Ronald Bachman, FSA, MAAA

1
A Workbook for Developing a Vision and Roadmap
to 2nd Generation Healthcare Consumerism
Ronald Bachman, FSA, MAAA President
CEO Healthcare Visions, Inc. Senior Fellow,
Center for Health Transformation RonBachman_at_gingri
chgroup.com 404-697-7376
2
Table of Contents

• Page Topic
  .
• 2 Agenda
• 3 Scope of Work
• 4 Background Info
• 5 Task 1 Setting Principles for Change
• 8 Task 2 Vision Statement Development
• 11 Task 3 Identification of Acceptable
  Stategies
• 14 Change Formula
• 18 Actuarial Issues
• 20 Consumerism
• 40 Task 4 Personal Care Accounts
• 65 Task 5 Wellness, Prevention, Early
  Intervention
• 78 Task 6 Disease Management
• 93 Task 7 Decision Support Tools
• 102 Task 8 Incentives Rewards
• 111 Task 9 Viewing Consumerism by
  Generations

3
Agenda

• Day Goal
• 1 Morning Agenda, Scope of Work, Background,
  (T1-3), Change Formula, Actuarial Issues,
  Consumerism, Building Blocks (T4), Building
  Blocks (T5)
• 1 Afternoon Building Blocks T(6-8),
  Multi-generational Issues (T9),
• Create MSFT Plans (T10), Time Frame for
  Implementation (T11)
• 2 Review Decisions from Tasks 1-11,
  Financials Task 12, Final Input to Roadmap
• Tasks To Be Completed During 1.5 Day Extreme
  Consumerism
• 1. Principles 7. Decision Support Tools
• 2. Consumerism Vision Statement 8. Incentives
  Rewards
• 3. Strategies 9. Viewing by Generations
• 4. Personal Care Accounts 10. Create
  Consumerism Plans
• 5. Wellness 11. Time Frames
• 6. Disease Management 12. Financial Analysis

4
Scope of Work for Developing the Roadmap and
Beyond
Diagnostic and Readiness
Assessment
Perform Financial Actuarial
Analysis (set metrics)
Design Benefits and
Contrib. Strategy (The Road Map)
Evaluate, Select,
Implement Vendors
Develop and Implement
Education, Comm., Training, etc.
Monitor and Evaluate

• Evaluate current
• plans
• Interview
• stakeholders
• Identify Basic
• Principles for Change
• Create Consumer
• Vision Stmt
• Select Strategies
• Develop Obj.
• scope, set timeframe
• Match HR/business plan

• Communication Strategy
• Web-based Training, education
• Print, video, other media uses
• Internal vs. External Services

• Vendors
• Technology
• Services
• Performance
• Accountability
• Reliability

• Periodic reevaluation of baseline metrics
• Consumer scorecards
• Survey, measure success, acceptance
• Vendor/supplier audits
• Reassess modify as appropriate

• Develop baseline costs
• Co. Ee contrib. level
• Model options
• Evaluate cost impact and revise
• Develop measures of success

• Est. Rel. Value
• of Components
• HDHP Accts
• Wellness DM
• Transition
• strategy
• Optional
• Coverages
• Carve-out Programs
• Support services
• Health vs. Healthcare
• Debit/Credit Cards
• Incentive Programs

5
Background Issues

• Current Benefits,
• Design Issues,
• Service Issues,
• General Concerns,
• Anti-selection
• Reasons for Change,
• Interests in Consumerism,
• Driving Forces for Change,
• Perceptions of Employee Satisfaction,
  Dissatisfaction
• Other Problems and Positives with Current Plans

6
Task 1 Setting Principles for Change

• 
  ImportantNot Important
• 1. Have the Right Vision Vision Stmt
  1 2 3 4 5
• 2. Have a 3-5 Year Roadmap/Strategic Plan
  1 2 3 4 5
• 3. Consider Other Related Corporate Initiatives
  1 2 3 4 5
• 4. Create plan as part of Employer of Choice
  1 2 3 4 5
• 5. Consider other HR metrics impacted by
  Healthcare 1 2 3 4
  5
• 6. Provide Information on Rx Costs
  Alternatives 1 2 3 4
  5
• 7. Provide Information on Dr. Medical
  Service Costs 1 2 3 4
  5
• 8. Provide Information on Hospital Costs
  1 2 3 4 5
• 9. Provide Information on the Quality of Dr.
  Care 1 2 3 4 5
• 10. Provide Information on the Quality of
  Hospital Care 1 2 3 4
  5
• 11. Focus on Discretionary Costs (Rx and OV)
  1 2 3 4 5
• 12. Focus on High Cost Claims Claimants
  1 2 3 4 5
• 13. Focus on Wellness and Preventive Care
  1 2 3 4 5
• 14. Focus on an Individual Behavior Changes
  1 2 3 4
  5
• 15. Focus on Group Behavior Changes 1
  2 3 4 5

7
Task 1 Setting Principles for Change

• ImportantNot
  Important
• 16. Use Incentives and Compliance Rewards
  1 2 3 4 5
• 17. Increase Costsharing to Change Behaviors
  1 2 3 4 5
• 18. Increase Employee Contributions to Offset
  Costs 1 2 3 4
  5
• 19. Focus on Overall Plan Cost Reduction
  1 2 3 4 5
• 20. Set the Right Measurements for Monitoring
  Progress 1 2 3 4
  5
• 21. Build Broad Employee Agreement for Change
  1 2 3 4 5
• 22. Minimize Change from Current Plans 1
  2 3 4 5
• 23. Make Choices and Plan Options available
  1 2 3 4 5
• 24. Improve Access to Care
  1 2 3 4 5
• 25. Maintain Existing Network of Providers
  1 2 3 4 5
• 26. Provide for post-65 retirement healthcare
  1 2 3 4 5
• 27. Provide for pre-65 retirement healthcare
  1 2 3 4 5
• 28. Provide for non-plan medical
  1 2 3
  4 5
• 29. Provide for terminated ees healthcare
  1 2 3 4 5
• 30. Provide for non-healthcare expenses
  1 2 3 4 5
• 31. Alternative to cutting benefits or initiating
  contributions 1 2 3 4 5

