BEYOND CDHC

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BEYOND CDHC BEHAVIOR-BASED FINANCING Putting
the health back into health care benefits

• Kyle Rolfing 5.04 Wellness Incentives Track

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GROUP ACTIVITY / DISCUSSION
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A digression and a thought experiment
BEHAVIOR-BASED FINANCING
What would happen if we applied the health
benefit financing model to retirement savings
programs?
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The twist equal distribution regardless of
individual investment
BEHAVIOR-BASED FINANCING
Investment amount _____low_______
GroupFund
Investment amount ___moderate____
Investment amount _____high______
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Consider implications on future behavior
BEHAVIOR-BASED FINANCING

• What is your reaction to this financing model?
• Who gains form this approach? Who loses?
• What behaviors would you expect to see take place
  as a result of this plan?
• Who would invest? How much?
• How much attention would be paid to individual
  investments?

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CONNECTING FINANCE TO HEALTH CARE WORKS CDHC
PROOF POINTS
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CDHC connecting financing to health care
decisions works!
BEHAVIOR-BASED FINANCING
5-10 fewer ER visits3

• 6.5 decrease in pharmacy costs1
• 11 decline in overall prescriptions1
• 13 increase in overall generic utilization1
• 31 increase in the use of pill-splitting2
• 100 increase in the use of mail order pharmacy
  services2

• 12 fewer inpatient admissions3
• 30 fewer inpatient hospital days3

36 increase in members taking annual preventive
exams3
Source1 Aetna CDH book of business. 2
UnitedHealth book of business. 3 2007 Health
Spring Meeting, Session 89 CDHP Experience
Update.
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However, the impact to health status is less
evident
BEHAVIOR-BASED FINANCING
While CDHC has impacted individual health care
decisions, it does not appear to have much
impact on the individual health behaviors that
drive increased medical costs.
SourceCenters for Disease Control and
Prevention, National Center for Health Statistics.
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And, efforts to engage arent having the desired
effect (a sickly response)
BEHAVIOR-BASED FINANCING

• 4 of smoking employees participated in
  employer-sponsored smoking cessation programs
• 5 of overweight employees joined workplace
  weight control programs
• 10 of employees with chronic conditions
  participated in employer-promoted disease
  management programs

SourceSurvey Findings Two Roads Diverged
Hewitt's Annual Health Care Survey 2008.
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THE DISCONNECT BETWEEN BEHAVIORS AND FINANCING
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50 of healthcare costs are attributable to
individual behaviors
BEHAVIOR-BASED FINANCING
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The problem will only get worse
BEHAVIOR-BASED FINANCING
These costs are entirely preventable.
Total HealthcareCosts
8,000
4,000
0
2008
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A digression and a thought experiment
BEHAVIOR-BASED FINANCING
What would happen if we applied the health
benefit financing model to financing home owner
insurance?
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BEHAVIOR-BASED FINANCING MOVING BEYOND CDHC
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Consumerisms next phase
BEHAVIOR-BASED FINANCING
Behavior-Based Financing
Connects financing to individual behaviors and
health engagement
Consumer-Driven PlansReconnected financing
through deductiblesand point-of-sale
decision-making
Indemnity PlansConnected financingthrough
deductible
Managed Care PlansDisconnected financing
Time Line
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Components needed to move to behavior-based
financing
BEHAVIOR-BASED FINANCING

• First, we need a behavior-based financing
  framework in which the individual consumers
  share of health care costs depends on whether
  they engage in their health
• Second, because we are asking people to take more
  responsibility in their health, we need to make
  it easy for individuals to engage

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STEP 1ESTABLISH A BEHAVIOR-BASED FINANCING
FRAMEWORK
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The current system treats employees unfairly
BEHAVIOR-BASED FINANCING
Regardless of behavior,everyone pays equallyfor
increasing premiums.
Under current system
Typically these increases are absorbed by
employers or passed on through premium increases
or plan design changes. But neither option
addresses the primary cause behaviors.
As costs increase both parties assume some
percent of increase with no apparent end in sight
Increase
HighlyEngaged
Employee dollars
Employee dollars
Costs are split between employers and employees
with employers bearing the larger share
Increase
ModeratelyEngaged
Employer dollars
Employer dollars
This system does not treat individuals fairly.
Unengaged
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A more equitable, effective system aligns
financing with behaviors
BEHAVIOR-BASED FINANCING
Premiums are distributed more fairly based
onindividual behavior.
Under current system
Behavior-based financing breaks the pattern
Increase
Increase
Employee dollars
Employee dollars
Behavior-based financing works within the current
framework to transform health care
Employer dollars
Employer dollars
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Solution transform financing to pay for health
BEHAVIOR-BASED FINANCING
Yellow portion is contingent on employee engaging
with their Personal HealthMapSM
Notes 10,000 employees 8,000 total health
spend (2008) 80 / 20 current contribution
split 8 trend.
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Incentive approach aligns rewards to achieve
outcomes
BEHAVIOR-BASED FINANCING
PHASE
FEATURES
TYPE ANDAMOUNT
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Comparison of monthly contribution impact to
consumers
BEHAVIOR-BASED FINANCING
Notes 10,000 employees 8,000 total health
spend (2008) 80 / 20 current contribution
split 8 trend first-year health budget
increase of 8 5 first-year base health spend
allowance.
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RedBrick Health solution rewards employees more
equitably
BEHAVIOR-BASED FINANCING
Notes 3,741 employees 7,752 total health spend
(2008) 75 / 25 current contribution split 5
trend
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STEP 2MAKE IT EASY TO ENGAGE
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Making it easy for individuals to engage
BEHAVIOR-BASED FINANCING
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Approach designed to best meet individual needs
BEHAVIOR-BASED FINANCING
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Early results of behavior-based financing
BEHAVIOR-BASED FINANCING
Notes Actual engagement represents year-to-date
book-of-business results through July 2008.
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CONCLUSION