©2007 chapterhouse, llc—not to be distributed without permission for additional information,...

©2007 ChapterHouse, LLC—Not to be distributed without permission For additional information, please contact us at (630)968-6880

©2007 ChapterHouse, LLC—Not to be distributed without permission For additional information, please contact us at (630)968-6880

Realizing the Promise of the Retail Market and Saving the Private Healthcare System

Realizing the Promise of the Retail Market and Saving the Private Healthcare System

Presented by ChapterHouseTom Main, Managing Partner

September 27, 2007

©2007 ChapterHouse, LLC—Not to be distributed without permission 2II-9000-136_Consumer Driven Summit

Agenda

Employer Sponsored Affordability and Coverage CrisisEmployer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough InnovationsCurrent Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive InnovationRetail Market Development Evolution and Disruptive Innovation

Redefining the Sponsored Retail GameRedefining the Sponsored Retail Game


Unrelenting Healthcare Costs and Shifts in Employer Sponsorship Are Creating a New Marketplace

6.5M employees or 6.5M employees or 13M members have 13M members have

fallen out of the fallen out of the market—and over market—and over

$73B$73B11 in healthcare in healthcare costs have been costs have been

shifted to employees shifted to employees over the last five over the last five

yearsyears

Notes1. Includes both discontinued employer contributions for members who are no longer covered by a group benefit, as well as cost-shifting to continuing members2. Average uninsured on any given day; equates to 42M on a full year equivalent basisSources: Kaiser Family Foundation, AHRQ-Medical Expenditure Panel Survey, Hewitt Health Value Initiative,

Bureau of Labor Statistics, U.S. Census Bureau (Current Population Survey), ChapterHouse Analysis


Healthcare Marketplace Scorecard

The general progress required to shift the basis of competition in healthcare has been slow. Creating market-based incentives for providers to compete on cost, quality and outcomes—and to invest in improving their clinical business models is no easy task. Equally difficult is motivating

employers and consumers to become educated buyers of health care. While the industry grapples with these difficult issues, employer sponsorship is eroding and the social concern about the

uninsured and underinsured is on the rise.

Key PointsKey Points

Progress SummaryProgress Summary

Health Economy Performance LeversHealth Economy Performance Levers

New programsin place

Strong momentum

Still losing ground in thesekey markets

Consumer Sponsorship

Employer Sponsorship

Government Sponsorship

Sponsorship and theEconomic Value Equation

Beginning to get consumer and provider engagement in the new model

Still deeply embedded old market behaviors and incentives

Progress is slow

Consumer Engagement

Provider Engagement

Health Service Exchange Defining the Competitive Model

Robust investment climate

Mixed focus MCOs heavily

favored

Unprecedented government reform

More private/ public partnership required

Government Programs

and Regulation

Investment and

Innovation

Marketplace and Business System Enablement

?


Agenda







Retail MarketRetail Market

Sponsored Retail Market Holds the Promise of Driving Durable Market Reform Finally Unlocking Competitive Market Forces to Dramatically Improve the Cost/Value Performance Profile of the U.S. Healthcare Delivery System

Building a Sponsored Retail MarketplaceEnabling Market Competitive Forces to Work


Value-Based Reimbursement

and More Patients

High quality Convenient Available Spanish speaking Financing plan Open to

alternative medicine

On-site pharmacy

High Quality and Cost-Effective Care

Medical school Board certified Patient satisfaction

scores Quality and outcome

scores Location Office hours Integrated wellness Credit card

Healthcare Services Market Exchange

Industry shifts are increasingly moving the market from wholesale to retail: 1) Consumers selecting physicians based on performance information, 2) Providers competing for consumers’ business, and

3) Providers learning about cash businesses. While still in its early stages, the sponsored retail market holds the promise of driving health market reform through free market competitive forces.


