Current Status of CDHHealth Savings Accounts

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Current Status of CDH/Health Savings Accounts WHO
is doing WHAT and with HOW MUCH
success? 2007.03.01
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Discussion Topics

• CDH Landscape Overview
• Considerations on both sides of the CDH decision
• Key Components of CDH Implementations
• Plan Design Options standards and new stuff
• Roadmap for the Future
• Questions

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New Employee Benefit Decisions
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CDH Landscape Overview

• HSA Expansion Legislation significant growth
  opportunity
• CDHPs become mainstream through continued
  industry consolidation
• Slower enrollment growth than first round
  adopters of CDH designs
• Financial Institution market play

Key market events in 2006
Key Focus Areas in 2007/2008

• Additional financial services integration multi
  purpose cards, transaction management, funds
  mobility
• More comprehensive data on trend impact, driving
  plan design innovation
• Further connection between health management
  (wellness, coaching, chronic condition) and
  incentives

I cant give you a sure-fire formula for
success, but I can give you a formula for
failure try to please everybody, all the time.
(Herbert Bayard Swope)
Employers and health plans need to need to have
clear CDH strategies and be careful about the
risks of hyper-flexibility and over-choiced
consumers
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CDH Landscape Overview

• Key Indicators
• Over 13 million participants and growing (HSA
  HRA)
• Some surveys show over 40 of ERs planning on
  offering some type of consumer account based
  benefit plan in the next 2 years
• Claims history studies starting to present
  credible data across more than 3 years
  tangible trend reduction depending on behavior
  incentive approach
• HDHP participation alone has tripled in the last
  2 years (AHIP research)
• Evidence of continued legislative support
  12/20/2007 rule changes expansion

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CDH Landscape Overview

• Key Indicators
• Overall healthcare cost trend continues to build
  momentum toward double digit growth (estimates of
  growth from 2.1 trillion to 4.0 trillion by
  2014)
• CDH showing initial capability to flatten plan
  spend to single digits
• Retiree health expenses absorbing substantial
  portion of overall personal retirement asset base
• Pressure at national level for more quality and
  cost information transparency

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CDH Landscape Overview

• Adoption rates increasing rapidly for CDH and
  account based plan designs
• Forward looking CDH Roadmap

• Age mix across CDH enrollees appears evenly
  distributed, and
• Health status is not materially different than
  non-CDH plans

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CDH Landscape Overview

• Common Rationale for Wait and See on CDH

Even ERs can be paralyzed by new choices
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CDH Landscape Overview
Primary reasons for offering CDH
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CDH Landscape Consumer Profile

• Lower Premiums 37
• Savings Opportunity 18
• all the way down to
• More Control 5
• Easy to Understand 2

Common reasons for selecting a CDH plan when
offered as an option
Common themes across enrolled CDH population
Kaiser Family Foundation
Less than 2 health conditions
College Graduate
Substantial group w/ Income gt 75,000
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CDH Landscape Overview

• Experience and data are beginning to show that
  individuals engaged in CDH plan types are
  exhibiting some behavior changes that may lead to
  better health outcomes

• A recent study showed that consumers in HRA plans
  were
• 25 more likely to engage in healthy behaviors,
  such as preventive care and wellness programs
  and
• 20 more likely to follow treatment regimens for
  chronic conditions very carefully.
• (McKinsey Company, June 2005)

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CDH Landscape Overview

• Exposure to the financial accountability inherent
  in CDH plan designs has also started to drive
  consumer behavior change around benefit value
  stewardship

• HRA enrollees made value-based decisions
• 50 more likely to ask about overall heath care
  costs, and
• Twice as likely to inquire about Rx costs
• (McKinsey Company)

• HSA enrollees asked Qs
• 33 asked for information about cost of Rx,
  compared to only 18 of non-CDH enrollees
• 20 asked for information about cost of physician
  visits, compared to 14 of non-CDH enrollees
• (BCBS Association)

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CDH Landscape - Patient Responsibility

• Patient responsibility increasing trend for all
  health plans
• Driving provider receivables (A/R) management
  burden

25 - 30 Receivables

• Need unique solutions to help consumers manage
  their healthcare finances more effectively

