Consumer Driven Health Plans: Empirical evidence of takeup, cost and utilization and HSA policy impl

1
Consumer Driven Health Plans Empirical
evidence of take-up, cost and utilization and HSA
policy implications.

• Stephen T Parente, Roger Feldman, Jon B
  Christianson
• Presentation to the National Association of
  Business Economics (NABE), Washington, DC, March
  13, 2006
• Sponsored by the Robert Wood Johnson Foundations
  Health Care
• Financing Organization Initiative (HCFO)
• and the U.S. Department of Health and Human
  Services

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Presentation Overview

• What is a Consumer Drive Health Plan (CDHP)?
• Policy Questions
• National CDHP Take-up
• Cost Utilization Comparisons Over Time
• National HSA Simulation
• Policy Implications

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Classic CDHP Model Definity Health

• Health Reimbursement Account (HRA)
• Employer allocates HRA1
• Member directs HRA
• Roll over at year-end
• Apply toward deductible2

• Health Coverage
• Preventive care covered 100
• Annual deductible
• Expenses beyond the HRA

HRA

• Health Tools and Resources
• Care management program
• Internet enabled

1 Employer selects which expense apply toward the
Health Coverage annual deductible. 2 Paid out of
employers general assets.
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CDHP Version 2.0 The Health Savings Account
(HSA)
HSAs legislated in MMA 2003. Pretty similar
to Definity Health HRA Design except the
consumers owns the account.
HSA
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Conceptual Model of CDHP
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Policy Questions to be Addressed

• Do CDHPs (in the form of HRAs) have national
  appeal?
• What are the longer-run cost use consequences
  of CDHPs?
• Where do they save money?
• What is the impact on pharmacy services, where
  consumers can act in a directed fashion?
• Do HSAs have potential national appeal?
• Are HSAs a viable approach to addressing the
  problem of the uninsured?

• FYI We are just approaching the half-way point
  of our research.

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Nearly National Appeal of HRAs States where the
study employers 1st year CDHP take-up was gt5
Take-up
gt5
0.1 - 5
0
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Employer-based Analysis Overview

• Analysis started in 2002 with six employers
• Combined population drawn from 50 states
• Total covered lives represented 250,000
• Collect primarily employer HR data and insurance
  claims data for all plans.
• New HCFO grant will create a study panel with six
  total years of CDHP experience 2001-2006.

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What is the impact of CDHPs on cost use?

• Study Design
• First results reported in 2004, August, Health
  Services Research.
• Look at CDHP/PPO/POS cohorts within one large
  employer for employees over time to see longer
  run impact of CDHP in 2001 - 2003.
• Control for several factors to ADJUST cost use
  estimates
• Health status/illness burden/health shocks
  (cancer, catastrophic accident)
• Income
• Family size and dependents
• Age, gender

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Study Setting

• Large employer that offered HMO and PPO in
  2000-2003 and introduced CDHP in 2001
• Variation in cost sharing by contract
• Take-up of CDHP approximately 15
• Smaller account/deductible gap, 0 co-insurance
  on catastrophic
• General caveat ANY Employers experience can be
  quite different due to
• Alternatives offered
• Plan design
• Communications with employees
• Sponsors objectives for the plan

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New Results Impact of CDHP and PPO on Cost
Compared to POS
All Annual Plan Effects Using POS Plan as
baseline.
NOTE These are results from a restricted
continuously enrolled sample of 27 of the total
employee population and are not a reflection of
the plans full prescription drug experience.
NOTES These are results from a restricted
continuously enrolled sample of 26 of the total
employee population and are not a reflection of
the plans expenditures. Bolded numbers are
significant at plt.05.
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Impact of CDHP and PPO on Physician, Hospital and
Pharmacy Cost Compared to POS
All Annual Plan Effects Using POS Plan as
baseline.
NOTE These are results from a restricted
continuously enrolled sample of 27 of the total
employee population and are not a reflection of
the plans full prescription drug experience.
NOTE These are results from a restricted
continuously enrolled sample of 26 of the total
employee population and are not a reflection of
the plans expenditures.
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Is brand name pharmacy use different for CDHP
enrollees?
NOTE These are results from a restricted
continuously enrolled sample of 27 of the total
employee population and are not a reflection of
the plans full prescription drug experience.
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Is there a difference in pharmacy use for CDHP
patients with chronic conditions?
NOTE These are results from a restricted
continuously enrolled sample of 27 of the total
employee population and are not a reflection of
the plans full prescription drug experience.
NOTE These are results from a restricted
continuously enrolled sample of 27 of the total
employee population and are not a reflection of
the plans full prescription drug experience.
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Overall Cost Use Results Summary