WholesaleEnablementWholesaleEnablement


Value-Based Provider Networks and

Integrated Medical Homes Integrated medical homes

Evidence-based

Transparency and outcomes

Patient experience matters

Integrated Personalized Health

Management Personal health plan

Engagement tied to

personalized health goals

Care coordination and provider

information integration

Health and wellness programs

Whole Person Consumer Engagement Personalized health and financial management plan

Integrated multi-channel consumer engagement model

Whole person benefits and healthcare management model

Aligned Benefit Plans and Integrated

Rewards

Health improvement incentives

Health risk assessment bonus

First dollar prevention

coverage

Treatment compliance

Sponsored Retail Market Means Sponsored by Employers and Enabled by Health Plans, Providers, and the Government




and More Patients



On-site pharmacy

High Quality and Cost-Effective Care


scores Quality and outcome

scores Location Office hours Integrated wellness Credit card



WholesaleEnablementWholesaleEnablement

Value-Based Provider Networks and

Integrated Medical Homes Integrated medical homes

Evidence-based

Transparency and outcomes

Patient experience matters

Integrated Personalized Health

Management Personal health plan

Engagement tied to

personalized health goals

Care coordination and provider

information integration

Health and wellness programs


The Sponsored Retail Market is a Work in Process



Improved Consumer Engagement Personalized health and financial management plan

Integrated multi-channel consumer engagement model

Whole person benefits and healthcare management model

Aligned Benefit Plans and Integrated

Rewards

Health improvement incentives

Health risk assessment bonus

First dollar prevention

coverage

Treatment compliance

1. Consumer engagement models are just beginning to be designed to increase consumer involvement in health and benefits management



On-site pharmacy

High Quality and Cost-Effective CareValue-Based Reimbursement

and More Patients


scores Quality and

outcome scores Location Office hours Integrated wellness Credit card


2. Payer’s health management and provider network models are just starting to be architected to drive real improvements in the practice of medicine


Sponsored Retail Market Development Barriers

Employer & BrokerEmployer & Broker

Sponsorship is erodingSponsorship is eroding

Engagement is weakEngagement is weak

Worksite education Worksite education programs are not well programs are not well supportedsupported

Brokers still focus on Brokers still focus on traditional solutionstraditional solutions

Benefit buy-downs are Benefit buy-downs are working in the short-termworking in the short-term

Challenges by Constituent

Consumer driven healthcare models and health savings accounts alone are not sufficient to effectively address the root cause problems driving medical trend or to solve the growing employer

affordability crisis. Health plans must partner with consumers in the change process while leveraging their collective market clout to drive essential market changes with providers and

employers that are well beyond the reach of the consumer.

ConsumerConsumer

Low trust of the health planLow trust of the health plan

Limited engagement in Limited engagement in managing healthmanaging health

Unprepared for new Unprepared for new responsibilitiesresponsibilities

Big gaps in tools, support Big gaps in tools, support and reliable informationand reliable information

ProviderProvider

Focused on transactional Focused on transactional medicinemedicine

Misaligned economic Misaligned economic incentivesincentives

Limited care collaborationLimited care collaboration

Significant practice Significant practice variabilityvariability


Agenda







Current Solutions—Product Benefits Continuum

Product Benefits ContinuumProduct Benefits Continuum

Health plans mainly compete on point solutions without addressing trade-offs in health management, networks or value-based benefits.

