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AZSHRM CDH Presentation 2012 State Conference


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One hour strategic credit approved presentation. Co-Authored and presented by Mary Harwood, PHR, Karen Alter and Janet(Asher)Vreeland, CEBS

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AZSHRM CDH Presentation 2012 State Conference

  1. 1. Healthcare Costs, HealthCare Reform and Family Wellness 0
  2. 2. SHRM 2012 Trend Book – Top three Benefit Concerns:Health care costsHealth care reformFamily health 1
  3. 3. SHRM 2012 Trend Book – Top three Benefit Concerns: Health care costs Health care reform Family health Hypothesis: Consumer Driven Health plans play an active role and have a track record of success in strategies that address all three concerns So let’s explore our topic in the context of Yesterday, Today and Tomorrow………. 2
  4. 4. Yesterday The Social Transformation of American Medicine:The rise of a sovereign profession and the making of a vast industry Paul Starr Winner of 1984 Pulitzer Prize for General Non Fiction 3
  5. 5. Today The Peculiar American Struggle over Health Care Reform Paul Starr Winner of the 2011 American Publishers Awards and Scholarly Excellence(PROSE) in the Government and Politics category, as given by the Association of American Publishers 4
  6. 6. Woodrow Wilson – 28th President of the United States (1913 – 1921) 5
  7. 7. Health Care Reform first begins in 1917 Between 1910 and 1913 Workers Compensation laws passed requiring compulsory insurance against industrial accidents Political reformers thought Americans could be persuaded to adopt compulsory insurance against sickness which caused poverty and distress among many more families National debate on health insurance begins on the eve the U.S. enters WWI 6
  8. 8. In Favor of Health Reform and Compulsory Health Insurance Believed workers would benefit from compulsory health insurance as a means of income protection Believed enhanced quality of life and that employers would realize handsome returns from a healthier more productive workforce As an additional cost containment feature, reformers strongly believed that doctors should be paid on a capitated basis instead of fee for service… 7
  9. 9. Opposed to Health Reform - Business, Unions, InsuranceIndustry and the Medical Profession Opposition for these groups had more to do with issues of control and power rather than the argument that strong and healthy citizens lead to a strong and healthy country Neither employers nor unions were interested in a social welfare program that would increase workers’ loyalty to either of them Opposition from insurance industry was due to the initial proposed health insurance package that included a funeral benefit. Prudential had 38% of the market and Met 34% of the industrial life insurance market 8
  10. 10. Opposed to Health Reform - Business, Unions, InsuranceIndustry and the Medical Profession The medical profession and the AMA believed the patient physician relationship was sacred. Doctors charged what their patients could afford to pay and would do anything in their collective power to defeat a system that introduced intermediation into their compensation 9
  11. 11. What happened instead of national health insurance?1920s and 1930sHealth care costs began to hit the middle class both with increased physiciansfees and hospital costs1929 Health care costs estimated at 4% of national income or $3.66 billion.Social Security and The New Deal offered an expansionary vision: increasedaccess to medical care by augmenting nation’s medical resources and reducingfinancial barriers to their use – yet no threat to physicians’ income.1940s and 1950sKaiser, Kaiser Permanente evolved from industrial health care programs forconstruction, shipyard, and steel mill workers for the Kaiser industrial companies during the late 1930s and 1940s. It was opened to publicenrollment in October 1945.1960s Academic medicine flourished and hospital growth mushroomed 10
