EXTREME MAKEOVER: HEALTH CARE EDITIONReaping radical savings from innovative benefits strategies
HOUSEKEEPING
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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
Q&AVisit us at hni.com