Consumer Driven Healthcare
A Mixed Bag... or an opportunity to preserve consumer choice?
Mark H. Prudowsky, Executive Consultant
• CDHC Overview: Options, Options, Options
• The Purchaser's Point of View
• The Responding Marketplace
– CDHC Benefit Considerations
– Acceptance “to date...”
• Challenges for the “Best” Choice plan design
• “We've chosen...now what?”
• A Case in Point...Putting theory into practice.
“Your Menu, Sir...”
Chez CDHC Select Whines
The “FSA”... served lean for over HR vin 2004 : “ Too risky, too
twenty years. Cheap! complex to appreciate the value!”
The “HRA”... the best option when CFO vin 2007 : A great value, but
someone else is paying. $$$ may cause indigestion when the bill
The “HSA”... you decide how much
and when.Let's negotiate! EE (no vin, consistent blend) : glaring
overtones of doubt...buyer may
Famous Pairings experience sticker shock.
§ 125 Plan ... a great option when Broker vin 2010 : Big, brash notes
you wish to save tax dollars...fine of overconfidence yielding little depth.
Tri Parte Admin : Vintner commits
HDHP ... pairs best with the HSA or to any pairing despite of products
actual limitations...suggest one tastes
HRA. FSA pairing may cause distress.
before buying the bottle.
“So...What are the differences?”
CDHC Program *
§ 125 EE Fund ER Fund Bal. Rollover
FSA Y Y Y N
HRA Y N Y Y – ER ONLY
HSA Y Y Y Y – EE ONLY
LP FSA Y Y Y N
PD HRA Y N Y Y – ER ONLY
* May require coupling with a HDHP.
“...have the different programs made a difference?”
HSA HSA Accounts surge
enrolments to over 5MM. ER's
begin...7% of now offering HDHP's
EE's opt for with EE coinsurance
HDHP...Health and maximum
Plan costs OOP ...Health Plan
increase by cost increases are the
< 2004 single digits. 2005 lowest...ever. 2007
FSA/HRA FSA/HRA More EE's/ER's
enrolments enrolments continue. offering/adopting
limited to Jumbo ER's prefer CDHC ... More ER's
14-22% of HRA; sm/med ER's offering LP FSA's/PD
EE's...Health adopt HDHP/HSA at HRA's with HSA's.
Plan costs an accelerating Expectations falling short
continue to rate...Health Plan due to failed EE education,
escalate. increases slow to 5%. poor planning and a
program design lacking
Now that health plan PMPM
costs are significantly
“What are Employers saying?”
“Either I increase the employee's “If my employees are unwilling to
Health Plan contribution or adopt healthier lifestyles, then I
eliminate coverage all together.” will eliminate financial incentives.”
“My employees are increasingly
suspicious of my ability to continue
to provide health benefits.”
“I can't trust my employees to “Participation in CDHC programs,
use HRA/HSA money wisely generally, is low. Most employees
enough to drive plan savings.” elect the most expensive coverage
Now that their health plan
significantly increasing. Sure wish I
had been kissed first!
“What are Employees saying?”
“It's the employer's responsibility to “Why is my company trying to put
provide health care benefits for me me into these Wellness programs?
and my family...pay for it too!” They're trying to get rid of me!”
“My health plan is too
complicated...just give me my ID
card and Co-pays.”
“50 percent of employees in “44 percent of employees in
consumer driven plans were consumer driven plans think their
satisfied that their coverage health plan helped them find
protected them against the risk quality doctors and hospitals,
of major health care costs, versus versus 63 percent in traditional
65 percent of those in traditional health plans.”
“What is the Industry saying?”
Administrators: “We can manage a Banks (trustees): “...finally, some ROI for
CDHC program for our customers with the insurance services division we started
little or no training or adaptation to our and a chance to develop relationships with
technology.” large, multi-national customers!”
Producers: “if it wasn't enough that Consultants: “More opportunities to
Carriers were reducing my commissions, develop RFP's, conduct surveys, assess
now I have to sell a new product, for a the marketplace and draw the employer
lower premium and reduced closer to me!”
The Marketplace is responding to customer needs,
* On-line Prescription drug comparison tools.
* 120 newly licensed health insurers offering
HDHP's in all fifty States.
* Twenty-seven percent of all HDHP enrollees
had no prior health care coverage.
* Transparency applies to cost and quality data
* Prevention/Wellness benefits offered in more health benefit plans.
* Consumerism Tax legislation introduced in January, 2007
increases tax advantages for consumers.
* Technology vendors expand Auto-Adjudication and Transparency capabilities.
* State Governments introducing consumerism incentives to Medicaid Budgets.