• CDHP plan did not have the lowest cost and
  utilization across all plans.
• CDHP best (lowest) cost result was for pharmacy.
• CDHP worse (highest) cost result was for hospital
  expenditures (inpatient outpatient).
  partially explained by pent-up demand for
  elective procedures provider pricing
  differences across years.

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Pharmacy Summary

• Costs down initially volume does not decrease
  at same time suggests more frugal Rx use (e.g.,
  greater use of mail order).
• CDHP chronic condition cohort drug use is
  generally higher than other health plans, though
  rarely statistically significant.
• Brand name drug use higher in CDHP, but overall
  cost is lower.

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Using HRA Results to Explore HSA Policy Questions

• What is the expected take-up rate of HSAs in the
  individual market?
• What is the likely impact of the Administrations
  HSA sproposals?
• Take-up rate of HSAs with subsidies
• Reduction in the number of uninsured
• Cost of the subsidy
• What is the impact of other possible subsidy
  designs?

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Data Sources

• 2002 health plan choice data from 3 large
  employers participating in a Robert Wood Johnson
  Foundation funded study on CDHPs
• Employee premium, deductible, coinsurance,
  workers age, gender, wage income, single/family
  coverage
• 2001 Medical Expenditure Panel Survey (MEPS)
• Household Component
• Linked Insurance Component
• eHealthinsurance.com
• Individual HSA plan information

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Plan Choice Model Analytic Approach

• Plan Choices HMO, 3 PPOs (low, medium, high), 2
  CDHPs with Health Reimbursement Accounts (low and
  high)
• Utility-maximization assumption where Uhj aj
  ??Zj ??Xhj ehj
• Estimate a conditional logit model of plan choice
  using the pooled, employer data
• Explanatory variables
• Plan attributes (Z)
• Annual tax-adjusted employee premium (1000s
  dollars)
• Savings/reimbursement account size (1000s
  dollars)
• Donut hole difference between annual deductible
  and account size (1000s dollars)
• Coinsurance rate (i.e., .10 10 coinsurance)
• Interactions between employee and plan attributes
  (X)
• Age, female, wage income, family contract
• Plan-specific constants (aj )

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Price elasticity estimates from the plan choice
model
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Policy Simulations

• Baseline take-up of HSAs from the Medicare
  Modernization Act of 2003
• Simulation (1) Bush Administrations 2004
  proposal
• Refundable tax credit up to 90 of premium
  maximum of 1000/adult, 500/child (up to two)
• Subsidy for singles with no dependents phased out
  at 30,000 adjusted gross income and 60,000 for
  families
• Simulation (2) 2006 State of the Union Proposal
• Simulation (3) Level the Playing Field
• Simulation (4) Full subsidy of HSA premium

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Baseline Impact of MMA 2003
NOTE Population is 19-64, non public insurance
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HSA Summary Next Steps

• HSA Plan design matters We find a greater
  take-up from a reduction in the donut hole than
  an increase in the account size.
• Administration proposals to tax advantage HSAs
  will increase their take-up and reduce the number
  of uninsured, at the margin.
• Look at HSA take-up versus retirement saving
  choice is a new frontier to examine.

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Thank You!For more information on our
research, please visitwww.ehealthplan.orgStep
hen T. Parente, Ph.D., M.P.H., M.S.Assistant
Professor, Department of FinanceDeputy Director,
Medical Industry Leadership InstituteCarlson
School of ManagementUniversity of Minnesota321
19th Ave. South, Room 3-149Minneapolis, MN
55455612-624-1391 (v)sparente_at_csom.umn.eduhttp
//www.tc.um.edu/paren010