Value-Based Benefit DesignsValue-Based

Benefit DesignsIntegrated

Medical/DisabilityIntegrated

Medical/Disability

Integrated Medical/

Behavioral Health

Integrated Medical/

Behavioral Health

Savings Account Based


DefinedContribution

DefinedContribution

Health, Wealth and Retirement

Planning


Planning

A la Carte Health/Wealth

Solutions


Solutions

Catastrophic Plans

Catastrophic Plans

Short-TermCoverage

Short-TermCoverage

Voluntary ProductsVoluntary Products

Critical Illness Products


Mini-MedMini-Med

Discount CardsDiscount Cards

High Deductible Plans


Engagement-Based ProductsEngagement-

Based Products

Outcome-Based Products


Tiered NetworksTiered Networks

Specialty Network-Based

Products


Products

Integrated Medical Homes


Focused Benefit Focused Benefit SolutionsSolutions


Integrated Product Integrated Product Solutions Solutions

Integrated Product Integrated Product Solutions Solutions

Network Network SolutionsSolutionsNetwork Network

SolutionsSolutionsValue-Based Value-Based

Benefit DesignsBenefit DesignsValue-Based Value-Based

Benefit DesignsBenefit DesignsHealth and Health and

Wealth SolutionsWealth SolutionsHealth and Health and

Wealth SolutionsWealth SolutionsAffordability Affordability

SolutionsSolutionsAffordability Affordability

SolutionsSolutions

Ben

efi

ts

Ben

efi

ts

Fo

cu

se

dF

oc

us

ed H

ealth

H

ealth

F

oc

us

ed

Fo

cu

se

d


Evolving Product Categories

Catastrophic Plans Mini-Med Discount Cards Short-Term

Coverage Voluntary Products Critical Illness

Products

Integrated Medical and Disability Benefits

Integrated Medical and Behavioral Health Benefits


Defined Contribution Health, Wealth, and

Retirement Planning A la Carte

Health/Wealth Solutions

Tiered Networks Specialty Network-

Based Products Integrated Medical

Homes


Engagement-Based Products


Value Based Benefit Designs based on assessment of the clinical benefits to specific patient populations such as diabetics or asthma patients to improve treatment regimen compliance

Product Types

Product Types

MarketExamples

MarketExamples

The current product landscape is marked by innovation in plan design and integration, but not the fundamental health management that underlies medical trend abatement and disease market reform.

Product Benefits ContinuumProduct Benefits Continuum



Integrated Product Integrated Product SolutionsSolutions

Integrated Product Integrated Product SolutionsSolutions

Network Network SolutionsSolutionsNetwork Network

SolutionsSolutionsValue-Based Value-Based

Benefit DesignsBenefit DesignsValue-Based Value-Based

Benefit DesignsBenefit DesignsHealth and Health and

Wealth SolutionsWealth SolutionsHealth and Health and

Wealth SolutionsWealth SolutionsAffordability Affordability

SolutionsSolutionsAffordability Affordability

SolutionsSolutions

Ben

efi

ts

Ben

efi

ts

Fo

cu

se

dF

oc

us

ed H

ealth

H

ealth

F

oc

us

ed

Fo

cu

se

d

Aetna SCR BeniCard UnitedHealthcare

Belay Conseco Cancer

Secure

CIGNA Disability Solutions for Chronic Conditions

Humana/Corphealth Integrated Health-and-Wellness Program

Fidelity (“Health meets Wealth”)

Wells Fargo Ameriprise Aetna Accelerated

Death Benefits

Aetna Aexcel UnitedHealthcare Premera Blue Cross Medica Focus Blue Shield Net

Value HMO

WellPoint TONIK Humana No Worry BCN Healthy Blue

Living United Healthcare/

BeneComp Accretive Care RedBrick Health

Marriot International Inc./Hewitt Associates/Active Health—Reduced co-payments for diabetes, asthma, heart disease, colonoscopies, mammograms and childhood immunizations

Eastman Chemical/ Towers Perrin: Free drugs and supplies for diabetes, free mammograms and childhood immunizations


Solution focus shifting to consumer health management from benefit buy-downs (only)

Current Solutions—Level of Development

Product opportunities based on their level of maturity and their target market segments

MoreMature

Level of Development

All Segments

All Segments

EmployerSponsoredEmployer

Sponsored

IndividualIndividual

Early Stage

= Focused Benefit Solutions = Integrated Product Solutions = Network Solutions = Affordability Solutions = Value-Based Benefit Designs = Health and Wealth Solutions

Value-Based Benefit DesignsValue-Based

Benefit Designs

Tiered NetworksTiered Networks


Products


Products


Solutions


Solutions

High Deductible Health Plans

High Deductible Health Plans Engagement-

Based ProductsEngagement-

Based Products




Planning


Planning

Integrated Medical/Disability

Integrated Medical/Disability

Integrated Medical/Behavioral Health

Integrated Medical/Behavioral Health

DefinedContribution

DefinedContribution

Catastrophic Plans

Catastrophic Plans

Short-TermCoverage

Short-TermCoverage

Voluntary ProductsVoluntary Products


Critical Illness ProductsMini-MedMini-Med

Discount CardsDiscount Cards






Success of Early CDH Innovators

United’s Definity product has experienced:

