Consumerology: How to Change Employee Behavior and Lower Rx … · 2009-10-16 · Consumerology:...

Bob Ihrie – Senior Vice President, Lowe’sBob Nease – Chief Scientist, Express Scripts

Consumerology: How to Change Employee Behavior and Lower Rx Costs

2© 2009 Express Scripts, Inc. All Rights Reserved.

$48 Billion in sales

2nd largest home improvement retailer in the world

1,649 stores

225,000 employees

70% full-time

All 50 states plus Canada, Mexico (January 2010) and soon to be Australia (joint venture)

Lowe’s – Corporate Facts


Self-insured (80%) plus 9 HMOs (20%)

Best plan chosen for each location

No choice between company plan and HMO; therefore no adverse selection

In company plan, 2 copay choices – 500 or 750

80% enroll in Copay 500

No retirees

No CDHP

Lowe’s Medical Plan – Design


Lowe’s Medical Plan Trend

YearIncrease over Prior Year

Lowe’s Mercer Survey

2003 6.5% 9.8%

2004 5.5% 12.3%

2005 5.7% 9.2%

2006 3.3% 6.7%

2007 2.5% 6.1%

2008 -5.3% 6.3%


Live a healthy, sustainable lifestyle

Get needed care, but use plan wisely

Participate in helping control health care costs

Provide incentives and resources for intensive users (top 20% = 87% of claims)

If incentives don’t work, be more directive to achieve results

We’re self insured, so we’re all in this together

Lowe’s Medical Plan – Strategy


Maternity Program•

If pregnant mother enrolls within the first 24 weeks, we forgive the newborn deductible (either $500 or $750 depending upon plan)

•

Participation went from TPAs BOB of 17% to 49%

Aggressive Drug Formulary•

5 tier, all step therapies offered by Express Scripts (ESI), no grandfathering

•

78% voluntary generic utilization (highest in ESI BOB)

•

BUT, home delivery rate only 14% (very low in ESI BOB)

Lowe’s Medical Plan – Incentives & Results


HRA Completion•

First 2 years gave $104 ($4/paycheck) reduction

•

Next two years gave $104 into FSA

•

No reaction by employees – 14% participation (15,000)

•

2009 annual enrollment: announced that all employees must take an HRA during 2009 to remain in or enroll in Copay 500 for 2010▪

52,437 (71%) have completed as of 8/31/09

▪

11,763 of those in Copay 750 have also completed

•

HRA will be required every year thereafter

Lowe’s Medical Plan – Incentives & Results


Getting Beyond Financial Incentives

Voluntary Programs

Mandatory Programs

Effe

ctiv

enes

s

Acceptance


Consumerism in Healthcare

Revolution in the understanding and science

of human behavior

Revolution in the understanding and science

of human behavior

Consumer-directed healthcare,

account balances, data integration, decision tools…

Consumer-directed healthcare,

account balances, data integration, decision tools…

150+ years of effecting change at level of individual

150+ years of effecting change at level of individual

RATIONAL ECONOMICS RATIONAL

ECONOMICSCONSUMER MARKETING CONSUMER MARKETING

• Segmentation• Controlled trials• Predictive modeling

• Segmentation• Controlled trials• Predictive modeling

BEHAVIORAL ECONOMICS

BEHAVIORAL ECONOMICS

• Choice architecture• Message framing

(e.g., loss aversion)

• Choice architecture• Message framing

(e.g., loss aversion)

Spectrum of ConsumerismSpectrum of Consumerism


Choice Architecture

Designing with the intent to advantage desired behavior

Forcing Interrupting Nudging

Small

Large

$1.75

$3.50


Loss Aversion: Losses vs. Gains

Let’s play a game…

Heads YOU WIN $XTails YOU LOSE $100

How big does $X have to be before you’ll play?

Losses generally count about twice as much as gains


Loss Aversion Implications for Member Communications

GAIN

LOSS

+ 18%

+ 84%

Framing matters… a lot

© 2009 Express Scripts, Inc. All Rights Reserved. 13

Multidisciplinary Advisory Board•

Dan Ariely, PhD Behavioral economics, Duke University•

Ian Ayres, JD, PhD Law and econometrics, Yale University •

Art Caplan, PhD Bioethics, University of Pennsylvania •

Helen Darling, MA President, National Business Group on Health •

Alan Garber, MD, PhD Health economics, Stanford University•

Brian Knutson, PhD Psychology and neuroscience, Stanford University•

David Laibson, PhD Economics, Harvard University•

Robert Nease, PhD Chief Scientist, Express Scripts, Inc. •

Emily Oster, PhD Economics, University of Chicago•

Mark Turner, PhD Cognitive science, Case Western Reserve University•

Paul Zak, PhD Neuroeconomics, Claremont Graduate University


The Science of Procrastination

Future events discounted at 50%(“hyperbolic discounting”)


