Health System Health System ReformReform

Bringing the Consumer Back into the Health Care Equation

Why Reform?Why Reform?

• Increasing Premium Costs

• Consumers are Detached from Market

• Employers Dropping Insurance

• Too Many Uninsured

• Ineffective Delivery of Care

Need

Vision

Plan

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: GOPB analysis of data from the Agency for Healthcare Research and Quality Medical Expenditure Survey and Kaiser Family Foundation Annual Employer Benefits Survey

Premium Costs Have Doubled Premium Costs Have Doubled in Eight Yearsin Eight Years

Need

Vision

Plan

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005Source: GOPB Analysis of Centers for Medicare & Medicaid Services, National Health Expenditure Accounts

The Consumer The Consumer Has Been RemovedHas Been Removed

Consumer Out of Pocket Payments

Private Health Insurance Payments

Need

Vision

Plan

Percent of US Firms Offering Health Benefits

54%

56%

58%

60%

62%

64%

66%

68%

70%

2000 2001 2002 2003 2004 2005 2006 2007

Source: Kaiser Family Foundation

Fewer Employers are Offering Fewer Employers are Offering

Health BenefitsHealth BenefitsNeed

Vision

Plan

Percent of Utah Firms Offering Health Benefits

40%

42%

44%

46%

48%

50%

52%

54%

56%

58%

2000 2001 2002 2003 2004 2005

Source: Agency for Healthcare Research and Quality Medical Expenditure Survey

Fewer Employers are Offering Fewer Employers are Offering

Health BenefitsHealth BenefitsNeed

Vision

Plan

Vision of ReformVision of Reform

• Develop a consumer driven health care and insurance market that provides:

• Greater choice• Better access• Individual responsibility• Affordability• Higher quality• Improved health

Need

Vision

Plan

Vision of ReformVision of Reform

• "We all knew from the beginning our state was too compassionate, too good, too smart, too creative to let 300,000-plus people go without coverage and insurance... Today is a significant step toward getting to where we all know we can be in closing that gap and taking the superfluous costs out of health care.“ Governor Huntsman, March 11, 2009

Need

Vision

Plan

1-3-6-10 Plan1-3-6-10 Plan

• During the 1st year, specific actions have been taken to establish foundations for future success

• It may take as long as 3 years to fully develop a plan of action

• The plan will address 6 critical areas of need

• It may take as long as 10 years to realize the full implementation of the reform

Need

Vision

Plan

Six Areas of EmphasisSix Areas of Emphasis

• Health Insurance Reform

• Personal Responsibility

• Transparency and Value

• Maximizing Tax Advantages

• Optimize Public Programs

• Modernizing Governance

Need

Vision

Plan

Action to DateAction to Date

• 2008:• Health System Reform Task Force• Office of Consumer Health Services• Establish an “internet portal”• Standardized insurance applications• Medicaid waivers submitted • Outreach programs for CHIP & UPP

• 2009:• Administrative Simplification • Payment Reform (Demonstration Projects)• State Contracting Policies – Level Playing Field• Tort Reform – Additional protection for E.R. physicians• Insurance Market Reforms – “The most important piece of

legislation during my tenure as Governor.” Gov. Huntsman

Need

Vision

Plan

A Defined Contribution Market A Defined Contribution Market for Health Insurancefor Health Insurance

• H.B. 188 creates a new type of insurance market

• Similar to the defined contribution retirement system

• Employers set a payment amount for each employee

• Employees are empowered to use those funds to meet their needs

• Choice and accountability move to the employee side of the equation

Need

Vision

Plan

A Defined Contribution Market A Defined Contribution Market for Health Insurancefor Health Insurance

• A major goal is to keep the health benefit paid with pre-tax dollars

• Federal law places some limits• Employees must not be penalized based on

their health status• Employees must have access to the same

options (guaranteed issue)• Contributions do not have to be equal, but

cannot be discriminatory

Need

Vision

Plan

A Defined Contribution Market A Defined Contribution Market for Health Insurancefor Health Insurance

• Advantages to the Employer• Simple - The only decision is how much to

contribute• Expand Benefit Offerings – No need to try to

make everyone happy with one choice• Predictable future costs – Next year’s cost

decision is yours, not the insurer’s• Tax Advantages – All premium are pre-tax,

reducing employer’s FICA costs

Need

Vision

Plan

A Defined Contribution Market A Defined Contribution Market for Health Insurancefor Health Insurance

• Advantages to the Employee• Individual Control & Choice – The employee

chooses the plan that works for them• Pay with Pre-Tax Dollars – Up to 40% off• Expansion – More employees may be able to

participate as new employers join• Portability – May be able to keep the same

plan as they switch employers• Premium Aggregation – Families can pool

contributions from multiple sources• Engagement – Employees are now in control

and have the power to effect change

Need

Vision

Plan

A Defined Contribution Market A Defined Contribution Market for Health Insurancefor Health Insurance

• Impacts on the health system• Informed choice leads to competition• Plans respond directly to consumers• Consumer involvement leads to better health

choices and outcomes

Need

Vision

Plan

• The technology backbone for consumer-based reforms

• Internet-based information portal• Connect consumers to information• Execute informed choices electronically• Why an Exchange?

• Consumer-based system• Individual responsibility• Single shopping point with reliable information• Side-by-side comparisons

Need

Vision

Plan

exchange.utah.govexchange.utah.gov

exchange.utah.govexchange.utah.gov

Three Core Components:

1. Health, Cost & Quality Information

2. Individual & Family Products (IFP) – Three ways to shop:

• Find a broker• Buy direct• Comparison shop (a la Travelocity.com)

3. Employer-sponsored plans• Backbone of the Defined Contribution Market• Facilitates transactions• Enables comparison and choice

Need

Vision

Plan

exchange.utah.govexchange.utah.gov2009 Launch Details2009 Launch Details

• Open to businesses with 2-50 employees on Aug. 19, 2009

• (Large businesses come in Fall 2011)• Step 1 – Employer signs up• Step 2 – Collect employee information• Step 3 – Premiums are generated• Step 4 – Employee comparison shopping

and open enrollment period• Step 5 – Finalize enrollment • Step 6 – Plans go into effect Jan. 1, 2010

Need

Vision

Plan

For More InformationFor More Information

• John T. Nielsen• Advisor to the Governor on Health System Reform• Phone: 801-718-2711• Email: johntnielsen@utah.gov

• Norman Thurston• Health Policy and Reform Initiatives Coordinator• Phone: 801-538-7052• Email: nthurston@utah.gov

Need

Vision

Plan