– Lower utilization of non-preventive care services

– Decrease in emergency room utilization

– Fewer hospital admissions compared to industry

– Higher generic substitution rate

– Employer renewal rates below national trends

United’s Simply Engaged program offers rate discounts in exchange for employer commitments

CIGNA’s Choice Fund results included:

– Lower costs of health care for CDHP members

– Higher degrees of engagement

– More frequent use of preventive care

– Increased use of medications to treat chronic conditions like diabetes

– Greater awareness of health care cost and quality

Integrates CareGain’s Defined-Care platform to further customize and enhance Choice Fund

Humana’s SmartSuite improved:

– Members compliance with maintenance drugs

– Annual medical cost range (4 to 5%)

Humana introduces “No Worry” rate cap product for 51 to 99 to ease employers into CDH

Introduces “Smart Results” product for ASO 300+ groups that reduces fees if employer lowers claim expenses

Success of Early CDH Innovators

WellPoint’s Lumenos customer survey revealed:

– Increased knowledge of managing their health care

– Improved health-related behaviors, such as exercise and eating healthier

– More engaged and more likely to use Lumenos' online health site

Offers first full-service, FDIC-insured HSA plan on the market

One of the first payers to bring across-the-board support to the Small Group Market

CDH pioneers have driven meaningful breakthroughs—where innovative solutions have resulted in positive measurable outcomes.

Aetna’s HealthFund has improved:

– Medication compliance among chronic patients

– Preventive care screenings

– Generic drug utilization

Aetna spearheads provider transparency

– Pricing information for 100k providers

– Quality information for 22k specialists

Aetna’s Aexcel performance network expands to 31 markets


Agenda




Retail Market Development Evolution and Disruptive Retail Market Development Evolution and Disruptive InnovationInnovation



Retail Consumer Market Evolution—Building Momentum or Stalled?

Stage I: Stage I: EmergingEmerging

Financial engagement stimulated by buy downs and

costs shifting

Stage II: Stage II: DevelopingDeveloping

Informed and improved healthcare decision making

Stage III: Stage III: MaturingMaturing

Increased health management engagement resulting in behavior changes and improved outcomes

Stage IV: Stage IV: TransformingTransforming

Collective consumer voice driving market reform

To

da

y’s

Ma

rke

tT

od

ay

’s M

ark

et

To

mo

rro

w’s

Ma

rke

tT

om

orr

ow

’s M

ark

et


Expect Disruptive Innovation

Core CompetenciesCore Competencies Consumer BrandConsumer Brand Consumer TrustConsumer Trust Consumer InnovationConsumer Innovation Health Benefits ExpertiseHealth Benefits Expertise Clinical ExpertiseClinical Expertise Financial ExpertiseFinancial Expertise Personal Services, Coaching Personal Services, Coaching

and Intimacy and Intimacy Local Market KnowledgeLocal Market Knowledge IT, Integration, Decision IT, Integration, Decision

Support Support and Procurementand Procurement

Financial Services

Insurance Products

ConsumerSoftware

& Services

Health Benefits Services

Retailers

MedicalProducts &

Services

Consumer Products

Provider & Payer

Solutions

Pharmacy & Biotech

Disease Management

Healthcare Delivery


Emerging Competitors and Niche Players

A health services company that utilizes financial tools, incentives, personalized wellness plans, and independent customer service advocacy to achieve greater accountability, behavior change and return on healthcare investments

A new business focused on reducing total medical costs by providing a high touch patient guidance system

Assumes total risk by guaranteeing trend/savings

A leading provider of business and financial management solutions for consumers, accounting professionals and small to mid-size employers

Declared healthcare as new business vertical introducing personal healthcare financial management programs

Mission is to organize the world’s information and make it universally accessible and useful

Recently declared and established focus on healthcare

“What’s needed is an independent advocate on behalf of customers.”

Kyle Rolfing, CEO

“…Guiding each of your employees, their families and their physicians to personalized, high-quality healthcare allows us to grow employee satisfaction…”

Tom Spann,CEO

“The personal intimacy and drop-dead ease of the solutions is only possible if you’re a consumer-driven company.”

