Consumer-Driven Health Plans

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Consumer-Driven Health Plans Evidence, Experience
Implications The Delaware Health Care
Commission March 3, 2005 Anne K. Gauthier Vice
President, AcademyHealth Program Director, RWJFs
HCFO program Senior Consultant, RWJFs State
Coverage Initiatives
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Presentation Overview

• Overview
• Different types of CDHPs
• Benefits
• Drawbacks
• Evidence from the field
• Employer and insurer interest
• Profile of early enrollees
• Early consumer experiences
• Utilization and cost effects
• Implications

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Consumer-Driven Health PlansA New Paradigm?

• Health care costs continue to rise
• Premiums up 13.9 in 2003 over 2002
• Pharmaceutical costs rose 8.8 first half 2004
• Rate of uninsured continues to rise
• 45 million in 2003
• Past approaches have not worked
• Traditional health insurance (until early 80s)
• Regulated prices for government programs (until
  early 90s)
• Managed care and purchaser power (until early
  00s)
• New solution- CDHPs?
• Shift of power to cost-conscious, educated
  consumers
• Where does evidence based medicine fit in?

Claxton, G. et al. Employer Health Benefits
2004, Annual Survey, Kaiser Family Foundation
and Health Research and Educational Trust, 2004
http//www.kff.org/insurance/7148/index.cfm
Strunk B. and P. Ginsberg. Tracking Health
Care Costs Spending Growth Slowdown Stalls in
First Half of 2004 Center for Studying Health
Systems Change, Issue Brief 91, December 2004,
http//www.hschange.org/CONTENT/721/
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What are CDHPs?

• While definitions vary, the most common
  characteristics are
• High deductible insurance plan
• Personal account funded in various ways to pay
  for care
• Gap between the annual amount in account and
  deductible
• Internet-based decision support

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Different Types of CDHPs

• Health Savings Accounts (HSAs)
• Portable accounts owned by individuals
• High deductible health plan required
• Health Reimbursement Arrangement (HRAs)
• Employer funded accounts that stay with employer
• High deductible health plan not required
• Archer Medical Savings Accounts (MSAs)
• Portable accounts for small firms (lt50) and
  self-employed
• High deductible health plan required
• Flexible Spending Accounts (FSAs)
• Employee funded with pre-tax dollars
• Use it or lose it at years end

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Potential Benefits of CDHPs

• Enhanced consumer involvement
• Greater control over dollars
• Personalized decision-making
• Greater choice of providers
• Greater cost control / potential for savings
• Incentives to control utilization
• Cost transparency
• HSAs as a tax-free investment opportunity
• Quality of care promoted
• Internet tools to educate consumers
• Better quality measures/reporting promoted
• Preventive care encouraged in HSA design

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Potential Drawbacks of CDHPs

• Only for the healthy wealthy
• Greater out-of-pocket costs for sicker
• Greater out-of-pocket expense burden for poor
• Market risk segmentation
• If sicker and poorer remain in other models,
  those premiums could rise
• Unintended consequences
• Induced demand for non-portable models
• Coverage of elective services
• Delay in needed care leading to increased costs
  later

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HRAs versus HSAs

• HRAs
• Available only through employers, who must
  contribute
• No HRA payout until an employee makes a claim
• Flexibility in design
• Tax-favored distributions for medical expenses
  only
• Can be combined with an FSA
• HSAs
• Employees AND employers CAN contribute
  (voluntary)
• Must be offered with a high-deductible health
  plan
• Tax-favored distributions for medical expenses
  distributions for non-medical expenses allowed,
  with penalties
• Cannot be combined with an FSA
• Contribution fully vested and portable

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Incentives to Control Spending?

• Incentives concentrated below deductible
• Chronically ill cannot effectively change
  utilization patterns
• Incentives to compare cost and quality, but good
  information lacking
• Employer savings may be offset by education costs
• HSAs account portability incentive to save
• HRAs employees gain more value when spending the
  account, especially when leaving employer

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Employer/Employee Interest

• Strong trend toward greater cost sharing
• In 2004, 51 of workers in health plans requiring
  deductible before most plan benefits are
  provided
• Employer interest in CDHPs growing
• Overall, 10 offered a high-deductible health
  plan in 2004 3.5 offered a personal/health
  savings account
• Large firms (gt 5,000 employees) lead the way in
  2004, 20 offered high-deductible health plans
• 81 of large and 78 of small employers plan to
• implement HSAs by 2006
• Employee takeup slow but growing
• 500,000 consumers enrolled in HSA

Claxton, G. et al. Employer Health Benefits
2004, Annual Survey, Kaiser Family Foundation
and Health Research and Educational Trust, 2004
http//www.kff.org/insurance/7148/index.cfm
Mercer Human Resources Consulting. National
Survey of Employer-Sponsored Health Plans 2003
Survey Report. New York, NY, 2004 Americas
Health Insurance Plans. Health Savings Accounts
Off to a Fast New Start http//www.ahip.org/conte
nt/pressrelease.aspx?docid7303
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Insurer Response