Hyperbolic Discounting: Example

January 15th

6 units of effort today

10 units of health later

Total

New Year’s Resolution

6 units of effort next month

10 units of health later

Total

= - 3

= + 5

+ 2

- 6 2

+ 102

Decision I’ll exercise

The result: “cycles of procrastination”

- 6

= + 5

- 1

+ 102

Decision But not today


Lessons from 401(K)

Standard approach

Active choice +35%

Default enrollment +45%

Participation rate

40%

• Procrastination• Latent demand


What happens if we …

“Activating” Home Delivery

ASK members where they want to get their medications

ASSIST those who choose Home Delivery

AVOID any changes in plan design and use of financial penalties


Our Challenge: Increase Home Delivery use without making plan design changes or implementing “mandatory” programs

Our Goals•

Plan and member savings

•

Improved therapy adherence and health outcomes

•

Maintain high member satisfaction

The Solution•

Overcome procrastination by requiring an active decision

•

Make it as easy as possible for members to switch

Putting Theory Into Practice


A Tremendous Opportunity at Lowe’s

All Rx’s at Retail

1,060,737

555,160

MaintenanceAcute

Data from 10/07-9/08

Savings Opportunity

Members $2,872,863Plan $2,092,826

Total Savings $4,965,689


Concern: Employees could retire with nothing through inertia

Several 401(k) variations since ESOP eliminated % Enrolled•

Baseline match with year end performance match …………42%•

Safe harbor match of 4.25% ………………………………….52%(100% on first 3%, 50% on 4-5%, 25% on 6%)

Automatic enrollment (August 1, 2008) ………………………... 94.4%•

Same safe harbor match above•

All current employees and new hires after 180 days of service with opt out feature

•

Enroll at 1% pre-tax contribution•

Default investment = retirement date funds•

New trend: employees moving from 1% to 3%

Today ……………………………93%

Being More Directive – 401(k) Plan


Not a plan design changeTarget members with maintenance medicationsActive decision required; members can call and make a decision at any time1. Switch to Home Delivery2. Stay at retail (member-level or drug-level prior authorization

added to system)Two courtesy fills allowed at retail pharmaciesIf no decision is made by 3rd fill, members are have to call Express Scripts to make a decision

Select Home Delivery – Choice Architecture


Comprehensive Communications Multi-channel, targeted, and actionable

Automated proactive outbound notification (APON) call

Pre-go live letter

• Retail fills 1 and 2

• Rapid Response letters

• APON calls

• Retail intervention

• Courtesy override available

Note: Member can select out at any time

0 Go Live

-2 Months

-1 Month

+3Months

+1Month

+2 Months


Hyperbolic Discounting•

Use active decision to overcome procrastination

•

Minimize upfront costs by making it as easy as possible to switch from retail to Home Delivery

Loss Aversion•

“Stop wasting your money”

Social Norms / Authority•

“Do your part … help maintain our health benefit for everyone”

•

“The Express Scripts Pharmacy is Lowe’s preferred way to fill maintenance medication prescriptions”

Applying Behavioral Economics


Example of Social Norms – Company Website

“If everyone of us switched to the Express Scripts Pharmacy, you and Lowe’s together may save nearly $5 million and help maintain our health benefit for everyone.”


Endorsement: Personalized Savings Letter

“Lowe’s has selected Home Delivery from the Express Scripts Pharmacy as the preferred way to fill your maintenance medications.”


Postcard Sample


Postcard Sample


Postcard Sample


Key Results

•

2.7 times increase in Home Delivery utilization

•

Completely voluntary for members

•

No change in plan design or copays

•

No complaints, many positive comments

1/1/08

Adjusted Home Delivery Utilization

Before Select Home Delivery

7/31/09

chose Home Delivery

52%

Select Home Delivery


Conduct member survey to compare pre/post satisfaction

Offer incentives to move “opt out” members to Home Delivery•

In September all “opt outs” will be solicited with a coupon offering first fill at Home Delivery for free

Celebrate success and share results with our associates

2010 Annual Enrollment announcement:•

Exclusive Home Delivery for all new hires or new entrants on maintenance medications

•

Preferred Home Delivery (2X copay) for “opt outs” who continue to opt out

Next Steps


Applying proven behavioral economic principles works

Know your culture and employees’ tolerance for change

Make communications a priority – no surprises!•

Target people who need it most

•

Increase intensity as decision point nears

Get buy-in by promoting shared responsibility

Lessons Learned

Date post:	22-May-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

Consumerology: How to Change Employee Behavior and Lower Rx … · 2009-10-16 · Consumerology:...

Documents