  12. 12. Kaiser’s Legacy Former Broncos owner Kaiser, approved trade for Elway, dies wire reports Jan. 14, 2012 5:42 PM ET DENVER -- Former Denver Broncos owner Edgar F. Kaiser Jr., who oversaw the trade that brought Hall of Fame quarterback John Elway to Denver, has died, according to a charitable foundation Kaiser established. Cheryl Smith, PHR, Safety and Benefits Specialist Desert Del Oro Foods – Northwest Arizona Human Resource Association (NWAHRA) – June 2012 11
  13. 13. Richard Nixon – 37th President of the United States (1969 – 1974) 12
  14. 14. Discovery of a Crisis - Runaway costs and Barriers toaccessFrom 1960 – 1975 the share of health care expenditures paid by third partiesincreased from 45 to 67 percent (The Blues, private plans, Medicaid, Medicare)The $10.8 billion government had spent in 1965 became $27.8 billion by 1970Health expenditures had risen from 4.4% of the federal budget in 1965 to11.3% of the budget in 1973 13
  15. 15. Discovery of a Crisis - Runaway costs and barriers toaccess Specialization flourished and general practitioners grew scarce Lack of facilities and providers in rural areas Emphasis on inpatient care over ambulatory and preventive health services 14
  16. 16. Discovery of a Crisis - Runaway costs and barriers toaccessFavorable HMO legislation passed during this era1979 7.9 million people were enrolled in HMOsHMOs costs were significantly lower mainly because of reduced hospitalizationFor every 1,000 people, Kaiser plan subscribers had only 349 days ofhospitalization compared to a national average of 1,149However Nixon’s political dream of national health insurance disappeared in the scandal that ended his presidency 15
  17. 17. Bill Clinton – 42nd President of the United States (1993– 2001) 16
  18. 18. Clinton Health Care Plan of 1993Provided universal health care coverage for all AmericansEmployer mandate to offer coverage to all employees through HMOsHillary Clinton was drafted by the Clinton Administration to head a new TaskForce and sell the plan to the American people, a plan which ultimately backfiredamid the barrage of fire from the pharmaceutical and health insurance industriesand considerably diminished her own popularityBy September 1994, the final compromise Democratic bill was declared dead 17
  19. 19. What did happen during Bill Clinton’s first term?The Family and Medical Leave Act of 1993 (FMLA) is a United Statesfederal law requiring covered employers to provide employees job-protected and unpaid leave for qualified medical and family reasonsThe bill was a major part of President Bill Clintons agenda in his first term.President Clinton signed the bill into law on February 5, 1993 18
  20. 20. Barack Obama – 47th President of the United States (2009 – current) 19
  21. 21. Today According to Kaiser Family Foundation, the United States spends more per capita on health care than any other country Spending as a percentage of the gross domestic product has risen from 9 percent in 1980 to 16 percent in 2008; and may top the 20 percent mark in a few years 20
  22. 22. Unsustainable Health Care Cost Increases Are a UniversalConcern Since 2006 Today 2012Employer 40% increase $8,000 average spent per employeeEmployee 82% increase of out-of-pocket $5,000 average spent per year and payroll contributionsTotal Cost 52% increase Nearly $13,000 per employee annually With employee pay typically rising at 3% per year, compare a 19% pay increase to an 82% health care cost increase over the past 5 years. Experts estimate that health care costs willSource: Aon Hewitt HHVI Database continue to rise at 8-9% per year 21
