Consumer Driven Health Plans: Early Findings from the Field and Future Directions

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Consumer Driven Health PlansEarly Findings from
the Field and Future Directions

• Stephen T. Parente, Roger Feldman, Jon B.
  Christianson
• University of Minnesota
• October, 2003
• Funded by the Robert Wood Johnson Foundation
  Health Care Organization
• and Financing Initiative
• For more information sparente_at_csom.umn.edu

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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 current analysis results.
• Opportunities and conundrums of CDHPs.

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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

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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.

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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

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Definity Health Component Details

• Personal Care Account (PCA)
• Employer allocates PCA1
• Member directs PCA
• Section 213(d) scope
• Roll over at year-end
• Apply toward deductible2

• Health Coverage
• Preventive care covered 100
• Annual deductible
• Expenses beyond the PCA
• Nationwide provider access
• No referrals required

PCA

• Health Tools and Resources
• Care management program
• Extensive easy-to-use information and services

1 Employer selects which expense apply toward the
Health Coverage annual deductible. 2 Paid out of
employers general assets.
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New RWJ-Funded ResearchKey Research Questions

• 1. Is there an adverse selection problem?
  Traditionally, adverse selection is defined as
  the situation when healthy individuals choose
  Definity leaving the sick in a traditional plan
  that will soon implode its premiums because of
  disproportionate share of sick individuals in the
  insurance pool.
• 2. What is the impact on cost and utilization?
  Definity has been chosen as a response to rising
  premium prices in an attempt to make the consumer
  drive the market be examining price variations
  and constraining their personal consumption, if
  possible.

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Research Design

• 2 Year study (11/1/2002 - 10/31/2004)
• Six employers examined
• University of Minnesota, MN
• Medtronic, National
• Ridgeview Medical Center, MN
• Hannaford Bros, New England
• Welch-Allyn, Upstate NY (tentative)
• To be Named (New England or South Atlantic firm)
• Data collected
• Claims data of all utilization for all health
  plan choices, pre (2001) and post (2002-2003)
  Definity.
• Employer info on flexible spending accounts and
  employee income
• Survey information on Definity choices in 2002
  2003 from U of M.

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Early Results 1Employee Choice of a Consumer
Driven Health Plan in a Multi-Plan, Multi-Product
Setting
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Health Plan Choices

• Health Partners Staff model HMO with direct
  capitation contracting at a limited number of
  group practices.
• Patient Choice A Tiered-direct contracting
  descendent of Minnesotas Buyers Health Care
  Action Group health benefit design experiment.
• Definity Health Consumer-driven Health Plan
• Preferred One Preferred Provider Organization

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UPlan Options/Enrollment
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Early UM Definity ExperienceYear 2002
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Definity Age/Gender Distribution2002 University
of Minnesota
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All RespondentsSatisfaction with Plan
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Health Plan Features Most Preferred
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Results Premium Sensitivity

• Employees are sensitive to out-of-pocket
  premiums, and surprisingly, employees with
  chronic conditions are more premium-sensitive
• If Definity raised its premium by 1 it would
  lose 4.6 of healthy single enrollees and 5.4
  of healthy families
• 1 premium boost would cause 6.9 of singles and
  10.7 of families with chronic condition to leave
  Definity
• The results depend on 100 of the premium hike
  being passed along to the employee (i.e, defined
  contribution), as is the case for the UM

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Results Health Status and Other Employee
Characteristics

• Employees and families with chronic conditions
  prefer the PPO, but otherwise, there is no
  evidence of adverse selection
• Having a chronic condition is associated with a
  3.2 increase in the probability of choosing
  PreferredOne vs. HealthPartners
• Note that PreferredOne had the highest premiums
  (189.51 for single coverage and 448.40 for
  family coverage per pay period), suggesting that
  the plan is experiencing adverse selection
• Higher income employees chose Definity or Choice
  Plus, suggesting these plans may evolve as
  favorites of the well-to-do
• Older employees chose PreferredOne or Choice Plus