3 - 7 Bad debt
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Healthcare Credit???
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CDH Landscape Health Savings Accounts
Initial Impressions Split

-

• Best opportunity to impact cost trend
• Creates whole new community of health care value
  advocates
• Market pressure on components of the health
  delivery system
• Mapping an asset with growth potential against a
  cost curve with similar characteristics over
  lifecycle
• Individual accountability

• Just a simple (but veiled) effort to shift
  growing trend cost to participants
• Not a sustainable change in how benefits are
  structured
• Further exposes under and un-insured populations
• Tax break for those who already have available,
  disposable income to cover OOP

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CDH Landscape Health Savings Accounts
Interesting Quotes In fact, over the long run,
HSAs will harm those who need healthcare the
most. They represent a radical departure from
our current healthcare system (Families USA
November 2006) I have 200 employees and one
big headache rising healthcare costs. (Employer
switching to HSA/HDHP plan and substantially
reducing trend) I dont think a Democratic
victory means a death knell for HSAs and their
continued evolution. That horse has left the
barn. (Towers Perrin CDH practice lead)
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CDH Landscape - HSAs

• Additional Experience Findings
• Vast majority not having problems with
  coordinating savings accounts with HDHPs
• Consumers slightly less likely to understand
  their CDHP plan as easily/fully as their
  traditional plan options (education becomes
  paramount)
• Consumers are more likely to feel exposed to high
  medical bills, BUTno material jump in unpaid
  medical bills
• Investment options becoming larger part of
  consumer decision, with growing balances

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HEALTH WEALTH Industries Active Continuing
Convergence
Health Plan
Financial Institutions
Product Innovation
Health Plan Enrollment, Claims, and Payment
Systems
Banking Systems, Omnibus Accounting Systems,
Debit Card Systems

• Health plans, financial institutions want to
  offer flexible CDHP designs
• Administration of health care accounts more
  complex than financial accounts rules-based
  processing, automation key to lower costs
• Connectivity between health plans and financial
  institutions needed to leverage core competence
  of each stakeholder bridge technologies

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CDH Implementation Components

• Successful CDH implementations require a direct
  strategy in each of the following areas
• Understanding your EE population (appetite and
  readiness for change)
• Education Communication using unique channels
• Plan designs with full range of consumer account
  types
• Proper pricing against other options
• Tools, consumer guidance and services
• Incentives and the ability to motivate adoption
  behavior

Successful technology solutions also need to be
integrated and able to support the span of
potential strategies across each of the key
implementation components
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CDH Implementation key steps

• Create Ownership
• Offer account based benefits
• Deliver decision making responsibility
• Communicate trust and shared cost management
  challenge

• Engage Encourage Action
• Unique incentives
• Personal value proposition
• Long term impact horizon
• Relevant, timely event driven info

• Inform Educate
• Profile and understand your population
• Communicate through variety of channels
• Allow access to key information

Consumers
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Connecting Equipping Consumers one possible
approach
Integrated, Multi-Purse Environment
Consumer ConnectionSM
Variety of Incentive Options/Programs
Event Driven Communication
Connecting employers and members to a wealth of
resources
Consumer ConciergeSM Service
24 hour Health Information Line
Member Activation Support
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Specific Hospital / Facility Concerns

• Payment Cash Flow
• Multi-Tier Network Pricing Administration
• Communication and incentive strategies to assist
  steerage to proprietary facilities
• Confidentiality and appropriate treatment of
  Personal Health Information data
• Opportunities to leverage facility specialties
  care focus areas to drive better health outcomes
• Talent attraction and retention through
  differentiated benefits

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CDH Platform Solutions
Core Claims Processing System
Account Administration Systems

• Key Functions
• Eligibility processing
• Claims receipt imaging
• Call tracking customer service
• Claims adjudication and payment
• Banking and claims accounting

• Key Functions
• Consumer account configuration
• Transaction processing and application to
  consumer accounts
• Payment hierarchy and coordination management
• Eligibility pass through

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CDH Platform Solutions
High functioning HDHP/HSA plan administration
includes

