Consumer-Driven Consumer-Driven Health Plans: Are They Health Plans: Are They More Than Talk Now?More Than Talk Now?

Jon Gabel

Anthony Losasso

Thomas Rice

How Did We Get to Consumer-How Did We Get to Consumer-Driven Health Care?Driven Health Care?

Managed care backlashReemergence of health care inflation

14.0%

18.0%

12.7%

11.0%

8.3%

4.8%

0.8%

8.5%

12.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1988

1990

1992

1994

1996

1998

2000

2002

Health Insurance Premiums Workers Earnings Overall Inflation

1.6%

3.4%

Increases in Health Insurance Increases in Health Insurance Premiums Compared to Other Premiums Compared to Other Indicators, 1988-2002Indicators, 1988-2002

6.9% 6.6%

5.0%

2.1% 2.2% 2.0%

3.3%

5.3%

7.1%7.8%

10.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Per

cent

age

Incr

ease

Percentage Increase in Percentage Increase in Underlying Underlying Health Care Spending, 1991-Health Care Spending, 1991-2001, 2001, for All Servicesfor All Services

Defined contribution – refers to employer contribution formula Cash out of health benefits business Managed competition model of fixed

absolute contributions for health insurance Consumer Driven Health Care – refers

to plan design “Stakeholder empowerment to improve

value”

Consumer-Driven Health Care Consumer-Driven Health Care

and Defined Contribution and Defined Contribution Plans: What is the Plans: What is the Difference?Difference?

Increased financial risk for consumers Increased choice of providers and/or

benefit design Use of e-health insurance medical

information products

Common Elements of Common Elements of Consumer-Driven ProductsConsumer-Driven Products

Three models– MSA type plans (Personal Spending

Accounts)– Personalized plans i.e., Vivius– Customized plans i.e., Health Partners

The upgrade is a tiered networkMore than start-ups todayCash-out is a non-starter

Consumer Driven Health Consumer Driven Health CareCare

An Overview of Consumer An Overview of Consumer Driven Health PlansDriven Health Plans

Total enrollment – 1.5 millionThe Upstart Startups (100,000)– PSA plans – Definity, Lumenos– Personalized plans – Vivius,

MyHealthBankThe Health Plans Cometh (1.4 million)– PSA plans – Customized plans – most of enrollment

The most successful model will be the MSA type plans. Vivius type plans are too complex for consumers.

Cash-out approach is non-starter. The market is ready for consumer-choice

plans. Employers don’t want to be pioneers. We need to enlist the consumer in the

crusade against high health care costs. Plans will be additional options for large

employers, not replacement products. The key to the success of the plans is the

extent consumers use web-based medical information.

Six Viewpoints of Consultants

Political failure of managed care requires a new strategy.

Without cost-sharing, consumers view cost-control as “taking away my benefits.”

Cost-sharing reduces the use of services. Cost-sharing does not reduce health status for

healthy people. More choice is associated with higher plan

and provider satisfaction. Public equates choice with quality.

Internet provides the tools to improve the knowledge and decision-making ability of consumers.

Some insurer-based plans will increase pooling.

The Case for Consumer The Case for Consumer Driven-Health CareDriven-Health Care

Cost-sharing is a blunt instrument. Impairs access to care for low-income populations. “Tax” on sick persons. Does not improve the appropriateness of care. Impairs health status for some chronic conditions

Plans less able to secure discounts. Could raise administrative expenses. Who will hold providers accountable for

quality of health care? Breaks down risk-pools; MSA plans may end

up transferring income from sick to healthy. In multi-plan settings, it may raise total outlays.

We need more rather than less co-ordination in health care, particularly for chronic care.

The Case Against Consumer-The Case Against Consumer-Driven Health CareDriven Health Care

Key IssuesKey Issues

Use of information– Will consumers use the web tools?– Can we provide information on individual physicians?– Can consumers understand the information?

Cost controlAccess to care– Effect on take-up rate– Effect on percentage of firms offering coverage– Will patients delay needed care?

Selection bias– Effect of PSAs– Contribution formulas

Key Issues (Continued)Key Issues (Continued)

Legal and legislative issues– IRS guidance allows employers to fund individual

spending accounts with pretax dollars.– Plans would like PSAs to be portable.

Quality of care– Will plans no longer monitor quality and compliance

with guidelines?