Employee Choice of a Consumer Driven Health Plan in a Multi-Plan, Multi-Product Setting

1. Employee Choice of a Consumer Driven Health Plan in a Multi-Plan, Multi-Product Setting Stephen T. Parente, Roger Feldman, Jon B. Christianson University of Minnesota Presented at the National Bureau of Economic Research August 1, 2003 Funded by the Robert Wood Johnson Foundation Health Care Organization and Financing Initiative For more information: sparente@csom.umn.edu

2. Presentation Objectives Describe the CDHP business model. Illustrate the mechanics of a CDHP using Definity Health as an example. Provide an Overview of our RWJ evaluation of Definity. Present plan choice descriptive and multivariate results. List the policy opportunities and conundrums of CDHPs. Outline the next steps in our analysis.

3. Issues Driving CDHP Creation Patients Dissatisfaction with provider access Patient incentives are to consume Limited choices of benefits and providers Combative relationship with managed care companies Providers Loss of autonomy Erosion of physician/patient relationship Misalignment of physician reimbursement and incentives Employers Plan costs are increasing Employees are not happy Increase of employer administration burdens

4. CDHP Business Enablers ‘Ready to Lease’ Components of Health Insurance: Electronic claims processing National panel of physicians National pharmaceutical benefits management firms Consumer-friendly health data web portals Disease management vendors Internet Transaction medium for claims processing 2-way communication with members ERISA-exemption Lack of state oversight Half the US commercial health insurance market is self-insured.

5. Early CDHPs in Operation Definity Concept developed in 1998, Funded in April, 2000 Minnesota based Clear first mover & dot-bomb survivor Lumenos Started in 2000 Based in Virgina Havard B-School inspired (Regina Herzlinger) Destinty Operating as Medical Savings Account model In operation for 10 years in South Africa