communication • Implementation Process • Case Study • Discussion/Q&A

3. A Perspective on CDH • Holistic view – a set of techniques designed to transform members to be more effective health care consumers • Not a single product….a long term process • Four key building blocks for an effective program • Account-based plans are an effective plan design • Financial incentives work • Health promotion and coaching Consumerism Tools Consumer Financial Role Health Promotion Health Coaching

4. CDH Drivers • Increasing health plan costs • Desire to involve employees and families in the process • Competition for talent • Desire to link quality of care with cost

5. Costs Continue Rising • National health care costs exceed $1.9 trillion • Over 15% of GDP • Costs will increase 13.0% in 2006(1) • Drivers • Medical technology • Biotech drugs • Aging population • Poor lifestyle choices • Inability to identify quality providers (1) Aon Fall 2005 Health Care Trend Survey

6. Need to Improve Quality • “Our study suggests that perhaps a third of medical spending is now devoted to services that don’t appear to improve health or the quality of care – and may make things worse.” Elliot S. Fisher, Professor of Medicine, Dartmouth, 2003 • Patients do not receive the proper diagnosis and treatment 45% of the time. 2003 Rand Corporation Study of 30 Conditions

7. Poor Lifestyle is a Cost Driver • 6% to 14% of medical costs attributable to smoking • Obesity has overtaken smoking as the number one health risk factor • 60% to 75% of Americans do not engage in enough physical activity • 49% lower health care costs if: • Non-smoker • Non-obese • Physical activity three days per week • 63% say smokers and non-smokers should pay different health plan rates Sources: National Center for Policy Analysis, May 2003; Journal of the American Medical Association, 1999, Wall Street Journal/Harris Interactive, December 2005

8. Engaging the Health Care Consumer “Consumers can guess: • The price of a Honda Accord within $300 • The price of a roundtrip ticket within $37 • But they’re off by $8,100 for a four day hospital stay Source: “Consumer Attitudes Toward Health Care”, Harris Interactive survey of 2,000 individuals, February 2005

9. The CDH Market is Growing Exponentially • Account-based plan (HSA and HRA) membership is doubling annually • 6 million CDH members versus 3 million in 2005 • Faster growth than HMOs in the 70’s • 2006 may be a tipping point • Surveys indicate 10 to 15% of employers will add an HRA or HSA in next two years • All industries and all sizes • Big names such as GM, Wal-Mart, Target as well as small and middle • UHC (Definity) has 11,825 CDH clients (11,500 are small HSA clients) • Aetna has 589 CDH clients

10. Expected Outcomes: CDH Plans Are Delivering Results • CDH plans are delivering on their promise to increase consumer engagement and reduce utilization • CDH participants make more careful, value-conscious purchasing decisions • CDH participants exhibit an increased level of engagement in health and well-being Source: “Consumer-Directed Health Plan Report – Early Evidence is Promising”, McKinsey & Company, June 2005

11. CDH Participants Are….. • 50% more likely to ask medical providers about cost • 33% more likely to identify treatment alternatives • 300% more likely to choose less extensive and expensive medical treatment • 25% more likely to engage in healthy behaviors, including exercise • 20% more likely to participate in wellness initiatives • 30% more likely to get an annual checkup • 20% more likely to follow their treatment plan for a chronic condition • 200% more likely to shop for lower Rx cost Source: “Consumer-Directed Health Plan Report – Early Evidence is Promising”, McKinsey & Company, June 2005

12. CDH Utilization Results • Reductions in: • PCP visits: -12.3% • Emergency room visits: -15.9% • Inpatient hospital admissions: -6.7% • Outpatient visits: -4.6% • Increases in: • EOB: +29% • Claim Status: +53% • DocFind: +37% • Specialist Visits: +3.6% Source: Aetna Medical Cost & Utilization Report, May 2005

13. CDH Financial Results • 1st year CDH cost increases average 5.3% • 2nd year trend rates are 1-4% less than PPOs • Full replacement plan had –2% trend over two years • >70% CDH enrollment had –13.4% trend • <5% enrollment had +9.9% trend • Chronic condition patients maintain care • Aetna assumes 7% utilization reduction Source: Aetna Medical Cost & Utilization Results, May 2005

