Early Experience of Employees with
a Consumer-Driven Health Plan
Stephen T. Parente, Ph.D., Jon B. Christianson, Ph.D.,
Roger Feldman, Ph.D.
Presented at the Academy Health Annual Research Meeting
June 27, 2003
Carlson School of Management,University of Minnesota
[email protected]
Presentation Objectives
• Describe the CDHP business model.
• Illustrate the mechanics of a CDHP using Definity
Health as an example.
• Provide an Overview of our RWJ evaluation of
Definity.
• Present preliminary results from our employee survey.
• List the policy opportunities and conundrums of
CDHPs.
• Outline the next steps in our analysis.
Issues Driving CDHP Creation
Patients
 Dissatisfaction with provider access
 Patient incentives are to consume
 Limited choices of benefits and providers
 Combative relationship with managed care companies
Providers
 Loss of autonomy
 Erosion of physician/patient relationship
 Misalignment of physician reimbursement and incentives
Employers
 Plan costs are increasing
 Employees are not happy
 Increase of employer administration burdens
CDHP Business Enablers
–
‘Ready to Lease’ Components of Health Insurance:
•
•
•
•
•
–
Electronic claims processing
National panel of physicians
National pharmaceutical benefits management firms
Consumer-friendly health data web portals
Disease management vendors
Internet
• Transaction medium for claims processing
• 2-way communication with members
–
ERISA-exemption
• Lack of state oversight
• Half the US commercial health insurance market is self-insured.
Early CDHPs in Operation
– Definity
• Concept developed in 1998, Funded in April, 2000
• Minnesota based
• Clear first mover & dot-bomb survivor
– Lumenos
• Started in 2000
• Based in Virgina
• Havard B-School inspired (Regina Herzlinger)
– Destinty
• Operating as Medical Savings Account model
• In operation for 10 years in South Africa
Definity Health Component Details
Health Tools
and Resources
$$
Health Coverage
• Preventive care covered 100%
• Annual deductible
Definity
• Expenses beyond the PCA
Health
Care
• Nationwide provider access
Advantage
• No referrals required
Health Tools and Resources
• Care management program
• Extensive easy-to-use
information and services
1
2
Annual
Deductible
PCA
Employer selects which expense apply toward the Health Coverage annual deductible.
Paid out of employer’s general assets.
Preventive Care 100%
Health
Coverage
Annual Deductible
Personal Care Account (PCA)
• Employer allocates PCA1
• Member directs PCA
• Section 213(d) “scope”
• Roll over at year-end
• Apply toward deductible2
Web- and
PhoneBased
Tools
How Definity Health Works
Healthcare expenses that
exceed the PCA are covered
under Health Coverage—offers
security to members
Member Responsibility—creates
true “consumer thinking”
Definity
Health
Care
Advantage
Health
Coverage
Annual
Member
Deductible
Responsibility
PCA
Preventive Care 100%
Preventive Care expenses are
covered 100%—encourages
healthy lifestyles
Annual Deductible
Members use the PCA—provided by their
employer—to pay for healthcare expenses
throughout the year
• Covers traditional services
• May cover non-traditional services
$$
• Unused balance rolls over at
year-end—motivates saving
Health Tools
and Resources
Web- and
PhoneBased
Tools
Definity Market Penetration
•2001
•2002
• Aon (pilot group)
• Medtronic (pilot group)
• Ridgeview Medical Center
•
•
•
•
•
•
•
•
•
•
•
•
•
Aon (rollout)
Dade Behring Inc.
Hannaford Brothers Co.
Medtronic (rollout)
Raytheon
Textron
University of Minnesota
Wise Business Solutions, Inc.
Broadband/Video Service Co.
ECS Designer/Manufacturer
Charter Communications
Budget Inc.
Medical Products Co.
2003 Definity
Experience
New RWJ-Funded Research
Key Research Questions
1.
2.
Is there an ‘adverse selection’ problem? Traditionally,
adverse selection is defined as the situation when
healthy individuals choose Definity leaving the sick in
a traditional plan that will soon implode its premiums
because of disproportionate share of sick individuals
in the insurance pool.
Is there a moral hazard problem? Moral hazard is a
situation where an insured individual perceives the
cost of seeking a insured service to be less than the
actual cost of the service, thus increasing the demand
for the service.
A Question of Adverse Selection
 Is this really an adverse selection
problem?
 If so, why?
 If not, are there situations where it
might be?
 How would it be detected?
A Question of Moral Hazard
 Can Definity generate a moral hazard
problem?
 If so, why?
 If not, are there situations where it
might be?
 How would it be detected?
Research Design
– 2 Year study (11/1/2002 - 10/31/2004)
– Six employers examined:
•
•
•
•
•
•
University of Minnesota, MN
Medtronic, National
Ridgeview Medical Center, MN
Budget Rent a Car, National
Hannaford Bros, New England
To be Named (New England or South Atlantic firm)
– Data collected
• Claims data of all utilization for all health plan choices, pre (2001) and
post (2002-2003) Definity.
• Employer info on flexible spending accounts and employee income
• Survey information on Definity choices in 2002 & 2003 from U of M.
Focus on University of Minnesota
Preliminary Results from the Survey
•
Survey goals:
Record taste for health plan features and general experience data.
Obtain Definity-specific feature experience data.
•
•
•
•
Survey administered in April to June 2003, to report on 2002
health plan experience.
503 Non-Definity Health Plan respondents (73.3% response rate)
433 Definity Health Plan respondents (62.6% response rate)
Interviewers were University human resource staff trained
specifically for this research project.
