CDH - BCBSD Internal Training

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Consumer-Directed Health Plans
BlueAdvantage A Presentation to the
Delaware Health Care Commission Tim
Constantine March 3, 2005
Blue Cross Blue Shield of Delaware and CareFirst,
Inc., are independent licensees of the Blue Cross
and Blue Shield Association, an association of
independent Blue Cross and Blue Shield Plans.
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Background

• Health care costs are projected to increase 14
  annually
• Employers will absorb 9 and pass the rest on
• Employee contributions will triple unless
  affirmative steps are taken to curb these
  increases
• Employers are confronted by a weakened economy
  and significant health care cost increases
• Intense competition in many industries makes it
  difficult to pass cost increases along to
  customers
• As a result, a greater portion of premium costs
  are being shifted to employees

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Background
Health plans have been increasing premiums in
response to rising health care costs. Annual
health insurance premium increases are
dramatically outpacing earnings growth for the
average U.S. worker. These expenses are expected
to nearly double by 2010.
Increases in Premiums vs. Other Indicators
Source The Wall Street Journal, June 21, 2004,
Kaiser/HRET Survey of Employer Sponsored Health
Benefits
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Potential Solution - CDHPs
Employee Advantages
Employer Advantages

• Empowers employees with more control over health
  spending and health decisions
• Preventive coverage
• Easy access to health care decision tools
• Possible roll-over of unspent funds
• Ongoing education helps promote appropriate use
  of consumer-directed health funds

• Friendlier way of cost shifting
• Provides a mechanism for more prudent purchasing
  decisions by employees
• Helps to stabilize medical spending
• Higher employee satisfaction with self-service
  features
• Continued education helps keep employees
  involved, informed and motivated

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CDHPs

• Primary driver behind consumer-directed health
  plans (CDHP) is the premium savings,
• through plan design change, which is shared with
  employees - in part or in full.
• Example ABC Corp. 260 Employees (HSA)
• Current Plan Annual Premium 1,819,980
• Proposed High Ded. Plan Premium 1,301,784
• (HSA 100/80 PPO, 1,000/2,000 Ded.)
• Savings through Plan Design Change Alone
  518,196
• HSA Funding by ABC Corp (50 of Ded.)
• - Individual (188 employees x 500)
  94,000
• - Family or 2-party (72 employees x 1,000)
  72,000
• Total HSA Funding 166,000
• ABC Corps Savings after HSA funds have
• been fully distributed (477,384 - 166,000)
  352,196

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Components of CDHPs
Health Care Accounts
Health Insurance Coverage
Online Tools and Resources
HSA Health Savings Account HRA Health
Reimbursement Arrangement
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BlueAdvantage CDHP

• BlueAdvantage Plans
• Based on popular PPO, EPO and prescription drug
  plans
• Offered with either a health savings account
  (HSA) or a health reimbursement account (HRA)
  option
• Freedom to choose in-network doctors without a
  referral
• Product designs include preventive health
  benefits such as
• Routine physicals
• GYN exams
• Mammograms
• Well-child care
• Vision and hearing exams

Registered mark of the Blue Cross and Blue
Shield Association
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BlueAdvantage

• Large, national network of providers through
  BlueCard
• 6,100 hospitals
• 600,000 providers
• Out-of-country coverage in 200 countries
• Options Discount Program
• Discounts on health-related products and services
  such as
• Acupuncture
• Chiropractic care
• Fitness centers
• Laser vision correction

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HSA - How Does it Work?
PPO Insurance

• HSA Plan Design
• (Example 1,000 deductible PPO plan)
• Can be funded by employer, employee or both
• Employees contribute monies into a tax-sheltered
  savings account, using payroll deduction
• Employees can pay the provider using a debit card
  and receive the Blue discounts (after receiving
  providers bill Rx paid at time of service) or
  save HSA funds for future use
• Once the deductible is met, claims are processed
  through the health plan
• Unused HSA balances are rolled over from year to
  year

High Deductible Health Plan
1,000 Health Savings Account (Tax
Sheltered)
Preventive Coverage - 100 Content, Tools
Care Management Services
1,000 Deductible
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HSA Basics

• Health care account is solely-owned by the
  employee
• Unused balances roll over to following years
• Accounts are portable always belong to the
  member
• Tax shelter for qualified medical expenses
• Contributions are tax-free, growth is
  tax-deferred and qualified distributions are
  tax-free
• Needs to conform to IRS guidelines for a
  qualified high deductible health plan
• Cannot generally be combined with a flexible
  spending account (FSA)
• Instills employee accountability
• Plan design governed by IRS guidelines and
  regulations

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Our BlueAdvantage HSA

• Employer Control
• Once money is given to plan participants, the
  employer loses control over their contribution
• Employer can make contributions into members HSA
  accounts in any number of installments (e.g.,
  monthly, quarterly, annually)
• Employee Accountability and Control
• Employees maintain control of their HSA funds
  from day one
• Employees become more educated due to the nature
  of HSA concepts and spending accountability
• Plan Flexibility
• Deductibles, coinsurance and contribution
  parameters are set and monitored by the IRS on an
  annual basis
• Cannot generally be combined with a FSA

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HSA Account Features

• No application or setup fees
• Low monthly administration fees free for first
  three months
• Competitive interest rates paid from day one
• Free, no fee AdvantageHSA debit card
• Free initial order of checks
• Online account access through bcbsde.com or
  myAdvantageHSA.com
• Powered by The Bancorp Bank (Wilmington, DE)
• 24/7 customer service
• Ability to invest balances above 2,500

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Cost Calculator Sample - HSA
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Industry Trends

• 438,000 HSAs established nationwide as of
  September 2004
• 346,000 individuals
• 79,000 small businesses
• Small businesses that previously did not offer
  health-care coverage purchased 16 of the HSAs in
  small group market
• Overall, 30 of HSA purchasers previously did not
  have health insurance

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BCBSD CDHP Use

• Began selling products January 1, 2005
• To date, 97 HSA accounts (330 members) and 11 HRA
  accounts (89 members) have been sold
• Most common HSA product is EPO 100 Plan 63
  plans sold
• HSA products have been sold to medical practices,
  attorneys and other small businesses ranging from
  1 to 42 employees
• 41 of the 108 accounts represent new business

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Website e-Tools
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Questions?