  23. 23. Worsening Health Risk – A National ProblemIt starts with Obesity: know the NUMBERS of Americans will be overweight or obese by 2030 86% based on current trends. Today 33% of adults are overweight and 34% are obese. Childhood weight is also an issue with 32% of US children currently overweight or obese deaths per year may be attributable to obesity 300,000 increase in the risk of coronary heart disease mortality for each 2.2 1%–1.5% pound increase in body weight of all medical 2.3% increase in claims cost for each unit increase of BMI spending 10% is accounted for by obesity, compared to the new onset of diabetes for a Double weight gain of 11–18 pounds over 6.5% in 1998 10 years Sources: various academic and governmental publications 22
  24. 24. Health Care Reform 2010 Addressed Access to Coverage BUT…did not address cost or population health 23
  25. 25. Consumer Driven Health Plans To The Rescue? 24
  26. 26. What Is a Consumer Driver Health Plan (CDHP)? A High Deductible Health Plan (HDHP) A Tax Favored Account HRA or HSA Integrated with Health Management/Wellness Framework Consumer Tools & Resources 25
  27. 27. A ‘Qualified’ High Deductible Health Plan (HDHP)Minimum Deductible:2012 $1,200 Single / 2,400 Family2013 $1,250 Single / 2,500 FamilyMaximum Out of Pocket2012 $6,050 Single / $12,100 Family2013 $6,250 Single / $12,500 FamilyMaximum HSA Contributions2012 $3,100 Single / $6,250 Family2013 $3,250 Single / $6,450 FamilyCatch up contributions allowed for those over 55•All expenses apply to deductible with the exception of preventive care•Preventive care can include physician services, lab/xray and some medications 26
  28. 28. ‘Qualified’ HDHP & Health Savings Account (HSA) Health Plan (Qualified HDHP) $2,000/year Deductible Preventive Care 100% Health Plan Pays After Deductible Gap $2,000 Employee Responsibility Limited purpose FSA(vision, dental, expenses HSA after deductible) (Employer or Employee Funded) Assumes single, in-network coverage 27
  29. 29. Health Reimbursement Arrangement (HRA) Health Plan (PPO, HMO, HDHP) $2,000/year Deductible Preventive Care 100% Health Plan Pays After Deductible HRA - $1,000 Employer Provided Coverage GAP - $1,000 FSA (If elected) Employee Responsibility Assumes single, in-network coverage 28
  30. 30. HRA/FSA/HSA—Features
  31. 31. Strategy and HDHP/CDHP Plan DesignsWhat type of high-deductible, consumer-driven health plan(s) does yourorganization offer or plan to offer? High-deductible health plan with employer-seeded Health 31% 7% 43% 19% Savings Account (HSA) HSA-eligible, high-deductible health plan with no employer 13% 2% 32% 52% account funding High-deductible health plan with Health Reimbursement 21% 2% 35% 42% Arrangement (HRA) High-deductible health plan 9% 1% 21% 69% without an attached account 50% 50% Other Currently Offer Will Offer in 2012 May Offer in 3–5 Years Not InterestedSource: Aon Hewitt 2012 Health Care Survey 30
  32. 32. Greater CDHP Acceptance—HRA or HSA Option HRA Prevalence 2011 – 41% 2012 – 38% HRA PrevalenceHSA Prevalence 2011 – 59% Consumer 2012 – 62% Choice ¹ Source: Aon Hewitt 2012 CDHP Survey Results 31 31
  33. 33. HSAs Gaining PopularityNationwide 11.4 million people were enrolled in HSAs January 2011, up by 1.4million from a year earlier according to America’s Health Insurance Plans Centerfor Policy and Research.In Arizona, 174,720 employees have HSAs – about 5% of the state’s privatehealth insurance enrollees.Phoenix Business Journal, May 4, 2012 32
  34. 34. THE TOP 5 – Employer Objectives for offering CDHP1. Promote Self-Service Environment and Accountability (Consumerism)2. Contain Rising Health Care Costs3. Provide a Low-Cost Plan Without Increasing Employee Contributions4. Offer ‘Cutting Edge’ Benefits5. Expand Choice of Offerings*Aon Hewitt 2012 CDHP Survey – Middle Market 33
  35. 35. Case Study: Arizona Central Credit Union Why Did Arizona Central Credit Union Chose a CDHP?Rising costs of employee benefit costsCulture shift away from mindset that benefits are freeThe need to offer an affordable premium option for employees with dependentsAbility to save using a Health Savings Account (HSA)
  36. 36. Case Study: Arizona Central Credit Union Transition ProcessTransitioned from offering traditional PPO and HMO plans to HDHP with HSAand a Choice Plan (EPO)Started charging premiums for the EPO and offered deductible subsidy for theHDHPHonesty and Transparency Were Key! Started from the Top with Visible Senior Leadership SupportEducated and Trained our Employees
