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BEYOND CDHC – BEHAVIOR-BASED FINANCING Putting the “health” back into health care benefits

BEYOND CDHC – BEHAVIOR-BASED FINANCING Putting the “health” back into health care benefits. Kyle Rolfing | 5.04 Wellness Incentives Track. GROUP ACTIVITY / DISCUSSION. BEHAVIOR-BASED FINANCING. A digression and a thought experiment.

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BEYOND CDHC – BEHAVIOR-BASED FINANCING Putting the “health” back into health care benefits

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  1. BEYOND CDHC – BEHAVIOR-BASED FINANCINGPutting the “health” back into health care benefits Kyle Rolfing | 5.04 Wellness Incentives Track

  2. GROUP ACTIVITY / DISCUSSION

  3. BEHAVIOR-BASED FINANCING A digression and a thought experiment What would happen if we applied the health benefit financing model to retirement savings programs?

  4. BEHAVIOR-BASED FINANCING The twist – equal distribution regardless of individual investment Investment amount $ _____low_______ GroupFund Investment amount $ ___moderate____ Investment amount $ _____high______

  5. BEHAVIOR-BASED FINANCING Consider implications on future behavior • What is your reaction to this financing model? • Who gains form this approach? Who loses? • What behaviors would you expect to see take place as a result of this plan? • Who would invest? How much? • How much attention would be paid to individual investments?

  6. CONNECTING FINANCE TO HEALTH CARE WORKS –CDHC PROOF POINTS

  7. BEHAVIOR-BASED FINANCING CDHC – connecting financing to health care decisions works! 5-10% fewer ER visits3 • 6.5% decrease in pharmacy costs1 • 11% decline in overall prescriptions1 • 13% increase in overall generic utilization1 • 31% increase in the use of pill-splitting2 • 100% increase in the use of mail order pharmacy services2 • 12% fewer inpatient admissions3 • 30% fewer inpatient hospital days3 36% increase in members taking annual preventive exams3 Source:1 Aetna CDH book of business. 2 UnitedHealth book of business. 3 2007 Health Spring Meeting, Session 89: CDHP Experience Update.

  8. U.S. Adult Population Inactive 60 Obese 40 Smokers Percent 20 0 CDHC introduced 1995 2000 2003 2006 Year BEHAVIOR-BASED FINANCING However, the impact to health status is less evident While CDHC has impacted individual health care decisions, it does not appear to have much impact on the individual health behaviors that drive increased medical costs. Source:Centers for Disease Control and Prevention, National Center for Health Statistics.

  9. BEHAVIOR-BASED FINANCING And, efforts to engage aren’t having the desired effect (a “sickly response”) • 4% of smoking employees participated in employer-sponsored smoking cessation programs • 5% of overweight employees joined workplace weight control programs • 10% of employees with chronic conditions participated in employer-promoted disease management programs Source:Survey Findings: Two Roads Diverged: Hewitt's Annual Health Care Survey 2008.

  10. THE DISCONNECT BETWEEN BEHAVIORS AND FINANCING

  11. Modifiable behaviors account for over $85 billion in health care spend for Fortune 500 employers Total HealthcareCosts • Specifically, behaviors related to: • Physical activity • Smoking • Nutrition • Medical compliance • Alcohol use • Stress $8,000 Excess over “normal”, driven by modifiable behaviors $4,000 $0 2008 BEHAVIOR-BASED FINANCING 50% of healthcare costs are attributable to individual behaviors

  12. $17,000 Today’s behaviors will drive this portion of costs tomorrow. 8% Year-Over-Year Increase $8,500 2018 BEHAVIOR-BASED FINANCING The problem will only get worse These costs are entirely preventable. Total HealthcareCosts $8,000 $4,000 $0 2008

  13. BEHAVIOR-BASED FINANCING A digression and a thought experiment What would happen if we applied the health benefit financing model to financing home owner insurance?

