Consumerology: How to Change Employee Behavior and Lower Rx Costs. Bob Ihrie Senior Vice President, Lowe s Bob Nease Chief Scientist, Express Scripts

Transcription

1 Consumerology: How to Change Employee Behavior and Lower Rx Costs Bob Ihrie Senior Vice President, Lowe s Bob Nease Chief Scientist, Express Scripts

2 Lowe s Corporate Facts $48 Billion in sales 2 nd 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) 2

3 Lowe s Medical Plan Design 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 % enroll in Copay 500 No retirees No CDHP 3

4 Lowe s Medical Plan Trend Year Increase over Prior Year Lowe s Mercer Survey % 9.8% % 12.3% % 9.2% % 6.7% % 6.1% % 6.3% 4

5 Lowe s Medical Plan Strategy 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 5

6 Lowe s Medical Plan Incentives & Results 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) 6

7 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 ,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 7

8 Getting Beyond Financial Incentives Effectiveness Mandatory Programs Voluntary Programs Acceptance 8

9 Consumerism in Healthcare CONSUMER MARKETING RATIONAL ECONOMICS Spectrum of Consumerism BEHAVIORAL ECONOMICS 150+ years of effecting change at level of individual Segmentation Controlled trials Predictive modeling Consumer-directed healthcare, account balances, data integration, decision tools Revolution in the understanding and science of human behavior Choice architecture Message framing (e.g., loss aversion) 9

10 Choice Architecture Designing with the intent to advantage desired behavior Large Small $3.50 $1.75 Forcing Interrupting Nudging 10

11 Loss Aversion: Losses vs. Gains Let s play a game Heads YOU WIN $X Tails YOU LOSE $100 How big does $X have to be before you ll play? Losses generally count about twice as much as gains 11

12 Loss Aversion Implications for Member Communications + GAIN 18% LOSS + 84% Framing matters a lot 12

13 Multidisciplinary Advisory Board Dan Ariely, PhD Ian Ayres, JD, PhD Art Caplan, PhD Helen Darling, MA Alan Garber, MD, PhD Brian Knutson, PhD David Laibson, PhD Robert Nease, PhD Emily Oster, PhD Mark Turner, PhD Paul Zak, PhD Behavioral economics, Duke University Law and econometrics, Yale University Bioethics, University of Pennsylvania President, National Business Group on Health Health economics, Stanford University Psychology and neuroscience, Stanford University Economics, Harvard University Chief Scientist, Express Scripts, Inc. Economics, University of Chicago Cognitive science, Case Western Reserve University Neuroeconomics, Claremont Graduate University 13

14 The Science of Procrastination Future events discounted at 50% ( hyperbolic discounting ) 14

15 Hyperbolic Discounting: Example New Year s Resolution 6 units of effort next month -6 2 = units of effort today January 15 th units of health later = units of health later = + 5 Total + 2 Total -1 Decision I ll exercise Decision But not today The result: cycles of procrastination 15

16 Lessons from 401(K) Standard approach 40% Active choice +35% Default enrollment +45% Procrastination Latent demand Participation rate 16

17 Activating Home Delivery What happens if we AVOID any changes in plan design and use of financial penalties ASK members where they want to get their medications ASSIST those who choose Home Delivery 17

18 Putting Theory Into Practice 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 18

19 A Tremendous Opportunity at Lowe s All Rx s at Retail Savings Opportunity 555,160 Members $2,872,863 1,060,737 Plan $2,092,826 Total Savings $4,965,689 Maintenance Acute Data from 10/07-9/08 19

20 Being More Directive 401(k) Plan 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) % 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% 20

21 Select Home Delivery Choice Architecture Not a plan design change Target members with maintenance medications Active decision required; members can call and make a decision at any time 1. Switch to Home Delivery 2. Stay at retail (member-level or drug-level prior authorization added to system) Two courtesy fills allowed at retail pharmacies If no decision is made by 3 rd fill, members are have to call Express Scripts to make a decision 21

22 Comprehensive Communications Multi-channel, targeted, and actionable -2 Months -1 Month 0 Go Live +1 Month +2 Months +3 Months 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 22

23 Applying Behavioral Economics 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 23

24 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. 24

25 Endorsement: Personalized Savings Letter Lowe s has selected Home Delivery from the Express Scripts Pharmacy as the preferred way to fill your maintenance medications. 25

26 Postcard Sample 26

27 Postcard Sample 27

28 Postcard Sample 28

29 Key Results Adjusted Home Delivery Utilization 1/1/08 Before Select Home Delivery 52% chose Home Delivery Select Home Delivery 7/31/ times increase in Home Delivery utilization Completely voluntary for members No change in plan design or copays No complaints, many positive comments 29

30 Next Steps 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 30

31 Lessons Learned 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 31