Consumer-Driven Health Care…

As the consumer-driven health plans (CDHP) concept continues to gain traction in the market, it is not without its critics.

The initial concern of many employers, consultants and brokers was that the greater cost-sharing responsibilities associated with high deductible plans would deter participation compared to other health plan options being offered. They feared that the concept would lead to adverse selection with only the healthiest and wealthiest employees and plan members enrolling in a CDHP.

While those are legitimate concerns, many early adopters have found solutions to those issues through various means, such as attractive premiums for CDHP participation, or simply limiting options by offering only a full-replacement CDHP.

What has become a more compelling concern, however, has been the issue of CDHP participants that take the concept of being more cautious about how they spend their health care dollars to the extreme. Instead of spending their health care dollars more wisely, they instead become too frugal – either inappropriately delaying care or simply skipping appropriate medications or care altogether.

This obviously can cause increased expense for everyone involved as chronic illnesses are neglected and become more potentially significant threats to member health.

The impact of chronic illnesses

It’s a well-known fact that the relatively small population of plan members with chronic illnesses, such as diabetes, coronary artery disease, asthma, congestive heart failure and chronic obstructive lung disease, account for the vast majority of a company’s health care expenses. While only 15 percent to 20 percent of the population has one or more chronic medical conditions, this segment accounts for approximately half of all health care costs. And that doesn’t include the indirect costs of absenteeism, decline in productivity, workers’ compensation, training and replacement expenses that are estimated to be three times direct costs.

Fortunately, there are ways to combat the negative impact of chronic illnesses, like implementing a disease management program. These programs consist of skilled nurse educators delivering evidence-based information in a one-on-one environment to plan members. As a result, plan member compliance with their treatment plans improves and so do employer savings.

The accompanying chart shows the actual experience of members enrolled in a disease management program and the improvement in care compliance as a result of the program.

CDHPs are well positioned to use disease management programs because of their emphasis on member education. But as mentioned earlier, the high out-of-pocket expense of CDHPs can hinder the improvements in care.

Addressing the cost/care issue

To truly address this concern, health plan sponsors need to focus attention and resources on their at-risk plan members who are enrolled or should be enrolled in disease management. The initiative needs to go beyond simply encouraging participation and compliance in disease management. It should include special monetary funds that disease management enrollees can use exclusively to cover the costs of medical care for their managed conditions – particularly diabetes, coronary artery disease, asthma, congestive heart failure and chronic obstructive pulmonary disease.

The idea is to motivate members to control their chronic conditions in order to avoid incurring catastrophic claims later on.

Setting up specialized funds for disease management

A special fund for disease management can be provided in conjunction with any consumer-driven or high deductible health plan:

• As an additional non-rollover health reimbursement account (HRA) in an HRA plan
• As a post-deductible non-rollover HRA in an HDHP
• As a zero-balance HRA for a non-HRA PPO plan that has significant out-of-pocket expense

To ensure usage, HRA members would not be allowed to roll their special monetary funds over to the next year while health savings account (HSA) members would only receive the special benefits after they have met their deductible.

The value of specialized funding

Specialized funding can improve:

• Participation in disease management programs
• Compliance with care protocols
• Broader enrollment in CDHPs as less healthy people can be attracted
• Potential to offer a CDHP as a full replacement plan
• Return-on-investment (ROI) as the cost of implementation is low if plan sponsors target only the 1 percent to 2 percent of their population that’s at the highest risk

Effective management

As innovative and effective as specialized funding can be in enhancing a disease management product offering, dollars alone won’t make the program successful. The management component cannot be overstated.

For instance, specialized funding is designed to pay only certain diagnosis codes and not typically set up for prescription drugs. A disease manager, however, can preauthorize certain drugs for improved benefits to reduce the financial disincentives.

A good example is heart attack victims and beta blockers. The ROI can be enormous if a heart attack survivor is preauthorized to take a beta blocker because medical evidence shows that the survivor is at an extremely high risk of suffering another heart attack without them. In fact, a company can still come out ahead financially by providing the beta blockers for free or even paying the member to take them because of their effectiveness.

