EXTREME MAKEOVER: HEALTH CARE EDITIONReaping radical savings from innovative benefits strategies

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Health Care

Edition

WHAT IS “EXTREME”?

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HOW DO YOU FEEL ABOUT HEALTH CARE IN 2014?

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Complete the following sentence…

• I’m feeling ____________ about the health care environment at this time.

• What issue would you most want to address with an extreme “health care” makeover for your company?

THE STATE OF HEALTH CAREEMPLOYER AND EMPLOYEE PERSPECTIVE

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STATE OF HEALTH CARE FOR EMPLOYERS

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COST AND RATE OF CHANGE BY EMPLOYER SIZE

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COST SHARING USING DEDUCTIBLES

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ANOTHER LOOK AT COSTS-FAMILY OF FOUR

2013 Milliman Medical Index

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RATE OF INCREASE LAST FIVE YEARS

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Cost shifting isn’t going to win the race for TALENT?

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INCREASE EXPECTED DUE TO ACA IN 2014

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INDIVIDUAL MANDATE

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COMMUNITY RATING

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EMPLOYERS THAT ARE “VERY LIKELY” OR “LIKELY TO TERMINATE PLANS IN THE NEXT 5 YEARS

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Cost shifting isn’t going to win the race for TALENT?

The BIG LOSER will be the one that exits healthcare altogether!

BEFORE THE MAKEOVERREVIEW OF THE BASICS

PxU=$20

BACK TO BASICS

PxU=$[PRICE] Medical care costs

Provider network contracts/discounts

Administrative and insurance costs

Adjunct service fees–case management,

employee help lines, brokers

Selection of vendors – TPA’s / carriers

Approach to funding and stop loss attachment points

Eliminating waste/Improve quality

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THE SYSTEM

PxU=$[UTILIZATION]

Employee Engagement and Empowerment

Addressing Consumption Behaviors

Physical Therapy vs. Surgery

Generic Medication vs. Brand Name

Urgent Care vs. Emergency Room

Low Cost vs. High Cost Provider

Maintaining Health Status / Wellness

Compliance w/Care Recommendations

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THE CONSUMER

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WHERE DO YOU HAVE THE MOST INFLUENCE?

OR

THE CONSUMER

THE SYSTEM

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D(PxU=$)

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[BENEFIT DESIGN CAN INFLUENCE BOTH PRICE AND

UTILIZATION]

THE SYSTEMS PERSPECTIVEWHAT’S HAPPENING BEHIND THE SCENES?

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What’s “extreme” is the amount of waste we’re seeing in our health care system.

How big is it?

$992 billionCenters for Medicare & Medicaid Services

How big is it?

$1.2 trillionaccording to PWC

How big is it?

That’s…

33-52%of a total health care spend of $2.6 trillion

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WASTE IN THE US HEALTHCARE SYSTEM

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WASTE IN THE US HEALTHCARE SYSTEM

THE CONSUMER

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WASTE IN THE US HEALTHCARE SYSTEM

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WASTE IN THE US HEALTHCARE SYSTEM

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WASTE IN THE US HEALTHCARE SYSTEM

THE SYSTEM

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WASTE IN THE US HEALTHCARE SYSTEM

THE CONSUMER

THE SYSTEM

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OPPORTUNITY TO REDUCE WASTE

Institute of Medicine – Best Care at Lower Costs

• Leverage Technology

• Involve Patients in Care Decisions

• Use Evidence Based Medicine

• Promote Coordination between Providers

• Pay Based upon Value

• Improve Transparency for Quality, Price, Cost, and Outcomes

THE MAKEOVER BEGINS….TOOLS, TECHNIQUES AND EXPECTED OUTCOMES

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MAKEOVER COMPONENTS FOR DISCUSSION

• Accountable Care Organizations (ACOs)

• Direct Primary Care

• Telemedicine

• Private Exchanges

• Health Incentive Accounts

• Captives

ACCOUNTABLE CARE ORGANIZATIONSRAPIDLY EXPANDING OPPORUNITIES

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ACCOUNTABLE CARE ORGANIZATIONS

Health care providers who work together collaboratively and accept collective accountability for cost and quality.

DEFINITION

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ACCOUNTABLE CARE ORGANIZATIONS

EXAMPLE

Care Management Team

On-SiteNurseNavigator

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ACCOUNTABLE CARE ORGANIZATIONS

EVIDENCE

For Employees

Patients leave hospital sooner than expected.

Chronic conditions are well-controlled (ex: high blood pressure, diabetes).