8
Task 2 Sample Vision StatementPositioning to
Balance Cost, Quality, and Access
Sample Vision Statement Create health and
healthcare program options valued by employees
that adapt effectively to environmental trends
that increase the quality of services, improve
access to care, and lower costs.
Quality
Uncertain, Clinically Oriented
Consumer Valued Quality
Demand Driven Controls
Supply Driven Controls
Access
Consumer Involvement Transparency
Third Party Reimbursement
Cost
9
Task 2 Create a Consumerism Vision Statement

• Sample Vision Statements
• Providing high performing highly educated
  employees and their families with the security of
  comprehensive health and healthcare coverage that
  meets their diverse needs and rewards their
  personal involvement and responsibility as wise
  users of services to optimize their individual
  health status and functionality.
• 2. Affect employee behavior change towards
  healthier lifestyles and greater consumerism
  through the use of rewards and incentives.
• 3. Make employees better consumers of healthcare
  services by providing them with the necessary
  health education, decision support tools and
  useful information including provider cost and
  quality data.
• 4. Encourage greater employee awareness and
  involvement in healthcare and financial decision
  making, as a building block towards a defined
  contribution strategy for healthcare in the
  future.

10
Task 2 - Key Words / Phrases for Consumerism
Vision Statement or Addition to Guiding Principles

• __________________________________
• __________________________________
• __________________________________
• __________________________________
• __________________________________

11
Task 3 - Identification of Acceptable Strategies

• 
  High Priority...Low Priority
• 1.Create Transparency support employees right
  to
• know, minimize distortions of third-party
  reimbursement
• system, create transparency in costs, provide
  education/
• training on healthcare costs, use decision
  support programs. 1 2 3 4
  5
• 2.Create Personal Involvement establish greater
  
• financial involvement through HDHPs, HRAs or
  HSAs,
• reward good behavior, offer valued options,
  provide long
• term incentives, provide immediate feedback.
  1 2 3
  4 5
• 3. Be Bold and Creative - Shift from supply-side
  controls
• to demand-side control designs. Be an early
  adopter/fast
• follower, consider out-of-the box ideas.
  1 2 3 4 5
• 4. Focus on High Cost Pareto Population -
  Provide
• financial protection to families in need due to
  high
• unexpected medical costs and/or chronic
  conditions 1 2 3
  4 5

12
Task 3 - Identification of Acceptable
StrategiesContinued

• 
  ImportantNot Important
• 5. Focus on Saving Lives and Improving Health
• Focus on improving the health of the entire
  population
• regardless of plan design selected. Implement
  prevention
• wellness for long term savings and DM for
• immediate impact. 1
  2 3 4 5
• 6. Focus on Preventive Care Create incentive
• programs that change behaviors towards acceptance
  and
• compliance with wellness and early intervention,
  including
• pre-natal, non-smoking, diet, exercise, and
  safety 1 2 3
  4 5
• 7. Minimize Impact of Cost Shifting Use
  consumerism
• as an alternative to increased cost shifting or
  higher
• contributions.
  1 2
  3 4 5
• 8. Implement Optional Consumerism Provide new
• programs and plan options on a voluntary basis.
  1 2 3 4
  5

13
Task 3 - Identification of Acceptable
StrategiesContinued

• High
  PriorityLow Priority
• 9. Implement Change on a Multi-Year Program
• Establish a consumer-centric program with a pre-
• determined multi-year introduction of options and
  
• use of accumulated HRAs and/or options.
  1 2 3
  4 5
• 10. Focus on Information Sharing Only Provide
  ees
• with decision support systems and information
  sources w/o
• accounts or incentives to reward behavioural
  change. 1 2 3 4
  5
• 11. Use Packaged Programs use full integration
  of plan
• design, information, disease management, and
  decision
• support systems from single vendor.
  1 2 3 4 5
• 12. Use Existing Vendors develop consumerist
  programs
• through current vendor relationships only.
  1 2 3 4 5
• 13. Use Best of Class Programs use selected
  vendors that
• May overlay core benefit designs as long as
  integration is

14
A Reason To Consider Change
The Definition of Insanity Endlessly repeating
the same process, hoping for a different
result.   -  Albert Einstein  
15
Employee Perceptions

• Lead to a sense of entitlement
• Employees underestimate total premium cost
• Employees overestimate their share of cost

63Underestimate
16Close
21 Overestimate
20Underestimate
11 Close
69 Overestimate
Source Watson Wyatt
16
Requirements Stages of Change
NO CHANGE Without Desire Back Burner Without
Vision False Starts Without Process
Frustration

• - - - - - - - Alignment - - - - - - -

C H A N G E
CHANGE


No C H A N G E
Threshold
Gather Info
Pros Cons
Awareness




17
The Formula for Making Change Happen
Set by Mgmts Direction
Task at Hand
Later - Next Steps
Results
Desire for Change
Vision / Roadmap
Process for Change
POSITIVE CHANGE



Desire for Change
Vision / Roadmap
Process for Change
Put on Back Burner



Desire for Change
Vision / Roadmap
Process for Change
Expensive False Starts



Desire for Change
Vision / Roadmap
Process for Change
Frustration



18
Preliminary Actuarial Work Issues(NOT
performed by CHT)

• 1. Data Collection and Population Profiling
• 2. Distribution of claims
  (low-medium-high-catastrophic claims)
• 3. Types and Analysis of Chronic
  Persistent Conditions
• 4. Review of Industry Data on Consumerism
• 5. Use of Actuarial Pricing Model
• 6. Behavioral Modification Recognition
• 7. Cost Impact of Strategies and Plan
  Designs Selected