Personal messaging

Another effective tool to increase participation and compliance is personal messaging. This service again is most financially effective when it targets the 15 percent of an employer’s population who are in the greatest need of personalized care.

Messaging is ideally designed to encourage compliance and participation in a member’s specific disease management program. It should consist of personalized statements suggesting ways to improve health care quality and reduce out-of-pocket expenses.

The statements should:

• Provide a detailed, easy-to-understand summary of a member’s medical and pharmacy claims
• Highlight suggestions specifically developed to improve the health of that particular member and to identify gaps in care
• Suggest specific ways the individual member can save money on health and pharmacy costs
• Offer a list of frequently asked questions along with telephone numbers of importance to that individual

A personal messaging program with this type of member-specific information will engage members to take action.

Don’t forget the majority of the employer population

While a strong focus on the high-risk portion of an employer’s population is essential to incorporating a highly successful CDHP, it’s important not to overlook the “healthy” majority. Even though the theory of adverse selection assumes that “healthy and wealthy” employees will be the most willing to participate in a CDHP, that’s not automatically the case – particularly if the member is simply more “healthy” than “wealthy.”

Participation can also be negatively affected by the perception that CDHPs are complex and difficult to understand. This situation, however, can be effectively addressed through a general member incentive program that’s designed to educate members in addition to providing some financial assistance.

HRA plans already supplement deductible expenses for enrollees, but what most don’t do is tie in the educational and informational components of the plan. A more effective way to implement the plan is for the employer to fund a small part of the deductible in an HRA and allow the employee to earn additional HRA dollars via incentives that:

• Increase health status awareness
• Inform them how to best use the plan
• Reward them for compliance with care management programs

For example, an employee could earn $100 for his or her HRA by completing a health risk assessment. In addition to earning $100, completion of the assessment would help the member understand his or her health status and also provide valuable information to disease managers who are trying to identify high-risk individuals who would be ideal candidates for disease management assistance.

The employee could then earn another $50 or $100 by using an online tool that assists the member in choosing the best plan options.

Another effective option is to allow spouses to earn the same incentive as the employee for completing tasks such as a health risk assessment. That’s because spouses are often making medical decisions for the entire family.

All incentive features on the HRA plan can be applied to an HSA plan in a post-deductible format.

The full replacement alternative

Another broader approach to affordability without adverse selection is the incorporation of a full replacement high deductible health plan. In this scenario, an HSA contribution scaled to income is recommended to provide affordable care and no increase in employer costs.

The match should be set to make out-of-pocket expenses affordable to all, but still within the employer’s budget. For example, the income-scaled matching scheme illustrated below can be provided out of the plan savings created by moving to a high deductible health plan at no additional cost for an employer with a typical income distribution.

In a full replacement plan, employees would have “skin in the game” as they would have to contribute their own dollars to get employer dollars. Employees would still have a powerful incentive to conserve as they own their HSAs and would be able to take those HSA dollars with them should they leave their employer. As the popular saying goes, “no one washes a rental car.” This change in plan paradigm helps employees feel like they “own the health plan,” since they do in fact own their HSA. An income-scaled match also makes it possible for an employee of modest income to accumulate a needed asset for future health care expenses – an attractive benefit in today’s employment market.

Finally, in addition to making it possible to change the health plan paradigm for the whole population, the employer has avoided the many pitfalls of adverse selection, where it is possible to increase overall employer cost by offering a low benefit option.

In summary, a CDHP can be a viable alternative for more than just the healthy and wealthy. Through effective use of programs such as disease management, specialized funds for high-risk plan members and personal messaging, employers can introduce a CDHP that’s attractive and affordable for everyone, including the plan sponsor.

It’s also important to engage the majority of the working population who are not currently affected by a chronic condition or illness through incentives that build health awareness and achieve behavioral change.

Properly implemented full replacement high deductible health plans are also another attractive option that can provide affordable care and no increase in employer cost.