  14. BEHAVIOR-BASED FINANCING – MOVING BEYOND CDHC

  15. Defined Contribution / Exit Strategy? Level of Consumer Ownership 1950s 1980s 2000 Today 20(??) BEHAVIOR-BASED FINANCING Consumerism’s next phase Behavior-Based Financing Connects financing to individual behaviors and health engagement Consumer-Driven PlansReconnected financing through deductiblesand point-of-sale decision-making Indemnity PlansConnected financingthrough deductible Managed Care PlansDisconnected financing Time Line

  16. BEHAVIOR-BASED FINANCING Components needed to move to behavior-based financing • First, we need a behavior-based financing framework in which the individual consumer’s share of health care costs depends on whether they engage in their health • Second, because we are asking people to take more responsibility in their health, we need to make it easy for individuals to engage

  17. STEP 1:ESTABLISH A BEHAVIOR-BASED FINANCING FRAMEWORK

  18. BEHAVIOR-BASED FINANCING The current system treats employees unfairly Regardless of behavior,everyone pays equallyfor increasing premiums. Under current system… Typically these increases are absorbed by employers or passed on through premium increases or plan design changes. But neither option addresses the primary cause – behaviors. Increase As costs increase both parties assume some percent of increase with no apparent end in sight HighlyEngaged Employee dollars Employee dollars Costs are split between employers and employees with employers bearing the larger share Increase ModeratelyEngaged Employer dollars Employer dollars This system does not treat individuals fairly. Unengaged

  19. Increase As costs increase both parties assume some percent of increase with no apparent end in sight Health Investment HighlyEngaged Employee dollars But instead of absorbing yearly increases, expected costs are pooled into a health investment account Increase ModeratelyEngaged Employer dollars Unengaged BEHAVIOR-BASED FINANCING A more equitable, effective system aligns financing with behaviors Premiums are distributed more fairly based onindividual behavior. Under current system… Behavior-based financing breaks the pattern… Increase Increase Employee dollars Employee dollars Behavior-based financing works within the current framework to transform health care Employer dollars Employer dollars

  20. Identify Appropriate Cost Share Base Investment Health Investment Employee $12,000 Employer Health Investment:“Pay for Health” $10,000 $8,000 The Opportunity Employer Base Health Spend:“Pay for Sick” Cost (PEPY) $6,000 $4,000 $2,000 $0 2008 2009 2010 2011 2012 2013 Year BEHAVIOR-BASED FINANCING Solution – transform financing to pay for health Yellow portion is contingent on employee engaging with their Personal HealthMapSM Notes: 10,000 employees; $8,000 total health spend (2008); 80% / 20% current contribution split; 8% trend.

  21. Participants Complete All Three: Health Screening Health Assessment Online Profile Participants Engage in Health Programs: Preventive Care Health Programs I. “Get to Know You” Awareness and Education II. “Get Going” Action and Behavior Change Earn:$100 Preventive:$25 Programs:$300 / $75 Per QTR BEHAVIOR-BASED FINANCING Incentive approach aligns rewards to achieve outcomes PHASE FEATURES TYPE ANDAMOUNT

  22. Contribution Impact Contribution Impact Without Behavior-Based Financing With Behavior-Based Financing $200 $200 With behavior-based financing, engaged consumers earn incentives to offset premium increases. $177 $150 $150 $157 $157 $145 $133 $100 $100 Contribution (PEPM) Contribution (PEPM) $50 $50 $0 $0 Year 2 Year 2 Year 2 Year 1 Year 2 Without Engaged Unengaged BEHAVIOR-BASED FINANCING Comparison of monthly contribution impact to consumers Notes: 10,000 employees; $8,000 total health spend (2008); 80% / 20% current contribution split; 8% trend; first-year health budget increase of 8%; 5% first-year base health spend allowance.

  23. Mary Bill Sue BEHAVIOR-BASED FINANCING RedBrick Health solution rewards employees more equitably Notes: 3,741 employees; $7,752 total health spend (2008); 75% / 25% current contribution split; 5% trend

  24. STEP 2:MAKE IT EASY TO ENGAGE

  25. Understand health status Take action to maintain and improve health Track progress and receive rewards BEHAVIOR-BASED FINANCING Making it easy for individuals to engage

  26. Understand health status Take action to maintain and improve health Track progress and receive rewards GOAL • Biometric screening • Health Risk Assessment • Profile • Personal HealthMapsSM • Lifestyle behaviorchange phone coaching • Disease management phone coaching • Web-based programs • Hybrid programs • SAFeSM • Record keeping • Incentive fulfillment SERVICES DELIVERY ConsumerPortal ConsumerAdvocacy HealthContent BEHAVIOR-BASED FINANCING Approach designed to best meet individual needs

  27. 75% 50% 50% Industry 30% BEHAVIOR-BASED FINANCING Early results of behavior-based financing Notes: Actual engagement represents year-to-date book-of-business results through July 2008.

  28. CONCLUSION

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