Scott Cook, Chairman and Founder

“Focus on the user and all else will follow.”

Larry Page and Sergey Brin,Co-Founders

Direct to employer Direct to employer Direct to consumer Direct to consumer

Goal is to help people be healthy Concierge services to be offered

through the website and through a call center

Elected new board member focused on “creating a consumer-centric system”

Help patients navigate healthcare system

Establish trust-based relationship with customers

Backed by investors that “deliver meaningful and unique value to their customers”

Only pursue opportunities that provide incremental value over other options for the consumer

“Follow them home” approach Vision of the customer:

aggregates all consumer touch points

Web communities Responses to feedback buttons

within the software Intuitive experience

Most services are free Global access by supporting 90

languages Develop services that

significantly improve the lives of as many people as possible

Credible track record with innovative employers

Entrepreneurial spirit

No barrier mentality with expertise outside of healthcare

Brand Consumer experience and

expertise

Brand Consumer experience and

expertise

DescriptionDescription

ApproachApproach

Key AssetsKey Assets

Non-traditional competitors are entering the broad health and wealth space to fulfill unmet needs and have the potential to disrupt the market.

PhilosophiesPhilosophies

Customer-Centric

Initiatives

Customer-Centric

Initiatives


Agenda







Employer Benefits and Product Market

Today Market

Consumer Benefits and Product Market

Consumer Health/ Wealth Service

Market

Employer Healthcare Affordability Market

Employer Healthcare Affordability Market

The New Competitive Landscape—Charting Your CourseF

rom

Insu

ran

ce t

o H

ealt

h M

anag

emen

t

From Wholesale to RetailWholesale(Employer)

Retail(Consumer)

Products/Benefits

HealthManagement

High Quality and Cost-Effective

Care


and More Patients

Healthcare Services Market

Exchange

$2.0T Marketplace Driving Competition and Investment


Health Plans and Innovators are Defining New Markets

Current LandscapeCurrent Landscape


Market


Market

Employer Healthcare

Affordability Market

Employer Healthcare

Affordability Market

Consumer Benefits and Product MarketConsumer Benefits and Product Market


Today Market


Today MarketFro

m In

sura

nce

to

Hea

lth

Man

agem

ent

From Wholesale to RetailWholesale(Employer)

Retail(Consumer)

Products/Benefits

HealthManagement

Consumer

Service

Companies

Consumer Product Companies

Health Management and Delivery Companies


Moving the Retail Market Forward

Employer and consumer-centric modelEmployer and consumer-centric model

Positive, constructive work site environment Positive, constructive work site environment

Personal relationship with every member with aligned health and finance goalsPersonal relationship with every member with aligned health and finance goals

Balanced consumer accountability with real decision consequencesBalanced consumer accountability with real decision consequences

Proactive integrated whole person consumer engagement modelProactive integrated whole person consumer engagement model

Evidence based medicine (clinical efficacy) and informed treatment optionsEvidence based medicine (clinical efficacy) and informed treatment options

Aligned provider economic model with role clarityAligned provider economic model with role clarity

Provider information integration and advanced medical homesProvider information integration and advanced medical homes

Design Guidelines Stage I: Stage I: EmergingEmerging

Stage II: Stage II: DevelopingDeveloping

Financial engagement stimulated by buy downs and

costs shifting

Informed and improved healthcare decision making

Stage III: Stage III: MaturingMaturing

Stage IV: Stage IV: TransformingTransforming

Increased health management engagement resulting in behavior changes and improved outcomes

Collective consumer voice driving market reform


Sponsored Retail Business Model—A New Value Chain

Promising lower costs, improving trend

performance, and increasing customer satisfaction through superior consumer engagement and

provider integration

Establishing the consumer as the

customer and building an information and

relationship foundation for personalized

integrated health/wellness

management

Engaging the consumer through a

personalized integrated experience leading to improved health, high levels of

satisfaction and increased value

Partnering with providers through the medical home model to improve the quality of care and facilitate