  37. 37. Case Study: Arizona Central Credit Union Transition Process Selected HSA Funding Strategy Years1 and 2 - Subsidized In-Network Deductible at 50%  Contributed - $750 individual  Contributed - $1500 Family Years 3 and 4 - Discontinued HSA subsidy and started charging premiums for HDHP plan
  38. 38. Case Study: Arizona Central Credit Union HDHP with HSA Enrollment Results Year % of Enrollment in HDHP with HSA2009--Year 1 39%2010--Year 2 41%2011--Year 3 40%2012--Year 4 33%
  39. 39. Case Study: Arizona Central Credit Union Experience Plan Years 15 11.9 10 9.6 8.1 8.9 5Plan Results 4.6 ACCU Initial Renewal ACCU Final Renewal 0 PPO Trend -2 CDHP Trend -5 -9.1 -9.1 -10 2009 2010 2011 2012 -15 38
  40. 40. Case Study: Arizona Central Credit Union Wellness InitiativesBiggest Loser CompetitionPartnered with Local GymTook Advantage of all the FREE resources
  41. 41. Case Study: Arizona Central Credit UnionImpact of Health Care Reform on Benefit Plan Strategy 90%
  42. 42. Report From the Field – What Do the Carrier’s Say?“Over five years, cumulative cost savings are sustainable and can grow to $9700per employee enrolled in a CDHP compared to employees who remained in atraditional plan.” Higher levels of care - preventive care, such as annual office visits and mammograms, more frequent More savvy consumers of health care – choose generic medications and had 14% lower pharmacy costs by comparison Source: Cigna Sixth Annual Choice Fund Experience Study released March 2012“CDH Plans Offer Material Savings “  Savings can result from better decision making  HSA plans are associated with higher savings than HRA plans  A well designed plan includes a ‘preventive’ drug list Source: UnitedHealthcare Consumer-Driven Health Plan Performance Report 2011 41
  43. 43. Report From the Field – What Do the Carrier’s Say?“HRA/HSA members spend 7% less on overall health care costs”  More frequent use of routine, preventive and chronic care  Higher usage of online tools  Plan sponsors impact engagement by thoughtful execution of strategy Source: 8th Annual Aetna Health Fund Sturdy released 2012 42
  44. 44. Lessons LearnedCommunication is Key!  Early and Often  Multimedia ApproachHR & other Senior Leaders Must ‘Walk the Talk’Focus on the Most Confusing/Impactful Topics  How do the accounts work?  Changes to prescription drug benefit (copay vs deductible)Help Me Understand  How do I decide what is best for me?What Do I Need to Do? How Does This Work? Tell Me One More Time! 43
  45. 45. Tomorrow 44
  46. 46. Potential Areas of Health Care Reform impact on CDH plansMedical Loss Ratio (MLR) - Fully insured plans  MLR calculation does not include funds contributed to HSAsValue of employer sponsored health coverage  W-2 forms issued in early 2013  HSA, FSA, HRA, and stand alone vision and dental plans excludedMinimum Essential Benefits  Expected costs for benefits must have actuarial value of 60%  Currently under consideration: only a portion of employer’s contribution to HSA or HRA will be included in actuarial valuationStephen Miller, CEBS, 3/21/12 online editor/manager SHRM 45
  47. 47. Potential Areas of Health Care Reform impact on CDH plansCadillac Tax - 2018  40% tax calculated based on amount in excess of threshold – aggregated employer sponsored benefits including value of health insurance premiums; vision, dental and other supplemental insurance premiums; including the employer’s contributions to HSAs, HRAs and FSAsAffordability  Employee contribution for single coverage cannot exceed 9.5% of family income – unknown if employers’ contributions to HSA or HRA can be included in calculation for affordabilityExchanges  CDH plans will be available in Vermont exchange  Other states unknownStephen Miller, CEBS, 3/21/12 online editor/manager SHRM 46
  48. 48. Join us for anupdate Questions? Thank you! 47