19
Purpose of Actuarial Work

• Perform the actuarial and financial analysis to
  determine the impact of options available under a
  Consumerism Plan.
• Determine Potential
• Plan designs
• Savings Elements / HRA, HSA, Account
  Credits
• Combinations and interactions of Building
  Blocks
• Costsharing structure
• Contribution strategies
• Participation

20
Consumerism

• Supply Controls vs. Demand Controls
• Them or You

Reform is Not Enough, Transformation is Required
21
Supply Controls or Demand Controls

• Plan Sponsors and Members have two basic
  choices to control costs
• 1. Managed care HMOs - The supply of care is
  limited by a third party who controls the access
  to medical services (e.g. utilization reviews,
  medical necessity, gatekeepers, formularies,
  scheduling, types of services allowed), or
• 2. Healthcare Consumerism - The member controls
  their demand for care because of a direct and
  significant financial involvement in the cost of
  care, rewards for compliance, and the information
  to make wise health and healthcare value driven
  decisions.

22
Supply Controls Are Failing
High Healthcare Costs Climbing Higher Patients
have lost control of their own healthcare, and
are not truly engaged in the process of managing
their health Patients are frustrated with managed
care rules and the impact on time and
productivity Patients dont understand healthcare
costs costs are not transparent
Every System is perfectly designed for the
results achieved.
23
Mega Trends Leading to Demand Control

1. Personal Responsibility
2. Self-Help, Self-Care
3. Individual Ownership
4. Portability
5. Transparency (the Right to Know)
6. Consumerism (Empowerment)

24
Healthcare Consumerism - Defined

• Healthcare Consumerism is about transforming an
  employers health benefit plan into one that puts
  economic purchasing powerand decision-makingin
  the hands of participants.
• Its about supplying the information and decision
  support tools they need, along with financial
  incentives, rewards, and other benefits that
  encourage personal involvement in altering health
  and healthcare purchasing behaviors.

The job of a leader is to create the possible
Condi Rice
23
25
Consumerism Saving Lives Saving Money

• The Moral Imperative for Consumerism
  Increasing the Quality of Care, Better Health,
  and Improving Lives The Economic Imperative
  for Consumerism Saving Money
• (Lower Product Prices and More Jobs)

26
Objectives Of Consumerism

• Change participant health and healthcare
  purchasing behaviors
• Narrow market cost and quality variations using
  patient decisions
• Increase transparency of healthcare costs to plan
  participants
• Give plan participants more control over and
  shared responsibility for managing own
  healthcare and related costs
• Supply participants with the tools to act as
  better informed healthcare consumers
• Reduce costs for discretionary care through
  informed purchasing incentives
• Reduce long term costs with added incentives for
  good health
• Reduce costs of Chronic Conditions through
  improved compliance with treatments and disease
  management programs
• Reduce Acute Care costs with incentive hospital
  tiering based upon cost and quality

27
Basic Requirements for Successful Healthcare
Consumerism

• Must work for the sickest members, as well as the
  healthy
• Must work for those not wanting to get involved
  in decision-making, as well as those that do

28
The Core of Consumerism

• The Unifying Theme
• for a
• Health and Healthcare Strategy is
• Behavioral Change

Implement only if it supports behavioral change
consistent with the strategy
29
Healthcare ConsumerismRoles Responsibilities /
Implications

• Employers
• Facilitators of change
• Provide increased information and decision making
  tools
• Improved employee morale with choice and access
• Link to productivity, absenteeism, disability,
  turnover, etc.
• Consumerism can improve costs/budgeting (current
  future)
• Payers (Self-Insured Employers)
• Focus on high cost case mgmt/disease
  mgmt/population mgmt
• Will become responsible for more communications,
  training, education direct to consumers
• Value added services may change, including
  transactions and asset management
• Diminished role of managed care for routine care

30
Healthcare ConsumerismRoles Responsibilities /
Implications

• Employees
• Increased responsibility for own health
  healthcare
• Involved in own treatment and medical necessity
  decisions
• Improved access to care
• Involved in financial costs of health
  healthcare (P4C)
• Providers
• More direct involvement with patients and
  treatment
• Service and quality will be determined by
  consumers
• Pricing will become more flexible and visible
  (P4P)
• Overall implications
• Roles will change for all players
• The picture change quickly - your strategy must
  prepare you for rapid market changes

31
Consumerism Choices Involve Options for
Behavioral Change

• Consumerism Choices
• Wellness
• Preventive care
• Early Intervention
• Lifestyle Options (diet, exercise, smoking,
  safety)
• Self-help, self care
• Discretionary Expenses (e.g. OV, ER, Rx)
• Value purchasing (e.g. DXL, o/p vs. in/p)
• Participation in Disease Management Programs
• Compliance with Evidence Based Medicine
• Treatment Plans

32
Consumerism Much Broader than HDHP
Consumer-Driven Healthcare

• Consumerism is
• A Strategy
• Its about moving from a benefit to an
  accumulating asset.