14. CDH Utilization Results • 1st year reductions in utilization • -11% emergency room use • -8% office visits • Two year utilization trends • ER visits…..35% of traditional plan trend • OP surgery………28% of traditional plan trend • Hospital days……32% of traditional plan trend • Preventive services • CDH members use preventive services 75% greater than traditional plan members (after adjusting for health status) Source: UHC (Definity) CDH Results Study, November 2005

15. CDH Utilization Results • 2nd year enrollees have deeper engagement • More aware of health care costs • More actively involved with health care decisions • More likely to research treatment options • CDH enrollees better access web tools • “Activation” makes a positive difference • Members have higher trust, satisfaction, and perceived value Source: UHC (Definity) CDH Results Study, November 2005

16. Education & CommunicationConsumers

17. Education & Communication • Assessing CDH readiness • Strategy development • Content outlines • Internal & external stakeholders – dealing with autonomy in your organization • Long-term goals/measurements of success

18. Evolving Employees Toward Consumerism…Today engage educate empower • I will: • be informed • initiate dialogue with my benefit partners • take responsibility for my healthcare and my future • actively participate in learning to improve the quality of {healthcare, retirement planning, etc.} as much as control costs for me and the Company • I understand: • how this is different • why this is important • how this affects me • what’s at stake if I do nothing • I accept that: • this process can improve outcomes • I have a role in the process and can make a difference • buying healthcare and other benefits requires the same due diligence as other major life purchases • I must be actively involved

19. It’s a Journey Change Behaviors Using Proven Processes Step 1: Understand Step 2: Educate Step 3: Implement Step 4: Measure Step 5: Sustain

20. Step 1: Understand the Communication Starting Point • Surveys and/or focus groups are critically important to accurately identifying the true healthcare benefits communication starting point • Employee sensing provides valuable information, including: • Current employee likes and dislikes about the benefits program • The degree to which employees truly understand how their benefits work • Misconceptions about the plans and healthcare terminology • Perceived value of current benefit plans • Identification of any benefit “sacred cows” • How employees utilize existing communications and other decision support tools • The degree to which spouses or partners factor into the healthcare decision • Potential employee “tradeoffs” • Employee communication preferences

21. For Example… Employers communicate… But employees hear… • Healthcare is a shared responsibility between employees and the Company; employees need to be part of the solution. • The Company provides the tools and resources to help employees lead healthy lifestyles and prevent or manage medical conditions. • A CDH plan puts you in control … over how your benefit dollars are spent and how you track your benefits. • Health risk assessment counseling helps employees stay healthy and minimize health risks. • The Company is trying to save money, so any healthcare change will be a take-away. • I’m going to have to deal with more of the administration associated with healthcare benefits. • The new CDH plan is confusing. I can’t figure out how it works, so I may just stay where I am. • I have to disclose personal information. How can I trust that it won’t adversely impact me later? GAP

22. Step 2: Educate Prior to Implementation • Employees have earned a right to some degree of skepticism • “Any news is bad news” syndrome • Communications previously focused only on cost, not quality of care or improving outcomes • Employees (at all levels) routinely under-estimate an employer’s true cost to provide healthcare benefits and over-estimate the percentage their per-pay contributions represent • Managed care has taught employees to think according to a certain vocabulary • Penalties for noncompliance • “Barriers” instead of advocacy and support • Pre-launch education can help to redefine terms, build organizational credibility and manage employee expectations prior to annual enrollment

23. Step 3: Implement • Articulate the long-term strategy – explain the business case for change and the long-term strategy; relate all plan design changes to how they support that strategy and how successful implementation will benefit employees and the Company; focus on quality of outcomes as much as cost control • Be aggressive – create a relentless communication campaign that aggressively promotes what employees need to do; create a distinct and new benefits brand • Use a mix of media – to reach entire employee audience (and their families), and make self-service easy, in accordance with employee preferences • Personalize the message to focus on different employee groups – by plan participation (traditional vs CDH), by FSA participation, by age for preventive care, etc. • Consider logistics – to what degree should spouses and partners of employees be included in the implementation? Should materials be translated into other languages? How can technology be leveraged to push communications out as much as pull employees in?

