Is a Consumer Directed Health Plan the Answer to Controlling Costs?

Transcription

1 Is a Consumer Directed Health Plan the Answer to Controlling Costs? February 3, 2011 Presented by Joe Spurgeon Lindberg & Ripple, Inc. 100 Northfield Drive, Third Floor Windsor, CT jds@linrip.com

2 CDHP Answer to Cost Control? Q. Is a Consumer Directed Health Plan the Answer to Controlling Costs? -1-

3 CDHP Answer to Cost Control? A. It Depends The following slides will review studies that show that CDHP plans are performing better than traditional copay modeled plans However in order to obtain savings plan sponsors must design the plan carefully and with consideration of other plan offerings. Attention must be paid to: Premium contribution levels Employer account funding levels Deductible level How will post deductible RX be handled Quality and quantity of education sessions All the above factors will impact the success of a CDHP plan. We have provide some plan design considerations for your review at the end of the presentation. -2-

4 CIGNA/Aetna Consumer Directed Studies Two recent studies by national carriers Cigna: Reduce Costs Without Compromising Care: How Cigna s CDHP achieves immediate and sustainable cost savings-presented December 2, 2010 Aetna: Aetna HealthFund consistently delivering meaningful savings and engaged member (6 th annual Aetna Health Fund Study) March

5 CIGNA/Aetna Consumer Directed Studies Both studies found Findings Outcomes CDHP members used more generics Less cost, member exercising choice CDHP members had lower ER utilization CDHP members had increased preventive care CDHP members had fewer visits for nonroutine PCP visits, fewer specialist visits CDHP members better managed chronic conditions (diabetes, CHF, CAD) and higher participation in disease management programs CDHP member had increased use of online tools and health risk assessments HSA drives more savings than HRA HSA account balances grow over time Less cost, member exercising choice Increased personal health awareness Less cost, members exercising choice, increased personal health awareness Less cost, increased personal health awareness, healthier workforce Increased personal health awareness, members exercising choice Using the HSA as a long term savings vehicle Using the HSA as a long term savings vehicle -4-

6 CIGNA/Aetna Consumer Directed Studies Aetna specific findings Claims outperformed projection by $800 and $1000 per employer per year (based on trended projected claims not compared to traditional copay plan) CDHP cost remained lower than the Copay Plan base year for years 1 and 2 and were equal to Copay Plan base year in year 3-5-

7 CIGNA/Aetna Consumer Directed Studies When factoring in HSA/HRA funding employee out-of-pocket cost was equal or lower to traditional copay plan. Dispelling the employee cost shift argument. Similar mix in age/demographics between CHDP and traditional copay plans A $10M Account can obtain $15M in savings over 5 years (total cost employee and employer) Cigna cost findings: Cigna specific findings Cost Findings CDHP Savings -v- Copay Plan CDHP Trend Rate Trad. Copay Plan Trend Rate Year 1 15% -4% 12% Year 2 18% 7% 12% Year 3 21% 8% 12% Year 4 24% 8% 12% Year 5 26% 8% 11% -6-

8 CT Public Sector Example Study 1: CT Reg. School District HSA introduced 2006/2007 HSA is core plan for teacher (they have to buy up to the copay plan) HSA is a $1500/3000 RX as any other expense Employer initially funded 75%, will be at 60% for July 2011 July 2010 PCS 16% July 2005 annualized premium $4.77M on 343 employees July 2010 annualized premium $4.70M on 324 employees 48% of total employees in HSA plan 72% of teachers in the HSA plan July 2009 thru June 2010 HSA per member per year cost $3,609 July 2009 thru June 2010 Copay Plan per member per year cost $5,428 That s a 34% improvement Rate Impact: July % (adjusted for mid year HSA migration) July % July % Two RFP have produced extremely competitive vendor responses based on the size of the HSA population -7-