The Marketplace is responding to customer needs,
but...is the Industry meeting specified goal(s).
“OK ... I saved the
customer a ton of “How do I evaluate
$$$. What about that consuming behavior
next year?” is changing?”
Products, Programs, Technology, Information
...too painful to adopt?
• How do I assess my Customer's
readiness for a CDHC program?
• How crucial is strategic planning?
• What is my Customer's ultimate goal?
• What are the costs to the plan,
employee morale and/or other
• What are the costs of not offering an
expanded CDHC program?
• Which technologies will help ensure
success and employee satisfaction?
• What analyses should be conducted
pre- and post-implementation?
• Are there voluntary benefits available
that will add value and allow
employees to assume more
“What are some of the typical CDHC plan features?”
• HDHP/HSA Benefit(s) offered as an
option to other medical plan(s)
• Avg. Deductible $2,668 (S); $5264 (F)
• Avg. OOP max $3,449 (S); $6,881 (F)
• Ann. PMPM costs avg. $2,855 (S);
• Most commonly provided (first dollar)
Preventive Health Programs were
Diabetes (91%), CAD (90%), COPD
(80%), CHF (89%) and Asthma (87%)
• HRA's more popular with large ER's
• Medical FSA's, while prevalent,
continue to have low participation
• Limited Purpose FSA's and Post-
Deductible HRA's becoming more
popular as HDHP's include participant
coinsurance and max OOP.
“Is CDHC just a matter of yes or no questions?”
A CDHC program Yes Yes Rev. HDHP plan
in place? Offering a HSA/HRA
(Y/N) HDHP? Enrollments &
Are Savings or Savings Design HDHP Rev. Claims to
Employee Morale with HRA/HSA offer Wellness
more important? Benefits
Design MFSA Design HDHP Consider offering
with HRA & with HRA/HSA Health Incentive
EE Education Accounts
Rev. Voluntary Use $avings to
Benefits offering incent EE's and
to expand pay for Preventive
“What other resources are purchasers placing in the
hands of their health plan participants?”
Key earmarks of a successful CDHC program
* Assess Corporate Culture – Many ER's build paternalism into their
* Review previous CDHC attempts/programs – Learn from prior
* Ultimately, the goal should be a full replacement CDH model...but the
customer will dictate the pace of evolution;
* Don't use boilerplate plan designs (watch out for the
Carriers)...tailoring the right approach will insure success;
* Involve the participant in preventive/wellness programs from the
* Always use derived plan savings to “pay” for the CDHC program...you'll
be offering the customer a “budget neutral” renewal.
Key earmarks of a successful CDHC program
* Design and implement EE education according to each benefit class
(i.e., Exempt, Non-Exempt, Bargaining Unit, Exec's earning > $150K);
* Multi-site ER's will require on-site education, and if Voluntary Benefits
are offered, they will also require enrollment assistance;
* Conduct post-enrollment/education evaluation(s) to assist with
designing next year's benefit offering and CDHC program enhancements;
* Communication with the customer is crucial. Make sure meeting are
scheduled to keep all necessary parties “...in the know.”
A Case in point...a time to apply what we have learned
You have been requested by Ed Bitness, Broker for I B Widgets, Inc., to provide a
CDHC solution. You have worked with Ed before and know that if mistakes are
made, whether yours or not, you will be held responsible. You review Ed's email
request, give a big sigh, cuss a little, and respond in the affirmative. Ed
coordinates a conference call with IBW. You learn the following about the
customer's health benefit plan:
1). The ER has 11oo EE's across three job sites (2700 plan participants); annual health plan
expenditures of $6.05MM...EE's pay 25% of health plan costs (as a contribution);
2). Ed is moving the customer from a SI-PPO to a full replacement SI-HDHP with
deductibles of 1200/2400 and 100% coinsurance due to continued double-digit renewals
(this year's increase 18%, budgeted 13%);
3). IBW has had an FSA for the last eight years with no more than 13% of the EE's
4). Avg. EE profile is Female, < 35 yrs, married, ann. Income ≈$30,000.00, education at
least two years of college;
5). Dx's driving claims: HTN, Diabetes, CAD, Asthma, Obesity, Complicated Pregnancy;
6). ER leads the industry in applied technology, all EE's are computer literate and have
asked in the past for preventive care programs.
Formulate the best, in your opinion,
CDHC solution for Ed and IBW. Be
sure to include your plan/program
design and implementation.
Remember to include planned
technology for education, healthcare
prevention and transactional access.
Employee education will be crucial
to your plan's success...determine
how you will educate them. And,
lastly but most importantly, include
your plan for post-enrollment
evaluation keeping an eye on the
following year's plan enhancements.