• 75 major insurers now offer an HSA nine out of
  ten insurers expect to offer an account-based
  CDHP within one year
• Recent examples
• United Healthcare purchases Definity Health
• own employees in high-deductible plans for 2005
• Kaiser Permanente offers a deductible health plan
  with HSA Option in CO, GA and the Northwest in
  2005
• Blue Cross and Blue Shield expects to have
  HSA-compatible policies nationwide by 2006
• Aetna makes HSA product available for small
  employers and individuals in May 2005 new
  Aetna-specific VISAs to simplify spending

Milliman Consultants and Actuaries. Milliman
2004 Group Health Insurance Survey Sees Surge in
Consumer Driven Products, Press Release, October
18, 2004, http//www.milliman.com/press_releases/2
00420CDH20Press20Release.pdf
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Profile of Early Enrollees

• Early choices of Whirlpool employees
• CDHP enrollees have more education (41 versus
  20 have college degree)
• CDHP enrollees have higher incomes (34 versus
  21 with income over 75,000)
• CDHP enrollees healthier (61 versus 47 with
  very good health status 46 versus 69 with
  chronic disease)
• Early choices of U Minnesota employees
• CDHP enrollees neither younger or healthier but
  are wealthier
• Ability to fund a deductible in the case of an
  emergency associated with choice of CDHP
• Provider choice/flexibility dominating factor of
  plan choice

Hibbard, Judith. Will Consumers Become More
Informed Cost-Effective Users of Care Under
Consumer Driven Health Plans? Preliminary
Findings, Cyber Seminar Presentation, September
2004 http//www.hcfo.net/cyberseminar/0904/hibbard
.ppt Parente, S. et al. Employee Choice of
Consumer-Driven Health Insurance in a Multiplan,
Multiproduct Setting, Health Services Research,
Vol. 39, No. 4, August 2004, pp. 1091-1111

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Early Consumer Experiences

• CDHP enrollees appear satisfied
• 8 of CDHP enrollees switched plans, compared
  with 5 in traditional plan
• 46 of CDHP enrollees reported a particularly
  positive experience and 24 reported a
  particularly negative experience, similar to
  traditional plans
• CDHP enrollees use decision-making tools, some
• Provider directory most used decision-support
  tool
• Disease management and pharmacy pricing tools
  less used
• BUT -- more likely to use a website to find
  health information and prescription costs than
  PPO enrollees

Christianson et al. Consumer Experiences in a
Consumer-Driven Health Plan, Health Services
Research, Vol. 39, No. 4, August 2004, pp.
1123-1139 Hibbard, Judith. Will Consumers
Become More Informed Cost-Effective Users of
Care Under Consumer Driven Health Plans?
Preliminary Findings, Cyber Seminar
Presentation, September 2004 http//www.hcfo.net/c
yberseminar/0904/hibbard.ppt
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CDHP Utilization Over 2 Years

• Hospital use higher than PPO or POS
• CDHP had the highest use of elective admissions
• CDHP had the highest emergency admission rate
• CDHP hospital admission rates grew 220
• compared with 57 for PPO and 29 for POS
• Doctor visits less than POS but growing
• In 2002, CDHP enrollees had fewer visits per
  capita (7.15) than HMO enrollees (7.29), possibly
  using more nurse help lines
• Between 2000-2002, CDHP physician visits grew
  24.5 compared with 20 for PPO and 8 for POS

Parente, S. et al. Evaluation of the Effect of
a Consumer-Driven Health Plan on Medical Care
Expenditures and Utilization, Health Services
Research, Vol. 29, No 4, August 2004, pp. 1189-
1209
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CDHP Utilization (cont.)

• Prescriptions filled grew more slowly than POS
• Between 2000-2002, CDHP prescriptions filled per
  capita grew 33.6 compared with 19 for PPO and
  39 for POS
• CDHP decision-making tools encourage cost saving
  in pharmacy utilization
• In 2002, CDHP prescriptions filled per capita
  (25.3) were lower than POS (30.9) but higher than
  PPO (24.5)
• Brand name drug use higher in CDHP, but cost is
  lower

• Parente, S. et al. Evaluation of the Effect of a
  Consumer-Driven Health Plan on Medical Care
  Expenditures and Utilization, Health Services
  Research, Vol. 29, No 4, August 2004, pp. 1189-
  1209
• Parente, Stephen. Consumer-Driven Health
  Plans Early Cost Use Evidence with a Focus on
  Pharmaceuticals Hospital Admissions, Cyber
  Seminar Presentation, September 2004
  http//www.hcfo.net/cyberseminar/0904/parente.ppt
  