33
Evolution of Healthcare Consumerism
Focus Impact Choices
First Generation High Deductible Plans with HRAs or HSAs, Decision Support Tools Discretionary Expenses Rx, ER, OV, D-X-L Initial Level and Type of Accounts with CDHC / HDHP Designs, Information and Decision Support Services
Second Generation Behavior Change Through Rewards Chronic and Persistent Conditions, Pre-natal, Preventive Care Covered Benefits, Type and Level of Matching Funds and P4C / P4P Incentives for Prevention, Wellness, and Disease Management Programs
Third Generation Health and Performance Organizational Health, Turnover, Absenteeism, Productivity, Disability, and Presenteeism Group rewards, Importance and Impact on non-health Corporate metrics
Fourth Generation Personalized Health and Lifestyle Needs Personalized Health and Performance Outcomes, Genetic Predispositions Lifecycle Needs, Culturally Sensitive DM, Holistic Care, Information Therapy
34
The Evolution of Healthcare ConsumerismFuture
Generations of Healthcare Consumerism
2nd Generation Consumerism Focus
on Behavior Changes
Traditional Plans with ConsumerInformation
1st Generation Consumerism /CDHC Focus on
Discretionary Spending
4th Generation Consumerism
Personalized Health Healthcare

3rd Generation Consumerism Integrated Health
Performance
Traditional Plans
Behavioral Change and Cost Management
Potential Low Impact ---- ---- ---- ---- ----
---- ---- ---- ---- High Impact
35
The Promises of Consumerism
Major Building Blocks of Consumerism
Personal Care Accounts
The Promise of Demand Control Savings
It is the creative development, efficient
delivery, efficacy, and successful integration of
these elements that will prove the success or
failure of consumerism.
Wellness/Prevention Early Intervention
The Promise of Wellness
Disease and Case Management
The Promise of Health
Information Decision Support
The Promise of Transparency
Incentives Rewards
The Promise of Shared Savings
36
2nd Generation Consumerism Focus
on Behavior Changes
1st Generation Consumerism Focus on
Discretionary Spending
4th Generation Consumerism
Personalized Health Healthcare
The Consumerism Grid
3rd Generation Consumerism Integrated Health
Performance
Personal Accounts
Initial Account Only Activity Compliance Rewards Indiv. Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME
100 Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress error reduction Genomics, predictive modeling push technology
Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber support, cultural DM, Holistic care
Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health performance info, integrated health work data Arrive in time info and services, information therapy
Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related
Wellness/Prevention Early Intervention
Disease Management
Information Decision Support
Incentives Rewards
37
Creating Healthcare Consumerism Plans

• Understand Basic Consumerism Plan Designs
• Including Consumerism in All Plan Options
• Building Blocks
• 1. Understanding HRAs/HSAs to Create Personal
  Care Accts as a Basis for Health Asset
  Accumulation
• 2. Include Wellness Programs that Encourage
  Healthy Habits
• 3. Include Disease Management Programs that
  Encourage Compliance
• 4. Include Decision Support Tools for All
  Plans
• 5. Include Incentives/Disincentives to Change
  Behavior

38
Basic Plan Design Options Healthcare
Consumerism
Most Healthcare Consumerism Plan Designs
Traditional Health Plans
Personal Accounts
PPO FSAs with HRAs
HDHP PPO Ltd FSAs HSAs Ltd HRAs
HMO FSAs HRAs?
PPO FSAs HRAs?
HDHP PPO Ltd FSAs HSAs
Must Meet HSA / HDHP Legal Definition
Typical CDHP
Wellness/Prevention Early Intervention
Disease Management Case Management
Information Decision Support

• Incentives
• Rewards

39
Potential Use of PCAs to Support Consumerism
Plan Designs
Most Healthcare Consumerism Plan Designs
Traditional Health Plans
PPO
HDHP PPO
HMO
PPO
HDHP PPO
Personal Accounts
Must Meet HSA / HDHP Legal Definition
Typical CDHP
Wellness/Prevention Early Intervention
Minimum Co-Payment Designs
Disease and Case Management
High Ded Co-Insurance Designs
Health Incentive Accounts?
Information Decision Support
Initial Er HSA Contribution With
HRA Match Incentive HRAs HSAs
Initial Er HSA Contribution
Initial 500-1000 HRA with Incentive HRAs

• Incentives Rewards

40
PPO/HRA and PPO/HSA High Deductible Health Plans
Four components that work together to improve
quality, outcomes, and lower cost.
Preventive 100 Coverage
Health Account (HRA/HSA)
Deductible Gap
PPO
Additional Health Coverage beyond the HRA/ HSA.
4.
1.
2.
41
Task 4 - Personal Care Accounts

• The Promise of Demand Control Savings
• HSAs, HRAs, FSAs, FHSAs

Of the 5 building blocks, the greatest among
them is the Personal Care Account
42
HSAs and HRAs - Two Very Different Accounts to
Support Consumerism

• HSA (2003 MMA)
• - A law, with specific requirements and
  benefit design requirements.
• - Most TAX ADVANTAGED vehicle ever created
• HRAs (6/26/2002)
• - A regulatory creation based upon an IRS
  ruling
• - Most FLEXIBLE vehicle ever created

43
Health Savings Accounts Advantage Employees

• Tax-free savings vehicles for medical expenses,
  no use-it-or-lose-it rule
• Effective January 1, 2004
• Eligibility must be covered under high
  deductible health plan (HDHP)
• Portable

44
Health Savings Accounts

• Individual accounts
• To permit saving for qualified medical and
  retiree health expenses on a tax-free basis
• Must be offered in conjunction with a legally
  defined HDHP - High Deductible Health Plan
• Portable
• An HSA is owned by the individual, similar to
  IRAs, and transfers if the employee changes jobs
• Held in a trust or custodial account trustees
  banks, insurance companies, approved non-bank
  trustees

45
Health Savings Accounts Contributions

• Contribution limits determined monthly based on
  status, eligibility, HDHP coverage as of first
  day of month (offset by other HSA contributions)
• 2005 Monthly limit 1/12th of lesser of
  deductible or 2,650 (self-only), 5,250
  (family), indexed
• Catch-up contributions, age 55 to 64, 600 in
  2005, phased up to 1,000 annually in 2009