For Employers

Reduction in initial cost projections

Lower rate of increase in costs over time

Healthier, more productive workers

Market Movement-260 Medicare ACOs covering 4M patients-240 private commercial ACOs covering 14M-23M patients

TRUCKING FIRM WITH 70 EMPLOYEES

THE SITUATION:• Intolerable rate increase under traditional broad network

model

THE STRATEGY:• Didn’t want to stick employees with the bill • Chose ACO delivery system to reduce cost shift

THE RESULTS: • 19.9% reduction in premium with no plan design changes• No change in health insurance carrier• Savings per EE of $1,794 annually shared 75/25 with employees

DIRECT PRIMARY CARE (DPC)RAPIDLY EXPANDING OPPORUNITIES

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DIRECT PRIMARY CARE

It’s retainer primary care practice. Basically, you get a company doctor, and your employees are VIPs (very important patients).

DEFINITION

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DIRECT PRIMARY CARE

EXAMPLE

Characteristic Traditional Practice Direct Primary Care Practice

Panel size 2,000-3,000 < 500

Provider incentive Volume-based Quality-based

PT access to MD Through call center 24/7 access to MD cell phone/email

PT appointment scheduling

Weeks out Same day/next day guaranteed

Appointment length Appointment times < 10 min Appointment times > 30 min

Waiting room times Often > 1 hour No waiting

Annual exam Brief, it at all Comprehensive with lab work

Care Location MD office MD office, patient home, workplace, cell phone/email

Care coordination Minimal Complete

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DIRECT PRIMARY CARE

EVIDENCE

For Employees

24/7 access to doctor via cell phone/email.

Appointment times >30 minutes.

No waiting! And same day/next day guarantee for appointments.

Coordination of other medical care, including prevention and wellness.

For Employers

100% substitution of primary care costs

40-60% reduction in specialty care costs

70-80% reduction in ER/urgent care

20-30% reduction in in-patient hospitalization

MANUFACTURER WITH 550 EMPLOYEES

THE SITUATION:• Innovator in highly competitive industry making continual efforts to cut costs • Upcoming labor negotiation requires repositioning of health care offering

THE STRATEGY:• Emphasize importance of healthy lifestyles to maintain high benefit levels • Develop model to better connect people to primary care physician• Phase-in identical model for non-union prior to beginning negotiations

THE RESULTS: • 9.2% reduction in first year health care costs• Direct ROI of $1.40 for every $1.00 spent• Reductions in Urgent Care (-67%), Specialist Visits (-14%) and Acute Hospitalizations (-57%)• Very high employee satisfaction rates

TELEMEDICINERAPIDLY EXPANDING OPPORUNITIES

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TELEMEDICINE

Sharing medical info electronically to diagnose, monitor, and treat health conditions.

DEFINITION

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TELEMEDICINE

EXAMPLE

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teledoc 2 minutes

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TELEMEDICINE

EVIDENCE

For Employees

Transportation and location (ex: rural) issues disappear.

Avoid unnecessary trips to the doctor/ER.

Improved communication between doctor and patient.

Immediate access!

For Employers

40% reduction ED

70% reduction in office visits

10% reduction in prescriptions

Become an early adopter and win big!

THE SITUATION:• Multi-site employer was experiencing escalating and

unsustainable health care costs

THE STRATEGY:• Emphasis on keeping health care costs low while expanding access

to quality health care for employees• Save employees time and money, while keeping employees happy

and healthy

THE RESULTS: • Savings of more than $200,000 in health care expenses and

productivity-loss avoidance in one year• 400% Return on Investment.

DISTRIBUTOR WITH 2300 EMPLOYEES

https://vimeo.com/68191308

PRIVATE EXCHANGESRAPIDLY EXPANDING OPPORUNITIES

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PRIVATE EXCHANGE

An employer sponsored marketplace (usually online) where employees purchase benefits to suit their individual needs.

DEFINITION

Employer

Decision Support Engine

Medical

Determine contribution amounts and funds employee’s account

Employee uses funds to purchase benefits

Online or via call center

Employee purchases Products / Services which align with personal needs

Generates tailored list of recommendations

Vision

Dental

Other Products / Services

EXAMPLE

PRIVATE EXCHANGE

Choose products and options to offer

Plan premiums are 22% less than national average and payroll

deductions are 13% less

54% of employees elected HSA eligible plans versus 9% nationwide

79% of members who spoke to an advisor found it helpful

Families enrolled in high-deductible plans spend 14% less than similar

families in conventional plans

Source: Bloom book of business data as of 2/29/12 National benchmark data comes from the Kaiser Family Foundation's 2011 Employer Health Benefits Survey. Utilization statistics for HDHP members comes from a RAND Study

66% of employee chose lower cost plans, while 11% chose richer plans

EVIDENCE

PRIVATE EXCHANGE

PROFESSIONAL SERVICES FIRM WITH 100 EMPLOYEES

THE SITUATION:• 1 traditional and 1 HSA plan at main location in 2012• 4 locations with very different plans and subsidies across plans

THE STRATEGY:• Defined Contribution to normalize cost with increased transparency• Give people the power to choose the plan that works best for them• Automate as much of the process as possible!