• Foundational integration between core
  eligibility/claims processing system and consumer
  account administration platform
• Ability to configure unique CDH account
  arrangements and handle all existing account
  types (HRA, FSA, HSA, RMSA, etc.)
• Ability to uniquely configure business rules for
  how consumer accounts coordinate to offset claims
  expenses
• Ability to integrate Rx into consumer plan
  designs and manage combined deductibles,
  accumulators and transactions.
• Flexibility on consumer account payment hierarchy
  management
• Consolidated web view presentment and
  information tools

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Member Service Model to Support Full Scale CDH
Implementations
Tools Resources
Event Driven Communic-ations
Consumer Advocate
Care and Disease Coaching
Claims TransX Inquiry
Consumer-Centric Support Model
Financial Account Mgmt
Wellness Incentives
Full immersion in CDH personal experience
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Personal Care Note Example of Personally
Relevant Event Driven Communications
Front
Back
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Payment / Cash Flow Solutions
Flexible Spending Account

• Effective plans need to have multi-account purse
  management functionality
• Helping consumers manage their healthcare funding
  sources effectively
• Combined payments and EOBs
• Account coordination options
• Asset accumulation options
• Unique business rules at the account level

Health Reimbursement Arrangement
Health Savings Account
Health Incentive Account
Care Targeted Benefits Account
Retiree Reimbursement Account
Consumer Credit Account
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CDH Plan Design Options
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CDH Plan Design Configuration Options

• Differences on HRA / HSA approaches
• Multi-purse examples (FSA, HRA, HSA)
• Ancillary products like Credit, Retirement, and
  Incentive accumulation
• Deductible treatment options and behavior
  implications
• Preventive care treatment options
• Accumulation options and behavior implications
• Payment coordination options/elections

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HDHP/HSA Plan Design Single EE
Preventive Care Coverage - 100
HDHP Coverage In/Out Network Coins 80 / 60 OOP
Max 2500/4500

• Responsibility for funding deductible shifts to
  EE through consumer account - HSA
• Tax benefits (triple advantaged)
• Individual ownership and portability
• Integration with trustees
• Earning and asset accumulation options (each
  trustee has current rates)

Deductible 1,100.00
HSA (Consumer Owned Funded)
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HDHP/HSA Plan Design Single EE
Preventive Care Coverage - 100
HDHP Coverage In/Out Network Coins 80 / 60 OOP
Max 2500/4500

• Incentives can be included in plan design with
  access through a post-deductible HRA-like
  incentive account
• Unique business rules can be applied for
  incentive balance distributions based on care
  events and diagnosis
• HSA and incentive balances can be used to offset
  member OOP

Incentive Acct
Deductible 1,100.00
HSA (Consumer Owned Funded)
Incentive reward deposits () earned through
variety of consumer actions such as completion
risk assessment, consumer CDH tutorial /
knowledge quiz, PCN review, etc.
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CDH Plan Designs HRA Basic
Preventive Care Coverage
HDHP Coverage In/Out Network (Coinsurance Options)

• Safety net coverage
• Can include coinsurance options
• In/Out Network Provisions

• Annual exams
• Immunizations
• Essential Care
• No impact to HRA

Deductible Deductible
HRA

• First Dollar Coverage
• Non-Preventive care
• Asset accumulation
• Foundation for increased care cost awareness

• Member Share
• OOP cost up to annual limit
• Can be reduced through HRA rollover
• Can be partially positioned before HRA

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CDH Expected / Estimated Savings
Cost reduction opportunities exist for most/all
CDH plan design types, depending on how they are
structured
HRA w/out Initial Deductible
HRA w/Initial Deductible
HDHP/HSA
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CDH Roadmap for the Future

• Continued, aggressive adoption at the employer
  level
• EE enrollment will depend on how plans are
  positioned (financially and benefit coverage) and
  investment in education
• New industry partnerships will evolve and
  generate efficiencies and cross-over, hybrid
  products that have not been seen before (credit,
  critical illness gap coverage, loyalty programs,
  etc)
• Consumers will have more direct influence on
  plans they are offered based on their votes as
  consumers and the collective impact on trend

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Questions?