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CDHP Costs Over 2 Years

• Lower total expenditures than PPO
• In 2002, CDHP had lower total expenditures per
  capita (8,149) than PPO (8,377), but higher
  than HMO (7,198)
• CDHP enrollees had lower out-of-pocket
  expenditures than PPO and POS
• Hospital expenditures a big cost driver
• Substantial increase in hospital expenditures for
  CDHP enrollees between 2000 (1,370) and 2002
  (3,469)
• In 2002, CDHP hospital expenditures (3,469) were
  higher than POS (1,957) and PPO (2,367)

Parente, S. et al. Evaluation of the Effect of
a Consumer-Driven Health Plan on Medical Care
Expenditures and Utilization, Health Services
Research, Vol. 29, No 4, August 2004, pp. 1189-
1209
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Solving the Problem of the Uninsured?

• Results from initial take-up
• 1/3 of individual purchasers previously uninsured
• 16 of small firms previously did not offer
  insurance
• Industry reports indicate not only wealthy
  young, but more national data needed
• One report cites half of purchasers at least 40
• 41 of purchasers report incomes lt50,000
• Likely impact of the Administrations proposed
  subsidies for HSAs
• Without subsidies, the 2003 MMA HSAs could have a
  take-up of 10 million
• Hypothetical tax subsidies for HSAs could
  increase coverage among the uninsured from 4 to
  14 million

Americas Health Insurance Plans. Health
Savings Accounts Off to a Fast New Start
http//www.ahip.org/content/pressrelease.aspx?doci
d7303 Most HDHP Plans Cost Less Than 100
per Month, Survey Says Inside Consumer-Direce3d
Care. August 6, 2004 Parente, S. et al.
Consumer Driven Health Plans Early evidence of
take-up, cost and utilization and HSA policy
implications NHPC Presentation, February 2, 2005
http//www.academyhealth.org/nhpc/2005/parente.pdf

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Implications for States

• Impact on state budgets
• HSAs projected to cost the federal government 7
  billion to implement over 10 years
• Market impact
• HSAs could contribute to risk segmentation in the
  private market
• High-risk pools vary from state to state
• Regulatory questions
• Do state laws allow HMOs to offer coverage with
  high deductibles?
• States require insurers to cover certain services
  regardless of whether an annual deductible has
  been met
• State as employers
• State employees tend to be older than average,
  more unionized and used to comprehensive benefits
  packages

Kofman, Mila. Health Savings Accounts Issues
and Implementation Decisions for States, State
Coverage Initiative Issue Brief, Vol. 5, No. 3,
September 2004 Leitz, Scott. Consumer-Driven
Health Plans Policy Interactions and
Implications for States, Cyber Seminar
Presentation, September 2004
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Outlook for the Future

• CDHPs are a new market approach
• Cost transparency, quality reporting and consumer
  education may be lasting by-products regardless
  of the future of CDHPs
• Selection bias real but can be managed
• Large self-insured companies can anticipate
  selection and alter premium sharing
• Need for risk spreading mechanism in small group
  and individual markets?
• Time will tell
• Research underway will provide continuing
  insights
• Early adopters may not be representative of
  future enrollees
• Cost savings may not yet be realized
• Are vulnerable populations better or worse off?

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Concluding Thoughts

• CDHPs- neither a panacea nor a poison
• Unknown whether CDHPs can help in solving
  uninsured problem
• Current public policy strongly promoting CDHP
  products and the market is responding
• Challenge will be to incorporate evidence-based
  medicine into CDHP structure
• More research is needed to inform policy
• The jury is still out

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Additional Resources

• www.hcfo.net
• www.statecoverage.net
• Consumer-Driven Health Care Beyond Rhetoric
  with Research and Experience
• Much of the work presented was featured in the
  August 2004 Health Services Research special
  issue
• Cyber Seminar Disseminating Research Results for
  Policymakers
• Consumer-Driven Health Plans Potential,
  Pitfalls, and Policy Issues http//www.hcfo.net/me
  etings.htm , September 2004

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Additional Resources cont

• Health Savings Accounts Issues and
  Implementation Decisions for States
• Mila Kofman, Issue Brief, September, 2004
• http//www.statecoverage.net/pdf/issuebrief904.pd
  f
• High Deductible Health Plans and Health Savings
  Accounts For Better or Worse?
• Karen Davis presentation January 27, 2005
  http//www.nasi.org/publications2763/publications_
  show.htm?doc_id261078nameMedicare
• Consumer Driven Health Plans Early Evidence of
  Take-up, Cost and Utilization and HSA Policy
  Implications
• Stephen T Parente Presentation February 2, 2005
  http//www.academyhealth.org/nhpc/2005/parente.pdf