THE RESULTS: • 6 plan options with each enrolling 5+ employees after 2 years• Only 24% stayed in similar plans in year 1; 33% changed again in year

2• 70%+ elected an HSA-qualified plan during each years• Flat costs for employer w/reduced payroll cost for almost every

employee• Significant reduction in paperwork for HR staff

INCENTIVE HEALTH ACCOUNTSRAPIDLY EXPANDING OPPORUNITIES

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HEALTH INCENTIVE ACCOUNTS

Tax-favored accounts (FSA, HRA, HSA) that are funded based on participation in certain health activities or attainment of specific health improvement results. 

DEFINITION

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EXAMPLE

HEALTH INCENTIVE ACCOUNTS

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HEALTH INCENTIVE ACCOUNTS

EVIDENCEPlan costs are 17% lower than

traditional plan models

NON-PROFIT RETAILER WITH 400 EMPLOYEES

THE SITUATION:• Largely low wage workforce whose everyday reality includes life challenges• Traditional wellness programs “don’t help a family struggling to buy

groceries” • Client needed to UP IT’S GAME to live up to mantra of “putting people

first”

THE STRATEGY:• Develop holistic wellness program incorporating emotional, spiritual &

safety• Highly accessible support resources that help empower people and promote

personal accountability (without heavy incentives or intrusive programming)• Low cost access to high value health care while allowing people to save for

future needs

THE RESULTS: • 4 years running with 0% increase in health care budget (PEPM) with no

material change in plan design or employee premiums.• 74% of team members have $500 or more in accrued HRA funds to use

when future needs arise.

CAPTIVES (AND SELF-FUNDING)RAPIDLY EXPANDING OPPORUNITIES

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CAPTIVE

Insures the risks of its owners and returns underwriting profits and investment income to them in the form of dividends.

DEFINITION

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Specific and Aggregate Reinsurance

Captive’s Loss Fund

Collateral

Employer Deductible

Losses to Individual Employer above deductible and below group specific reinsurance paid on a pro rata basis. This pooling reduces Individual Employer’s economic impact/volatility from large claims.

Maximum Cost Group Captive = $1,435,278

Captive Risk Premium Collateral$33,601

Reinsurance Costs$124,468

Captive Loss Fund

Employer Aggregate Attachment Point$945,846

$241,924

$500,000

Captive Risk Premium Collateral$258,684 $43,114

$25,000

Frequency Policy Aggregate Stop Loss

Captive Aggregate Stop Loss

125%

EXAMPLE

CAPTIVE

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0 1 2 3 4 5 6 7 8 9 10 11 1230%

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

PARTICPANTS

Expected Cost

Maximum Cost

On average, client experience was 20% better than the expected cost numbers and 35% better than the maximum cost

Actual

PARTICIPANTS

EVIDENCECAPTIVE CELL RESULTS

CAPTIVE

GROCERY RETAILER WITH 35 EMPLOYEES

THE SITUATION:• 48% increase at renewal - largely from ACA required changes & taxes. • Traditional insurance markets not competitive even though group was

generally young and healthy.

THE STRATEGY:• Stay in the health care game to support its people• Take long-term view with self-funded model coupled with stop loss

through captive program.

THE RESULTS: • Reduced renewal pricing down to +15% ($1,967/EE/year less)• Maintained broad network with no change in plan design. • Opportunity to reap return on “claims fund” up to $80,000 annually.

COMPREHENSIVE MAKEOVER MODELSSEVERAL PLAN DESIGN VARIATIONS THAT ALL CAN USE

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OPPORTUNITY TO REDUCE WASTE

ACO

Direct Prima

ry Care

Telehealth

Private Exchang

e

Health Incentiv

e Account

s

Self Insured

or Captive Model

Leverage technology x x x

Involve Patients in Care Decisions

x x x

Use Evidence Based Medicine

x

Promote Coordination between Providers

x x x x

Pay Based On Value x x x x x x

Improve Transparency

x x x x x x

CLEAN SLATE PLAN

CLEAN SLATE PLAN

1)Physician Care

•Direct Primary Care model

•Coordinated Advocacy

•High copays for Specialists & Urgent Care

CLEAN SLATE PLAN

CLEAN SLATE PLAN

2) Prescription Drugs•VBID model with no copays for high efficacy prescriptions used to treat chronic conditions