24. Step 4: Measure Success • Representative metrics our clients are using, especially for “Year 1” CDH implementations: • Participation • “No noise” • Inquiries/questions • Direct survey feedback (opinion polls) • Post-implementation employee focus groups

25. Sustain Communication Eliminate the “any news must be bad news” syndrome Reinforce key messages Manage the grapevine Encourage and support sense of “partnership” Advertise tools and resources Publicize and celebrate successes Communication Vehicles Personalized statements Quarterly newsletters Intranet postings CEO letters Drawings (to reward participation in certain programs) Giveaways (to recognition participation) Step 5: Sustain

26. Implementation Process

27. CDH Project Overview • Develop Strategy • Establish desired outcomes • Complete data analysis and benchmarking • Design CDH plan and employee rates • Conduct focus groups • Communication • Establish objectives • Develop strategy (messages, timeline, etc.) • Draft, design and produce materials • Educate employees Project • Financial Modeling • Develop modeling assumptions • Develop “winners and losers” analysis • Calculate projected costs under the new CDH program vs. old program • Vendor selection • Determine available CDH vendors • Solicit bids or negotiate with current health plan vendor • Evaluate CDH bids and make a recommendation Total CDH project timeline: 12 to 18 months

28. Which CDH Model? • Use HRA if: • You want a plan design value equal to or greater than the current plans, • You want more plan design flexibility, and/or • You want high enrollment (>25%) • Use HSA if: • You want a high deductible (lower premium) option for employees, • You want a tax-favored savings account for high paid employees, and/or • You want fund portability, eg. to help with retiree medical

29. CDH Vendor Selection Criteria • CDH experience • Network size and discounts • Web tools • Communication support • Customer service • Health coaching and promotion • Administrative capabilities (degree of integration) • Debit/credit card capability

30. A Case Study Jefferson Health System

31. About Jefferson Health System (JHS) Largest hospital system in Philadelphia region consisting of: • 5 Affiliated Hospital “Members” • 6 Employee Plan Sponsors • 26,000 Employees – 19,000 Benefit Eligible JHS Members • Albert Einstein Healthcare Network • Frankford Hospitals • Magee Rehabilitation Hospital • Main Line Health, Inc. • Thomas Jefferson University Hospital

32. Employee Benefit Environment • Common benefit design and TPA/carrier at JHS level • PPOs and HMOs • Each Member is a Plan Sponsor • Member (not system) decisions: • Insure or Self-Fund • Employee contribution strategies • Open Enrollment • Employee Communications

33. Evolution of Consumerism within JHS • Vigilant about offering best possible employee benefits • Consider employee expectations • Track future of plan designs • Incorporate consumerism messages • Offer CDHP • Joint Venture

34. Issues and Conflicts for JHS as Plan Sponsor and Healthcare Provider • Provider network development • Physician practice concerns • Patient experience on admission • Services not provided within JHS

35. Scope of Project or “How we accomplished what others said could not be done” Phase I – Set CDHP Strategy and Plan Design Step 1: Garner Support of Stakeholders    Step 2: Establish Project Management and Set Objectives Step 3: Create CDHP Program Plan Design Step 4: Actuarial Analysis and Plan Pricing Step 5: Plan Implementation

36. Scope of Project Phase II – Develop CDHP Communication Program Step 1: Set Communication Strategy Step 2: Announce to Key Stakeholders Step 3: Train Key Communicators Step 4: CDHP Employee Campaigns Step 5: Open Enrollment Refresh Step 6: Ongoing Requirements

37. Results and Feedback • Successful partnership • Employee contribution strategy was a critical decision point • Exceeded leaderships enrollment expectation • “What they say is true” – communicate, communicate, & communicate some more • Monitor administration, participant feedback, and use of CDHP tools and resources

38. Questions?