UPlan Options/Enrollment
Patient Choice
Definity Health
HealthPartners
PreferredOne
Grand Totals
Single
Coverage
2,091
349
5,027
731
8,198
2002
Family
Coverage Totals
2,808
4,899
346
695
3,967
8,994
997
1,728
8,118 16,316
Single
Coverage
2,045
479
5,092
727
8,343
2003
Family
Coverage Totals
2,776
4,821
458
937
4,173
9,265
1,024
1,751
8,431 16,774
2003 Premium Contributions
2003 premium contributions per pay period
Employee-only coverage
Less U
Employee
Total Cost contribution contribution
HealthPartners Classic
$131.00
$131.00
$0.00
Patient Choice Cost Group I
$131.80
$131.00
$0.80
Patient Choice Cost Group II
$140.50
$131.00
$9.50
Patient Choice Cost Group III $150.70
$131.00
$19.70
PreferredOne National
$179.40
$131.00
$48.40
Definity Health Option 1
$141.20
$131.00
$10.20
Definity Health Option 2
$131.00
$131.00
$0.00
Family coverage
Less U
Employee
Total Cost contribution contribution
$327.50
$307.80
$19.70
$329.60
$307.80
$21.80
$351.30
$307.80
$43.50
$376.80
$307.80
$69.00
$448.40
$307.80
$140.60
$353.00
$307.80
$45.20
$327.50
$307.80
$19.70
Early UM Definity Experience
Year 2002
46%
49%
54%
51%
Option 1
Option 2
Female
Male
49%
49%
51%
51%
Family
Single
Employee
Dependents
Definity Age/Gender Distribution
2002 University of Minnesota
70
60
50
40
Definity Male
Definity Total
Other Plans
30
20
10
0
<25
25-34
35-44
55-64
>65
All Respondents
Satisfaction with Plan
Overall
By Whether Respondent or
Dependent Has Chronic Condition
Yes
No
How would you rate your overall
experience with your health plan in 2002?
(1=worst possible, 10=best possible)
Definity
Other Plans
For Definity respondents, would you
recommend Definity to a friend, family
member or colleague? (%)
Yes
No
Don't know/refused
7.47
7.55
7.41
7.64
7.50
7.49
85.0
12.4
2.6
87.4
9.3
3.3
83.6
14.1
2.2
Definity Respondents
Use of Internet Tools
1.Did you use any of Definity’s internet tools during 2002?
(37%=yes)
a.Personal care account manager: (%)
b.Provider directory: (%)
c.Disease management/prevention: (%)
d.Pharmacy pricing: (%)
2.How easy was it to use the personal care account to pay
for health services in 2002?
•Very easy
•Somewhat easy
•Somewhat difficult
•Very difficult
•Didn’t Use
•Don’t know/refused
Yes
76
80
22
33
No
19
17
75
62
N
273
78
24
16
24
18
433
%
63
18
6
4
6
4
DK/R
5
3
3
5
Health Plan Features Most Preferred
Definity Health Plan Members Only
0
20
Percent agreement
40
60
76.44
My doctors in health plan
50
No referral authorizations
Has preventive care
46.4
36.7
National provider panel
29.8
PCA balance rolls over
Small out-of-pocket $$
Small paycheck deduction
No copayments
Online tools
80
16
15
12
6.93
100
Health Plan Features Most Preferred
0
20
Percent agreement
40
60
My doctors in health plan
76.44
50
No referral authorizations
Has preventive care
46.4
36.7
29.8
National provider panel
PCA balance rolls over
Small out-of-pocket $$
Small paycheck deduction
No copayments
Online tools
80
16
15
12
6.93
Other Health Plans
Definity
100
Usual Source of Care and
Chronic Illness
0
10
20
30
Percent
40
50
60
80
68.3
71.8
Usual Source of
Care
37
35.1
Chronic Illness
Usual Source of
Care AND Chronic
Ilness
70
31
28.41
Other Health Plans
Definity
Health Plan Benefit Knowledge
0
10
Percent correct response
20
30
40
50
60
In any plan, your unused
Flexible Spending Account
(FSA) $$ can roll over to
next year (false)?
In Definity, the difference
in Brand and Generic drug
cost that you pay can be
applied to your deductible
(false)?
In Definity, out of pocket
network expenses count
toward your deductible
(false)?
70
80
72.5
68
18.3
27.1
16.3
28.7
Other Health Plans
Definity
Illustrative Comments
“Prescription co-pays were very nice because they were
taken out of PCA”
“Simple to use PCA, great flexibility”
“Customer service was excellent and didn’t get passed to
many different people”
“Kept getting billed for preventive care services – huge
nuisance to get fixed.”
“They were very helpful, courteous, good personal service.
Website was very up-to-date.”
“Unable to access web site even with help from customer
service.”
Policy Opportunities
• Innovative means to bring consumer choice into the
medical marketplace as well as consumer awareness of
the trade-offs of liberal medical insurance coverage
policies.
• Creates foundations for infrastructure for personal,
portable health care coverage.
• Hybrid variants could be crafted to serve low income
and part time workers.
• Provides consumers and providers with an alternative
to more restrictive managed care.
Policy Conundrums
• How does a employer-based personal care
account move with an employee?
• What if ERISA is modified to doom the
current CDHP practice?
• How should CDHPs be treated in the nonERISA marketplace?
• What if CDHPs accelerate the consumer’s
burden of health care spending ‘too’ quickly?
Next Steps
• Collect and analyze claims data and employee records
– Examine plan choice and selection issues
– Examine effect on cost and utilization
• Employer, health plan and human resource consultant
interviews
• Second year of survey for 2003 experience and/or 2004
health plan choices.
• New result venues:
– HCFO meeting on CDHPs in DC, 9/15/2003
– AEA meeting in January, 2004