46
HSAs Real Dollars, Portable, Vested

• Can be used or taken in cash at anytime, even
  when no longer eligible to make contributions
• Tax-free if used to pay for qualified medical
  expenses (IRC Section 213(d))
• For other purposes, subject to income tax and
  10 penalty
• - 10 penalty waived in case of death or
  disability
• - 10 penalty waived for distributions after
  age 65 or older
• HSA can be transferred tax-free to spouse on
  death otherwise taxable to estate or beneficiary
• Transfers upon divorce, nontaxable, becomes
  spouses HSA

47
HSA Eligible HDHPHigh Deductible Health Plan
By Law

• Self-only a deductible of at least 1,000
  maximum HSA is 2,650 no more than 5,100
  maximum out-of pocket expenses (incl. Ded.)
• Family coverage a deductible of at least 2,000
  maximum HSA is 5250 no more than 10,200 on
  out-of pocket expenses (incl. Ded.)
• 2005 Age 55 and over catch up amount of 600
• Preventive services are not subject to the
  deductible
• OK for out of network costs to exceed maximum
  out-of pocket limits

THE ABOVE 2005 AMOUNTS ARE SUBJECT TO ANNUAL
INDEXING
48
HRAs- Advantage EmployersNational Accounts, Er
Controlled Rules

• Employer does not fund and has cash flow value
• Employer can determine rules for HRA usage
  they are subject to forfeiture they are not
  portable, but can be subject to vesting
• HRAs are more flexible in plan design, can
  tailor scope of reimbursements, are less costly
  for employer
• Employer decides if HRA can used for (1)
  medical plan expenses not otherwise reimbursed,
  (2) non-plan QME 213(d), and/or (3) insurance
  premiums

49
Important Differences between Use of HRAs and
HSAs for Supporting Behavioral Change
Generation 1 Initial Account Only Generation 2 Activity Compliance Rewards Generation 3 Indiv. Group Corporate Metric Rewards Generation 4 Specialized Accts, Matching HRAs, Expanded QME
Personal Care Accounts
Health Reimbursement Arrangements
1. Any Amount 2. Notional Acct 3. Employer Determined 4. Employer Only Contributions 1. Flexible Activity Compliance Rewards 2. Employer Determined 3. Can not be cashed out 4. Must be used for healthcare 1. Flexible Indiv Group Rewards 2. Employer Determined 3. Can not be cashed out 4. Must be used for healthcare 1. Specialized Notional Accts, 2. Can terminate by employer rules 3. Potential IRS Expanded QME
Health Savings Accounts
1. Amounts Set by law 2. Real Dollars in Acct 3. Er or Ee Contrib 4. Contributions up to plan deductible of 1000-2650 Single 2000-5250 Family 5. Non-substantiation 1. Ltd Potential (But For Rule) 2. Must give Cash Option 3. Awards must be same amt or same of deductible 3. HSA can be used (with 10 penalty) for non- healthcare expenses 1. Ltd Potential (But For Rule) 2. All participants must receive same amount or same of deductible 3. Difficult to use for Group Incentives 1. Ltd Potential (But For Rule) 2. 100 Vested Portable 3. Can use matching HRAs, 4. Potential IRS Expanded QME
50
HRAs Best for Larger Groups?HSAs Best for
Individuals and Small Groups?

Current State
Combination Accounts
FSAs
HRAs
HSAs
Employer-based Healthcare Traditional (Ltd
Carry-over) Special Purpose Non-Plan
Individual-based Healthcare
Employer-based healthcare Special Purpose
Accounts Incentive Matching
Employer-based Healthcare with Individual
Accountability
Er-Based with HSA Contributions
Employer-based Defined Contribution Developments
51

• Are HSAs the right vehicle for large employer
  groups?

Yes, If.. Or No, Because. Need to
Understand the Consumer Movement, Federal Health
Policies, the Market Transformation that is
Underway
52
Are HSAs the Wave of the Future?Which Direction
will Legislation Take?

• Yes, if.
• we recognize the HSA legislation and
  regulations as a good start and another building
  block for consumerism and behavioral change.
• Ers and Ees recognize current limitation and
  optimize available uses
• there is additional legislation/regulation to
  support large Er interests in providing HSAs (use
  for healthcare only, Rx coverage problem,
  combination accounts).
• there is legislative support for the common use
  of FSAs for targeted needs, HSAs as true Health
  Savings Accounts and HRAs as true Health
  Reimbursement Arrangements.
• No, because.
• they were not legislated/regulated with large
  employers in mind.
• of a desire to promote individual insurance
  over individual ownership (under employer and
  individual policies)
• they are just a tool to cost shift to
  employees, they can not reward behavior change
• they are only desirable to the young, healthy,
  and wealthy

53
Summary - PCA Comparisons
54
Summary - PCA Comparisons (cont)
55
The Fundamental Federal Policy Question

• Will Legislation/Regulation Use HSAs to
• mainly promote portable Individual Small
  Group Insurance,
• OR
• expand Personal Care Account ownership through
  in both an employer-based and individual-based
  healthcare system thru HSAs, HRAs, and FSAs.

56
- The Answer - Flexible Health Savings Accounts
(FHSAs)

• FHSAs would have the tax advantages of
• HSAs and the key flexibilities of HRAs.
• Basic Principles
• Retain personal responsibility goal of HSA/HDHPs
• Focus on Behavior Change
• Recognize value of Pay for Compliance as a driver
  for behavior change and shared savings with
  personal responsibility
• Expand adoption and funding of HSAs by large
  employers

57
Flexible Health Savings Accounts (FHSAs)The Next
Generation

• Four needs that would allow FHSAs the flexibility
  to
• Provide financial Rewards and Incentives for
  Behavioral Change.
• 2. Encourage Employer/Carrier FHSA contributions
  towards healthcare
• 3. Be provided with plan designs other than HDHPs
• 4. Address FHSA/HSA Technical Issues

58
FHSA Flexibilty to Provide Financial Rewards and
Incentives for Behavioral Change

• 1.  Allow for compliance incentives under disease
  management programs (e.g. diabetes, asthma, CHF)
  and wellness initiatives (e.g. wellness
  assessments, smoking cessation, etc.).
• 2. Change Comparability Rule to mean all members
  under a given program of care or treatment, such
  as, a disease management or wellness program.
• 3. Rewards and/or incentives should not be
  limited by the deductible limit, but should be
  consistent with expected savings from programs
  for which participation is being rewarded.