9 CT Public Sector Example Study 2: CT Reg. School District HSA introduced 2006/2007 HSA PCS is 10% ----Copay Plan PCS is 18% (probably too much of a difference) HSA is a $1500/3000 RX as any other expense Employer funding 50% since inception July 2005 annualized premium $3.85M on 295 employees July 2010 annualized premium $4.97M on 311 employees 25% of total employees in HSA plan July 2009 thru June 2010 HSA per member per year cost $2,973 July 2009 thru June 2010 Copay Plan per member per year cost $4,424 That s a 33% improvement Rate Impact: July % (adjusted for mid year HSA migration) July % July % -8-

10 CDHP Answer to Cost Control? CDHP Plan Design Considerations -9-

11 Cost and Plan Design Considerations Plan Design Considerations 1. By far the most common CT public sector plan is the $1,500/$3,000 deductible plan 2. Depending on the carrier the $1,500/$3,000 is generating about 18-25% savings compared to a $15 or $20 copay PPO/POS plan with a 3 Tier Rx rider (savings is in total premium prior to employee contributions and employer funding) 3. 25% is on the high end and we are currently experiencing some downward pressure on the savings assumptions (expect the savings to be moving towards the lower end of the range) 4. Self funded groups may want to use the lower end of the range for budgeting/analysis purposes even if carriers are projecting a larger savings 5. Carriers are recommending moving away from the $1,500/$3,000 plans towards larger deductibles, including coinsurance after the deductible, or including RX copays after the deductible 6. Public sector entities should consider: a) Increasing deductibles to $2,000/$4,000 or maybe even $2,500/$5,000 deductible plans ($2,500/$5,000 plan will be hard to sell in negotiations) b) Adding post deductible RX copays c) May also consider having an 90/70% Coinsurance vs 100/80% (may be a hard sell in negotiations-post deductible RX may be a better option) -10-

12 Cost and Plan Design Considerations HSA Funding Considerations 1. Funding levels vary by municipality, with the most common at 50%. We often do not think you need to go above 50%. 2. Some are higher at 75% 3. A few are as high at 100% 4. We do not typically recommend 100%: a) Most carriers will add a premium load to the HDHP premium if a group funds over 75% b) For higher utilizers you lose out on any employee cost sharing that you would have had under a copay plan (and you are probably charging them a lower premium contribution too) c) If you fund 100% you run the risk of eliminating a great deal of consumerism (you are removing the employee s skin in the game ) d) Anthem has recently stated that rampant 100% funding of the HSA deductible, primarily in their small group book of business, has adversely impacted the experience in their CDHP plans. So much so that they are no longer offering the $1,500/$3,000 plan to most market segments (public sector can still get it). e) EXCEPTION: We can, and have, supported 100% funding if done on a first year only basis as an incentive to encourage participation in the HSA plan. This should only be done if a strong commitment to employee education is followed. Through education you can focus the employee on the benefits of limiting their HSA expenditures for use in future years (when funding will be lower) or as a retirement supplement. -11-

13 Cost and Plan Design Considerations HSA Funding Considerations-cont d. 1. Frequency of employer contributions-once funds have been contributed to an employee s account the employer can not pull those funds back (or it is very difficult to do it). This would include cases of termination. To protect themselves some employers choose to make periodic contributions throughout the year to limit exposure to potential loss of funds. In the municipal market, with relatively low turnover, we have been seeing more movement towards lump sum upfront payments or semi-annual payments. Employees prefer fewer but larger contributions as it limits their out-of-pocket exposure. Frequency Options include: a) Per Pay b) Monthly c) Quarterly d) Semi-annually e) Lump sum upfront Employee Premium Contribution 1. Employees should still pay a premium contribution for HSA plans 2. Differences in premium contribution between HSA and Copay plans will vary based on the costs of the plans, but a level not greater than 5% difference seems to work in most cases -12-

14 Presented by Joe Spurgeon Lindberg & Ripple, Inc. 100 Northfield Drive, Third Floor Windsor, CT