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Early Results 2Consumer-Driven Health
PlansEarly Evidence about Utilization, Spending
and Cost
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What was the gross impact on provider and patient
payment?
NOTE These are results from a restricted
continuously enrolled sample of 50 to 60 of
the total employee population and are not a
reflection of the plans full PMPM expenditures.
Also note 1) Patient expenditures from the
Personal Care Account (PCA) are included in the
employer payment category. 2) Consumer payment
reflects deductibles, copayments, and coinsurance
expenses.
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What was the impact on provider patient payment
by different services?
NOTE These are results from a restricted
continuously enrolled sample of 50 to 60 of the
total employee population and are not a
reflection of the plans full PMPM expenditures.
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Was service use different for CDHPs?Physician
visits
Utilization data presented are per member
averages.
NOTE These are results from a restricted
continuously enrolled sample of 50 to 60 of the
total employee population and are not a
reflection of the plans full physician visit
experience.
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Was service use different for CDHPs?Admissions
and prescriptions
Utilization data presented are per member
averages.
NOTE These are results from a restricted
continuously enrolled sample of 50 to 60 of the
total employee population and are not a
reflection of the plans full admissions and
prescription drug experience.
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Is illness burden different?
Data presented are per member averages.
NOTE These are results from a restricted
continuously enrolled sample of 50 to 60 of the
total employee population and are not a
reflection of the plans full illness burden..
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CDHP, HMO versus PPO
PMPM Differences for Continuously enrolled sample
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Distribution of CDHP Population by PCA Usage
Levels
Continuously enrolled population
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Conclusions

• The most important factor affecting choice is
  income.
• The consumer drive health plan was not
  disproportionately chosen by the young and the
  healthy (for this population).
• Cost is lower relative to a PPO, but maybe not a
  HMO in the long term.
• Use can be lower, depending on type an incentive.

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Policy Conundrums

• How does a employer-based personal care account
  move with an employee?
• How should CDHPs be treated in the non-ERISA
  marketplace?
• What if CDHPs accelerate the consumers burden of
  health care spending too quickly?

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Policy Opportunities

• Innovative means to bring consumer choice into
  the medical marketplace as well as consumer
  awareness of the trade-offs of liberal medical
  insurance coverage policies.
• Creates foundations for infrastructure for
  personal, portable health care coverage.
• Hybrid variants could be crafted to serve low
  income and part time workers.

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EpilogueCDHP Health Information Technology
EnablementA Personal, Portable Medical Record
How-to Opportunity
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Health IT Fantasies Goals

• Linked medical records womb to tomb
• Access medical results online (patient provider
  access)
• Universal views
• Provider perspective (missing data problem)
• Payer perspective (moral hazard problem)
• Real time adjudication, care tracking
• Personal medical resource calculator
• Customized treatment/care prompts
• Personalized new technology opportunity finder

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A Look Inside the Health IT Sausage of one
Integrated Delivery System
Decision Support
Life Support
Data
Hardware
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Whats Wrong With Todays Health IT Picture? TOO
MANY SILOES!
10 of Care
25 of Care
15 of Care
15 of Care
35 of Care
Data Available to the Average Medical Provider
About a Patients Care
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Actual eLinks
To Build
Congress
Main Street
Biotechnology
Federal Government
lt90 Income
Big Business
Physicians
99 Income
91-99 Income
Courts
Insurers
Hospitals
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Todays Health IT Realities

• 400 IT-siloed insurers
• 6000 IT-siloed hospitals
• 600,000 IT-siloed practicing physicians
• data does not connect by person
• cost to transition from one a platform is huge
• capital investment is substantial to change
• lack of standards
• little digital data present
• niche firms/vendors with turf not willing to
  yield

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One CDHP Future to Accelerate Creating Personal,
Portable Medical Records

• 2004 CDHPs requires links to outpatient
  laboratory results data at the provider encounter
  level.
• 2006 CDHPs requires links to pharmaceutical
  prescription orders at the provider encounter
  level.
• 2008 CDHPs requires data from practices from
  approved EMR/CPOE software applications.

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Why Should CDHPs Take Initiative

• Demonstrates an ability to give patients and
  providers better data as part of the regular
  health care system.
• Living innovation to meet the challenge of the
  IOM Quality Chasm/Patient Safety Call to Arms.
• It fits the evolution, not revolution, mantra of
  CDHPs.
• Gives CDHPs a marketing edge.
• Encourages patients to develop a brand taste for
  information packaging via their CDHP which
  could make possible employer cash-out of health
  benefits easier to take.

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Why Care?

• How might you gain/lose from this?

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Health Reform Circa 2005-2006

• Nation Health Opportunity Act Legislation
  introduced to reform system by
• Mandatory health insurance coverage for all
  adults and their dependents. Enforced through
  combination of DMV and IRS tax law.
• Voucher system provided by employers to employees
  for 30 hour to full-time employees.
• Government voucher system to all others of low
  option CDHP or price equivalent of a staff model
  HMO.
• New entrants into Medicare must select a health
  plan choice.
• Small business and single contract co-ops created
  regional catastrophic insurance using TriCare
  bidding model.
• All consumers own their electronic medical
  transactions and have a default agency that
  manages them as a government program (much like
  we all have a default DMV).