59
FHSA Flexibility to Encourage Employer
Contributions to Healthcare

• 1. Allow employers/carriers to voluntarily
  contract with employees to require
  employer/carrier funded FHSAs to be used only for
  healthcare expenses while employed and covered
  under the plan.
• 2. Remove cap on employer/carrier funded FHSA
  contributions or expand to at least the plans
  Maximum Out-Of-Pocket total exposure in a given
  calendar year. 

60
FHSAs Flexibility to be Provided with Plan
Designs Other than HDHPs

• 1. Preventive drugs include maintenance drugs.
  Drugs now defined as preventive by the Treasury
  Dept. can be covered below the deductible, while
  the cost of maintenance drugs is now included in
  the deductible.
• 2. Allow Rx to exist as carve out benefits at
  least for prescription drugs associated with
  chronic and persistent disease states
• 3. Allow incentive only based FHSAs for
  employer/carrier only funding under non-HDHPs
  (i.e. no initial FHSA funding or employee
  funding)
• 4. Allow some mental health and substance abuse
  benefits (besides EAPs) to be included under
  preventive care.
• 5. Allow use of HSA to pay for pre-65 Retiree and
  Individual Healthcare premiums

61
FHSA Flexibility - Technical Issues

• Allow FHSA/HSAs to go into effect on the first
  day of coverage is effective.
• 2. Allow FHSA/HSA contributions for a full
  calendar year regardless of when a plan is
  effective.
• 3. Allow FHSA/HSAs to be used to pay for health
  coverage premiums (other than current limited use
  for (1) Premiums for coverage under the
  Consolidated Omnibus Budget Reconciliation Act
  (COBRA), and (2) premiums for HDHP coverage for
  those who receive federal or state unemployment
  compensation).
• 4. Allow Flexibility to "post-date" the FHSA/HSA
  effective date so that FHSA/HSA dollars can cover
  expenses incurred before the account was
  established. Allow the account to be opened under
  a "provisional status" until the necessary
  paperwork is filed, at which time the account
  becomes active.

62
Growth of Personal Care Accounts

• HRAs HSAs
• 2000 None None
• 2001 19,000 None
• 2002 53,000 None
• 2003 394,000 None
• 2004(est) 1-1.5M 400,000
• 2005(est) 3.2M 1,000,000
• 2006(est) 6.0M ???
• 2007(est) 12-15M ???
• Deliotte Consulting

63
2nd Generation Consumerism Focus
on Behavior Changes
1st Generation Consumerism Focus on
Discretionary Spending
4th Generation Consumerism
Personalized Health Healthcare
The Consumerism Grid
3rd Generation Consumerism Integrated Health
Performance
Personal Accounts
Initial Account Only Activity Compliance Rewards Indiv. Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME
100 Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress error reduction Genomics, predictive modeling push technology
Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber support, cultural DM, Holistic care
Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health performance info, integrated health work data Arrive in time info and services, information therapy
Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related
Wellness/Prevention Early Intervention
Disease Management
Information Decision Support
Incentives Rewards
64
Task 4 - Discussion on Type(s) and Use of
Personal Care Accounts

• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________

65
Task 5 - Wellness, Prevention, and Early
Intervention

• The Promise of Wellness

66
Wellness - Defined

• Wellness is a proactive organized program
  providing lifestyle and medical/clinical
  assistance to employees and their family members
  in maintaining good health.
• Wellness programs encourage voluntary behavior
  changes and support compliance with proven
  approaches to maintain health, reduce health
  risks and enhance their individual productivity.

67
Wellness The Need

• For every 100 members
• 23-30 smoke (70 want to quit, 35 try each
  year)
• 29 have high blood pressure
• 30 have cardiovascular disease
• 80 do not exercise regularly
• 55 or more are overweight or obese
• 30 are prone to low back pain (many linked to
  obesity)
• 6-9 have diabetes
• 10 are depressed
• 35 are under significant stress
• 50 do not wear their seat belts

68
Wellness The Desire for Change

• For every 100 members
• 47 are trying to improve their diet
• 37 plan to undergo some health screening
• 30 state they exercise regularly
• Only 23 are aware of the health promotion and
  wellness programs offered by their employer
  sponsored health plans
• 76 of employers with over 11,000 employees
  offer health management programs

Kaiser Family Foundation Survey, 9/03
69
Wellness - How Does It Impact Employees and
Family Members?
Well e.g., Low Risk, Good Nutrition, Active Lifestyle Well e.g., Low Risk, Good Nutrition, Active Lifestyle At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Catastrophic e.g., Cancer, Rare Diseases, Head Trauma
No Claims GenerallyHealthy O/P (Low) In/P (High) Maternity O/P (Low) In/P (High) In/P (High)
Ee 15 48 14 3 3 12 4 1
0 12 15 12 5 21 20 15

Ee 63 63 20 20 20 17 17 17
12 12 32 32 32 56 56 56
Prevention
Wellness - Lifestyle
Wellness Lifestyle
Minimize Acute Episodes
Minimize Complications
Early Intervention
Wellness - Clinical
Wellness - Clinical
Traditional Wellness Programs
70
Wellness Examples for Employer Sponsored
Programs

