Prevalence and Design of Consumer-Directed Health Benefit Models

1
Prevalence and Design of Consumer-Directed Health
Benefit Models

• Meredith Rosenthal, PhD
• Harvard University
• September 10, 2004

2
Models of Consumer-Directed Health Benefits in
Our Survey

• Health Reimbursement Accounts (HRAs)
• Plans with tiered hospital or physician
  copayments
• Plans with flexible or tiered benefit options and
  defined contribution (e.g., Vivius, Humana Smart
  Suite)

3
CDHB Enrollment
HRAs Tiered copayment models Flexible benefit design/tiered contribution
Number of plans w/enrollment on 1/1/03 24 18 21
Number of enrollees as of 1/1/03 466,000 1,550,000 489,000
Number of enrollees as of 1/1/04 1,370,000 1,600,000 --
4
Health Reimbursement Accounts, 2003
Enrollee-weighted mean or share
Employer or insurer-funded account 824
Deductible 1654
5
Incentives to Control Spending HRAs

• Because account dollars can be saved for future
  use, enrollees should try to conserve (Note
  Compared to HRAs, Health Savings Accounts should
  engender stronger response due to portability)
• Account-based plans concentrate incentives below
  deductible (the doughnut-hole)
• Coinsurance (10-20) above deductible, up to
  out-of-pocket limit resembles current PPOs

6
HRA Benefit Design Elements

• Some plans insure inpatient from first dollar,
  others require deductible to be met without using
  account first
• Preventive care often covered with low/no
  copayment
• Separate riders may be added for prescription
  drug coverage, chronic care services

7
Tiered Copayment Models
Enrollee-weighted mean or share
Difference in estimated annual OOP between most and least preferred tiers 609
Provider tiers based on cost and quality 97
8
Incentives to Control Spending Tiered Copayment
Models

• Tiered copayment models offer targeted incentives
  over greater span of total spending (up to
  out-of-pocket max)
• Enrollees face little or no additional cost
  sharing if they make preferred choices, which
  may be higher value or at least lower cost

9
Flexible Benefit Design/Tiered Premium Models

• Tiered benefit design encourages leaner benefits
  and/or more managed models
• Elements of managed competition (minus the
  competition)
• Plan design choice
• Incentives to choose lower-cost models
• More backlash?

10
Transparency Are Enrollees Armed to Make
Value-based Provider Selections?
Account-based models Tiered models
Comparative cost information 16 20
Comparative quality information 95 50
11
Policy Issues

• Is the notion of CDHB just window dressing for a
  big cost shift?
• Will these plans revolutionize health care in the
  U.S.?
• Control spending trend?
• Lead to improved quality/value?

12
Cost Sharing

• Most CDHB plans quite generous --point-of-service
  cost sharing similar to alternatives offered by
  same employers
• For small employers, may be designed as palatable
  catastrophic insurance (and better than not
  offering insurance)
• HRA incentives to control spending limited no
  evidence to assess whether copayments
  differentials in tiered models are large enough

13
Will CDHB Models Enable Consumers to Seek Value?

• Comparative cost and quality information severely
  limited
• Data at individual physician level almost never
  provided
• Tiered copayment models, if well designed, can
  move consumers to higher value providers without
  informed choice (more backlash?)