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Kinder, Gentler CDHC Plans - Strategies for Gradual Implementation & Minimal Cost Shifting

Spring. Kinder, Gentler CDHC Plans - Strategies for Gradual Implementation & Minimal Cost Shifting Presented by: David Cowles Vice-President Benemax - The Benefit Management Co. Seven West Mill St. Medfield, MA 02052 1-800-528-1530.

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Kinder, Gentler CDHC Plans - Strategies for Gradual Implementation & Minimal Cost Shifting

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  1. Spring Kinder, Gentler CDHC Plans - Strategies for Gradual Implementation & Minimal Cost Shifting Presented by: David Cowles Vice-President Benemax - The Benefit Management Co.

  2. Seven West Mill St. Medfield, MA 02052 1-800-528-1530

  3. Benemax Founded in 1975 First Consumer Directed Health Plan: 1986 First Consumer Directed Dental Plan: 1988 Independent Patient Advocate: 1995 Web Based Benefit Management: 1998

  4. Who is “The Consumer” in a CDHC Plan? * Employee > Own Health > Own Money * Employer > Majority of employee health care cost > Lost productivity (15%) due to disability

  5. What Makes CDHC Work? * Consumerism * Tools & Incentives > to stay healthy or get healthier > to consume cost effectively * The Claim Cost Curve

  6. The Claim Cost Curve * 20% of claims = 1/2% of members * 47% of claims = 3% of members * 87% of claims = 31% of members * 69% of members = 13% of all claims * Median non-Rx claim cost = $500

  7. 70% 69% 60% $1,259 pmpm 50% 60% 40% $176 pmpm 30% $30 pmpm 20% 26% 24% 13% 10% 8% 0% Healthy Transitional Chronically Ill/High Risk ($1-$999) ($1,000-$4,999) ($5,000-$100,000) % Members % of Dollars

  8. The Impact of Disability * 10% of all employees file a disability claim * 55% of all claims come from disabled ees * Absence Management = Return to Work > 30% reduction in average length of disability > 40% reduction in average health claim cost * Only employer can manage disability claims

  9. Kinder, Gentler CDHC Step #1 - The Wrap * Employer adds a High Deductible to Plan > HMO, POS or PPO > $500 to $5,000 * Employer Self-funds that Deductible

  10. The Wrap - Results * Reduces premium by 20% to 50% * Reduces net cost by 10% to 20% * ER benefits from good experience * ER incented to promote health * ER incented to promote consumerism * ER has greater plan design flexibility

  11. Kinder, Gentler CDHC Step #2: Virtual HRA * Employer funds HRAs = New Deductible * Employer sets Employees’ Expectations: > Deductible increase or HRA decrease in year 2+ * Employer introduces tools: > Promote health > Educate consumption

  12. Virtual HRA - Results * 10% to 20% net savings year one * Employees become cost conscious year one * Year of grace before any cost shifting * Year to improve health (using tools) * Year to adjust consumption (using tools) * Year to build-up benefit bank (HRA balance)

  13. Kinder, Gentler CDHC Step #3: FSA * Employer adds corridor of employee liability * Employer contributes to employees’ FSAs * Employees may also contribute: pre-tax $$ * Employer introduces health tools * Funds may be used to pay for: > employee’s health plan claims liability > dental, vision & alternative care expenses * Funds unused at year end are forfeited

  14. Employer Funded FSA - Case Study * HMO Renewal = +15%; Goal = +5% * Add $500 (2x fam) deductible; Renewal = 0% * Contribute 5% to employees’ FSAs ($300 ea) * Employees may fund additional cost pre-tax * FSA may pay any IRC 213 expenses

  15. Kinder, Gentler CDHC Step #4: Triple Option Plan (TOP) * Employer buys a base high deductible plan * Employer self-funds options below deductible * Employees choose: Gold, Silver, Bronze * Employees pay more for richer options * Employer cost = same for all options

  16. TOP - Sample Employee Options * Gold = Virtual Indemnity Plan (100% benefit) * Silver = Base Plan + HRA + FSA * Bronze = Base Plan + FSA only

  17. TOP - Case Study * Renewal = 20%; Goal = 0%; EEs pay 20% * Add $1,000 deductible; Renewal = 0% * Gold: EE cost up 100%; no benefit change * Silver: EE cost up 50%; $500 HRA * Bronze: No EE cost change; $1k deductible

  18. Kinder, Gentler CDHC Step #5: The Blend * Employer buys high deductible base plan * Employer sets lower employee deductible * Employer “wraps” the deductible difference * Employer funds HRA @ 50% of ee deduct * Employees may fund net claims cost via FSA

  19. The Blend - Case Study * Renewal Rates = $370/980 * Employer buys plan with $3,000 deductible * Member deductible = $1,000 (2x family) * Employer “wraps” the $2,000 difference * Employer funds HRA @ $500 ($1k family) * Employees may fund net claims cost via FSA

  20. The Blend - Case Study Results * Premiums reduced 40%: $222/588 * “Wrap” cost = $0 on 69% of members * HRA pays 100% of cost for median member * HRA + FSA tax savings = 65% of deductible * Wrap + 1st year HRA + Admin = $60/160 * Net Plan Cost Savings: 24%

  21. Summary * Employers can save $ without shifting cost: > Take maximum advantage of claim cost curve > Provide health & health care tools > Manage absence toward “back to work” > Incent employees to measure health care behavior > Provide employees health & health care incentives

  22. David Cowles Vice President Benemax – The Benefit Management Company 1-800-528-1530

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