•Low copays for tier 1 drugs

•Deductible/Coinsurance for all other retail dispensing

•Specialty medication dispensed from Specialty Pharmacy Network with high copay

CLEAN SLATE PLAN

CLEAN SLATE PLAN

3) Common Procedures & Tests •Reference Based Pricing or Domestic Tourism Incentive

CLEAN SLATE PLAN

CLEAN SLATE PLAN

4) Complex Cases

•Mandatory use of Centers of Excellence or requires Treatment Review for approval

CLEAN SLATE PLAN

CLEAN SLATE PLAN

5) Other Cost Sharing Provisions•Deductibles can be varied should choice be desired

•Out-of-Pocket Maximums should be set at highest level across the board

CLEAN SLATE PLAN

CLEAN SLATE PLAN

6) Additional Components

•Health Incentive Account (tied to Annual Physical requirement)

•Advocacy Overlay or embedded in direct primary care delivery

•Telemedicine (available with moderate copays unless embedded in direct primary care service)

Direct Primary Care with Insured Medical Plan

• Pair with lowest value QHDHP plan

• Offer option of HSA contribution or DPC benefit based on equal value

• DPC plan disqualifies availability to establish HSA contributions

• Consider optional or funded Accident and/or Critical Illness plans

OTHER MAKEOVER STRUCTURES

Direct Primary Care w/optional or funded Accident or Critical Illness plans

• Can be offered standalone for groups with less than 50 employees (not subject to shared responsibility provisions)

• Can be offered alongside 60% Bronze plan (insured or self-insured) to cover employer shared responsibility requirement as long as employee premiums in 60% plan not greater than 9.5% of income

OTHER MAKEOVER STRUCTURES

Preventive Only Plans• MEC Qualified Preventive Only plan addresses individual mandate

requirement for individuals

• Add unlimited visit Telemedicine plan

• Consider optional or funded Accident and/or Critical Illness plans

• Can be offered standalone for groups with less than 50 employees (not subject to shared responsibility provisions)

• Can be offered alongside 60% Bronze plan (insured or self-insured) to cover employer shared responsibility requirement as long as employee premium in 60% plan not greater than 9.5% of income

OTHER MAKEOVER STRUCTURES

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AVAILABILITY BY EMPLOYER SIZE

ACO

Direct Prima

ry Care

Telehealth

Private Exchang

e

Health Incentiv

e Account

s

Self Insured

or Captive Model

Small (<50) x x x Limited x Limited

Mid-Sized (50-99) x x x x x x

Larger (100+) x x x x x x

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AVAILABILITY BY PLAN FUNDING METHOD

ACO

Direct Prima

ry Care

Telehealth

Private Exchang

e

Health Incentiv

e Account

s

Self Insured

or Captive Model

Insured x Limited x x x n/a

Self-Insured x x x x x x

CLOSING COMMENTS/Q&A

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WHERE DO YOU HAVE THE MOST INFLUENCE?

OR

THE CONSUMER

THE SYSTEM

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REMEMBER THE COSTS FOR A FAMILY OF FOUR?

2013 Milliman Medical Index

…and the Waste Pie?

That’s…

33-52%of a total health care spend of $2.6 trillion

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WHAT COULD YOU DO WITH “EXTREME” SAVINGS?

Employee Payroll Contri-

bution

Employer Premium Contribution

Employee Out-of-Pocket

$5,544

$12,886

$3,600

58%

25%16%

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Employee Payroll Contri-

bution

Employer Premium Contribution

Waste Re-duction

17%

Employee Out-of-Pocket

Improve the Bottom Line!$9,141

(from $12,886)

$5,544$3,600

WHAT COULD YOU DO WITH “EXTREME” SAVINGS?

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Employee Payroll Con-tribution

Employer Pre-mium Contribu-

tion

Waste Re-duction

17%

Employee Out-of-Pocket

Increase Take Home Pay or Enhance Plan

$12,886

$1,799 (from 5,544)$3,600

WHAT COULD YOU DO WITH “EXTREME” SAVINGS?

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Employee Payroll Contribution

Employer Premium Contribution

Employee Out-of-Pocket

Share it Equally!

$10,695(from $12,886)

$4,601 (from $5,544)

$2,988(from $3,600)

WHAT COULD YOU DO WITH “EXTREME” SAVINGS?

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You can WIN the race for TALENT!

READY FOR YOUR MAKEOVER?

hni.com/makeover

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