• Common Programs
• Weight Management
• Fitness/exercise/health clubs
• Smoking cessation
• Employer Support
• Communication and awareness (newsletters,
  health fair, posters)
• Screening (health awareness profiles, blood
  pressure check, blood tests, body fat analysis)
• Education (seminars/classes, self help kits,
  group discussions, lunch and learn)
• Behavioral Change (on-site fitness center, flu
  shots, lunchtime walks, yoga classes)

71
Wellness Working within Consumerism

• Traditional Plans
• Cover selected wellness in benefit plan at 100
  
• Supplement with non-plan wellness and work-site
  programs
• Other same as below PPO/HRA incentives
• PPO/HRA
• Include Employer defined wellness/prevention
  benefits at 100
• Include HRA Incentive for Wellness Appraisal
• Include HRA Incentives for personal wellness
  activities
• Include HRA Incentives for work-site wellness
  participation
• PPO/HSA
• Include IRS defined Preventive Care benefits at
  100
• Benefits contingent upon HSA contribution?
  Wellness Appraisal
• Other same as above with PPO/HRA incentives

72
Consumerism - Programs and Services

• Prescription Drugs Information
• Evidence Based Medicine
• Medical Care Guidelines
• Health Library
• Disease Management
• Condition Specific Assessment Tools
• Chronic Persistent Wellness
• Voluntary Participation
• Voluntary Incentive Based
• Mandatory Participation
• Mandatory Incentive Based
• Self Care Management Information
• On-Line Health Risk Assessment
• Personal and Family Tracking
• Health Performance
• Population Management
• Case Management
• Cost Quality Management

• Early Prevention
• Wellness
• Online News
• Safety
• Pre-Natal
• Well Baby Care
• New Mom Programs
• Medical Services Support
• FAQ, Preparation for In/P
• End of Life Care
• Provider Cost/Quality Incentives
• Regional Centers of Excellence

• Stress Management
• Assessment Tools
• Self Help Tools
• Depression Screening
• Preventive Care Lifestyle
• Lifestyle
• Nutrition
• Fitness
• Personal Health Management
• Preventive Care Clinical
• Immunizations
• Hypertension Screening
• Cholesterol Testing
• Mammograms
• Pap Smears
• Blood Pressure Checks
• Colorectal Cancer Testing
• Diabetes Testing
• Osteoporosis Testing

73
Wellness Preventive Care for HSAs

• Preventive care includes, but is not limited to,
  the following
• Periodic health evaluations, including tests
  and diagnostic procedures ordered in connection
  with routine examinations, such as annual
  physicals.
• Routine prenatal and well-child care.
• Child and adult immunizations.
• Tobacco cessation programs.
• Obesity weight- loss programs.
• Screening services

However, preventive care does not generally
include any service or benefit intended to treat
an existing illness, injury, or condition.
74
HSA Safe Harbor Preventive Care Screening
Services

• Infectious Disease Screening
• Bacteriuria
• Chlamydial Infection
• Gonorrhea
• Hepatitis B Virus Infection
• Hepatitis C
• Human Immunodeficiency Virus (HIV)
• Syphilis
• Tuberculosis Infection
• Mental Health/Subst. Abuse Screening
• Dementia
• Depression
• Drug Abuse
• Problem Drinking
• Suicide Risk
• Family Violence

• Cancer Screening
• Breast Cancer (e.g., Mammogram)
• Cervical Cancer (e.g., Pap Smear)
• Colorectal Cancer
• Prostate Cancer (e.g., PSA Test)
• Skin Cancer
• Oral Cancer
• Ovarian Cancer
• Testicular Cancer
• Thyroid Cancer
• Heart and Vascular Diseases Screening
• Abdominal Aortic Aneurysm
• Carotid Artery Stenosis
• Coronary Heart Disease
• Hemoglobinopathies
• Hypertension
• Lipid Disorders

75
Wellness Planning

• Will the wellness program be for employees
  only, or employees and dependents?
• Will you purchase from vendor, internally
  developed, or a combination
• Consider in conjunction with plan covered
  wellness benefits (immunizations, mammograms,
  screening, EAP, physical exams, pre-natal care,
  well child care, etc.)
• Consider in conjunction with worksite programs
  (safety, ergonomics, work-life programs, etc.)
• Incentives/rewards provided for compliance

76
2nd Generation Consumerism Focus
on Behavior Changes
1st Generation Consumerism Focus on
Discretionary Spending
4th Generation Consumerism
Personalized Health Healthcare
The Consumerism Grid
3rd Generation Consumerism Integrated Health
Performance
Personal Accounts
Initial Account Only Activity Compliance Rewards Indiv. Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME
100 Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress error reduction Genomics, predictive modeling push technology
Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber support, cultural DM, Holistic care
Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health performance info, integrated health work data Arrive in time info and services, information therapy
Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related
Wellness/Prevention Early Intervention
Disease Management
Information Decision Support
Incentives Rewards
77
Task 5 - Discussion on Type(s) and Use of
Wellness and Prevention

• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________

78
Task 6 - Disease Management Programs

• The Promise of Health
• The Holy Grail of Cost and Quality Improvements

79
Disease or Condition Management the Holy Grail
of Potential Savings

• Primary cost drivers are chronic disease and
  serious acute conditions.
• The direct impact on productivity is comparable
  to the direct cost of health care

80 of costs
Driven by
20 of claimants
For a typical employer, 15-30 of costs are
driven by controllable health risks
Have a behavioral root cause (CDC 1999)
50 of costs
80
Disease Management PotentialFocus on Hi-Volume
/ Hi-Cost Users
Cost Curve Members Costs 1 -gt
20 15 -gt 68 50 -gt 95 EBRI
-Stakeholders in Consumer-Driven Health Care
81
Disease Management - Defined

• Disease Management is an proactive organized
  program providing lifestyle and medical/clinical
  assistance to employees and their family members
  with chronic and persistent conditions.
• Disease Management programs encourage voluntary
  behavior changes and support compliance with
  proven medical practices which stabilize
  conditions, reduce health risks and enhance their
  individual productivity.