care coordination and information flow between/among

providers, consumers, and health plans

Evaluating performance

demonstrating total value for consumers and employers and

determining program refinements

Expanding customer relationships through deep understanding of

needs and differentiated

experience and outcomes

Sponsored Retail Business ModelSponsored Retail Business Model

Market Development

Consumer Relationship

Initiation

Consumer Engagement Management

Care andProvider

Integration Management

Performance Management

Relationship Extension


Building the Health Plan Business Model for the Consumer

Developing the Consumer as a Customer and

Establishing the Foundation for

Partnershipand Advocacy


Establishing the Foundation for

Partnershipand Advocacy


Initiation

HealthHealth

AttitudinalAttitudinal

FinancialFinancial

BehavioralBehavioral

FamilyFamily

Demographicsand Culture

Demographicsand Culture

Personalized integrated health/wellness and financial management plan (including

assessment) with shared goals

Consumer Engagement and Integrated Health, Wellness, Finance and Lifestyle Management

Consumer Engagement and Integrated Health, Wellness, Finance and Lifestyle Management


PersonalPlanning

Benefits Coaching and Financial Management

CareManagement

ProviderSelection

IntegratedConsumer Experience

Fragmented Whole Person

New Market Development Model With Employer

Partnership and Consumer Engagement

New Market Development Model With Employer

Partnership and Consumer Engagement

Market Development


EmployerSegmentation

Model

EmployerSegments

EmployerProfiles

Frozen in Place

Partners in Health

Price Buyers

Desperate Trailblazers

Attitudes

Demographics

Workforce profile

Labor market

Beliefs about roles

SegmentationModel

Refining Provider Partnerships and

Integrated Care Delivery

Refining Provider Partnerships and

Integrated Care Delivery

Care and Provider Integration

Management

CoordinatedCare with SharedHealth Benefitsand Household

ExpenseInformation

CoordinatedCare with SharedHealth Benefitsand Household

ExpenseInformation

HealthPlan

AdvancedMedicalHome

Patient

0%

20%

15%

10%

5%

Payer as the Trusted Resource

Using Deep Customer Understanding to Renew

and Expand Relationships

Using Deep Customer Understanding to Renew

and Expand Relationships


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q460%

100%

Performance Perspective

90%

80%

70%

Satisfaction

Trend

Co

nsu

mer

Sat

isfa

ctio

n Health

care Tren

d

Measuring Employer and Consumer

Performance Against Goals and Refine

Programs to ImproveTotal Value



Programs to ImproveTotal Value


Household budget for healthcare

100%1x day1x dayInsulin management

33%1x wk3x wkFitness program attendance

90%135/90120/75Blood pressure

90%225200Cholesterol

100%200208Weight

ResultActualGoalPersonal Plan

Consumer Performance Evaluation

80%$325/mo$300/mo


Employer segmentation and consultative sales approach

Broker segmentation and broker service model

New Market Development Model

With Employer Partnership and

Consumer Engagement

New Market Development Model

With Employer Partnership and

Consumer Engagement

Market Development

1

2


A Dozen Innovations Required to Shift the Model

Integrated product, solution and service offerings based on deep employer and consumer knowledge

Using Deep Customer

Understanding to Renew and Expand

Relationships

Using Deep Customer

Understanding to Renew and Expand

Relationships


12Consumer performance management capability tied to personal plan and integrated rewards



Programs to Improve Total Value



Programs to Improve Total Value


11Integrated or partnered provider relationships with aligned reimbursement model

Advanced medical homes

Shared evidence-based medicine guidelines and preference sensitive treatment options

Refining Provider Partnerships and Integrated Care

Delivery

Refining Provider Partnerships and Integrated Care

Delivery

Care and Provider

Integration Management

8

9

10

Personalized integrated health and finance plan with goals

Benefits models to align incentives and promote health

Whole person consumer engagement model tied to personal plan

Consumer Engagement and Integrated Health, Wellness, Finance

and Lifestyle Management

Consumer Engagement and Integrated Health, Wellness, Finance

and Lifestyle Management


5

6

7

Worksite education programs promoting a culture of health

Consumer profile development replacing current enrollment process


Establishing the Foundation for Partnership and

Advocacy


Establishing the Foundation for Partnership and

Advocacy


Initiation

3

4

©2007 chapterhouse, llc—not to be distributed without permission for additional information,...

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