Consumer-Driven Health Plans Evidence, Experience & Implications The
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 Presentation Overview Overview - Evidence from the field - Different types of CDHPs Benefits Drawbacks Employer and insurer interest Profile of early enrollees Early consumer experiences
Utilization and cost effects Implications Consumer-Driven Health Plans A New Paradigm? Health care costs continue to rise - Rate of uninsured continues to rise - 45 million in 2003 Past approaches have not worked - Premiums up 13.9 in 2003 over 2002* Pharmaceutical costs rose 8.8% first half 2004**
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/ 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 Different Types of CDHPs Health Savings Accounts (HSAs) - Health Reimbursement Arrangement (HRAs) - Employer funded accounts that stay with employer High deductible health plan not required Archer Medical Savings Accounts (MSAs) - Portable accounts owned by individuals High deductible health plan required Portable accounts for small firms (<50) 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 Potential Benefits of CDHPs Enhanced consumer involvement - Greater cost control / potential for savings - Greater control over dollars Personalized decision-making Greater choice of providers 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 Potential Drawbacks of CDHPs Only for the healthy & wealthy - Market risk segmentation - Greater out-of-pocket costs for sicker Greater out-of-pocket expense burden for poor 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 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 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 Employer/Employee Interest Strong trend toward greater cost sharing -
Employer interest in CDHPs growing - - - In 2004, 51% of workers in health plans requiring deductible before most plan benefits are provided* Overall, 10% offered a high-deductible health plan in 2004; 3.5% offered a personal/health savings account* Large firms (> 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/content/pressrelease.aspx?docid=7303 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/2004%20CDH%20Press%20Release.pdf 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 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/cyberseminar/0904/hibbard.ppt 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 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 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 Solving the Problem of the Uninsured? Results from initial take-up* - Industry reports indicate not only wealthy & young, but more national data needed** - 1/3 of individual purchasers previously uninsured 16% of small firms previously did not offer insurance One report cites half of purchasers at least 40
41% of purchasers report incomes <$50,000 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?docid=7303 **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 Implications for States Impact on state budgets - Market impact
- HSAs could contribute to risk segmentation in the private market High-risk pools vary from state to state Regulatory questions - HSAs projected to cost the federal government $7 billion to implement over 10 years* 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
Outlook for the Future CDHPs are a new market approach - Selection bias real but can be managed - - Cost transparency, quality reporting and consumer education may be lasting by-products regardless of the future of CDHPs 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? 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 evidencebased medicine into CDHP structure More research is needed to inform policy The jury is still out 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/meetings.htm , September 2004 Additional Resources cont Health Savings Accounts: Issues and Implementation Decisions for States
- Mila Kofman, Issue Brief, September, 2004 http://www.statecoverage.net/pdf/issuebrief904.pdf 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_id=261078&name=Medicare 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
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