82
Disease Management The Need

• 60 of an employers total medical costs come
  from chronic and persistent diseases such as,
  diabetes, asthma, congestive heart failure, back
  pain, and depression.
• 45 of Americans live with at least one chronic
  disease. 14 live with two or more chronic
  diseases.
• 76 of hospitalizations, 72 of physician
  visits, and 88 of Rx is due to chronic
  conditions
• The average cost of health care for a diabetic
  is 13,200/yr compared to 2,600/yr for a
  non-diabetic.
• 61 million Americans live with cardiovascular
  disease
• 50 of chronic disease deaths are traced to
  cardiovascular disease.
• Coronary artery disease is a leading cause of
  premature permanent disability.
• Obesity is becoming the 1 preventable cause of
  death

83
(No Transcript)
84
Disease Management The Desire for Change

• Very Little under Traditional System
• 50 do not follow recommended standards of care
• 33 will high blood pressure do not know
• 33 of diabetics do not know it
• Patients lack of knowledge and information
• Patients without financial incentives to change
  health and healthcare behaviors
• Distortions of current 3rd party reimbursement
  medical financing system.
• Plans pay for treatments not prevention or
  compliance
• Physicians without incentives to take time and
  effort to deal effectively with chronic
  conditions

85
Disease Management Elements for a Successful
Program

• There are four elements of a successful disease
  management
• 1. A delivery system of health care
  professionals and organizations closely
  coordinating to provide medical care and support
  the patients compliance throughout the course of
  a disease.
• 2. A process that monitors the compliance and
  describes outcome-based care guidelines for
  targeted patients.
• 3. A process for continuous improvement that
  measures clinical behavior, refines treatment
  standards, and improves the quality of care
  provided.
• 4. Incentive awards that support the disease
  management medical and clinical care services

86
20 Priority Areas per the Institute of Medicine

• 6. Frailty - preventing accidents, treating
  bedsores and improving advanced care.
• 7. High blood pressure - left untreated it can
  lead to heart attack, stroke and kidney failure.
• 8. Immunization.
• 9. Evidence-based cancer screening, which can
  reduce death rates for many cancers, including
  colorectal and cervical.
• 10. Ischemic heart disease, also known as
  coronary heart disease. Efforts should focus on
  prevention.

• 1. Asthma, supporting and treating those with
  chronic conditions.
• 2. Care coordination for patients with multiple
  chronic conditions.
• 3. Children with special health and care needs,
  particularly those with chronic conditions.
• 4. Diabetes, which can lead to high blood
  pressure, heart disease, blindness and other
  complications.
• 5. End-of-life care for people with advanced
  organ failures, concentrating on reducing
  symptoms.

87
20 Priority Areas per the Institute of Medicine

• 16. Pregnancy and childbirth, especially
  improving the quality of prenatal care.
• 17. Self-management and health literacy, using
  public and private organizations to increase the
  level of health education.
• 18. Severe and persistent mental illness
  improving mental health care in the public
  sector, including state hospitals and community
  centers.
• 19. Stroke, the third highest cause of death in
  America.
• 20. Tobacco-dependence treatment for adults.

• 11. Major depression, which currently has a much
  lower treatment rate that other major diseases.
• 12. Medication management to prevent errors.
• 13. Noscomal infections. These are infections
  acquired in the hospital and kill an estimated
  90,000 Americans annually.
• 14. Obesity, which is blamed for as many as
  300,000 deaths annually in the United States.
• 15. Pain control in advanced cancer.

88
Disease Mgmt - How Does It Impact Employees and
Family Members?
Well e.g., Low Risk, Good Nutrition, Active Lifestyle Well e.g., Low Risk, Good Nutrition, Active Lifestyle At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Catastrophic e.g., Cancer, Rare Diseases, Head Trauma
No Claims GenerallyHealthy O/P (Low) In/P (High) Maternity O/P (Low) In/P (High) In/P (High)
Ee 15 48 14 3 3 12 4 1
0 12 15 12 5 21 20 15

Ee 63 63 20 20 20 17 17 17
12 12 32 32 32 56 56 56
Prevention
Wellness - Lifestyle
Wellness Lifestyle
Minimize Complications
Minimize Acute Episodes
Early Intervention
Wellness - Clinical
Wellness - Clinical
Disease Management Program
89
Disease Management Programs Designed and
Financially Aligned for Success
90
Disease Management Program Planning

• Identify key populations
• Focus on Compliance
• Manage expectations
• Respect privacy
• Follow Best practices (EBM, Outcomes Based
  Medicine)
• Integrate demand management, disease management
  and utilization management
• Give patients their own data
• Align Incentives for patients, providers, and
  Employer

91
2nd Generation Consumerism Focus
on Behavior Changes
1st Generation Consumerism Focus on
Discretionary Spending
4th Generation Consumerism
Personalized Health Healthcare
The Consumerism Grid
3rd Generation Consumerism Integrated Health
Performance
Personal Accounts
Initial Account Only Activity Compliance Rewards Indiv. Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME
100 Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress error reduction Genomics, predictive modeling push technology
Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber support, cultural DM, Holistic care
Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health performance info, integrated health work data Arrive in time info and services, information therapy
Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related
Wellness/Prevention Early Intervention
Disease Management
Information Decision Support
Incentives Rewards
92
Task 6 - Discussion on Type(s) and Use of
Disease Management Programs

• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________
• __________________________________________________
  __________