tarren bragdon the maine heritage policy center 207.321.2550 [email protected]
TRANSCRIPT
Patient-Centered Health Benefits:How to Reduce Premium Costs and
Improve Employee Health
Tarren BragdonThe Maine Heritage Policy Center
How Does Insurance Work?Employee Perspective
Best case– have coverage, don’t use any health care and remain healthy (net premiums cost only)
Worst case – have coverage, have catastrophic health event (net premiums + maximum out of pocket)
Everyone in betweenImportant Terms
Premium DeductibleMaximum Out-of-Pocket
13%
5%
82%
How Much Health Care Do People Actually Use?
Adults age 18-44 (privately insured all year in Northeast, 2005)
• Median (half more/half less) - $626
• Average (mean) - $2,178
Source: Medical Expenditure Panel Survey, 2005, www.meps.ahrq.gov
13%
33%
16%
20%
18%
$0 $1-$500$501-$1,000 $1,001-$2,500$2,501+
Once a High User, Always a High User?For the top 10 of every 100 health care consumers
(using more than $5,000 in 2005) in a given year (who consume 65% of all health care used)only 4 will be in the top 10 the following year (41%).
However, those 50 with the lowest consumption (less than $800 per person in 2005, using 7% of all health care used)38 will be low users the following year (75%).
Source: Agency for Healthcare Research and Quality, Nov 2007, Statistical Brief #191.
HMO 1-08
PPO 1-08 PPO 7-08 (HSA)
HMO 8-08 (HSA)
PPO 11-08
HMO 7-08
$0
$3,000
$6,000
$9,000
$12,000
$5,940$4,368
$2,532$3,492 $3,108 $3,672
$1,500
$1,500
$3,000$2,700
$4,500$5,000
$7,890
$6,318$5,532
$6,192
$8,958
$10,172 Tax Con-sequence
Annual Indi-vidual Max Out of Pocket
Annual In-dividual Premium
Series4
Typical Individual Plans
HMO$0 ded.
PPO$500 ded.
HSA$3000 ded.
HSA$2700 ded.
PPO$2500 ded.
HMO$1000 ded.
Individual (Employee-Only) ChamberChoice Plans
PPO $3.5k ded.
PPO $1k ded.
HSA - $5k ded.
HMO $1k ded.
HMO $500 ded.
$0
$6,000
$12,000
$18,000
$24,000
$30,000
$2,631 $3,717 $2,592 $4,376 $4,857
$8,500$4,000 $5,000
$5,000 $3,000
$13,681
$8,917$7,592
$10,876$8,757
Tax Con-sequence
Annual Individual Max Out of Pocket
Annual Individual Premium
Series4
Family ChamberChoice Plans
PPO $7k ded.
PPO $2k ded.
HSA - $10k ded.
HMO $2k ded.
HMO $1k ded.
$0
$6,000
$12,000
$18,000
$24,000
$30,000
$7,894$11,151
$7,747
$13,127 $14,572
$17,000$8,000
$10,000
$10,000 $6,000
$29,994
$21,551
$17,747
$26,127
$22,372
Tax Consequence
Annual Individual Max Out of Pocket
Annual Family Premium
Series4
Changing your approach…Employer Perspective
Old Model New Patient-Centered Model
Premium Premium
Health savings account (HSA)with optional employer contribution
Health reimbursement account (HRA)employer promise to pay
Real Maine Case Study
Old (Traditional) Plan$405 monthly
individual premium
$500 deductible$3,000 out-of-
pocket (OOP)Co-pays for drugs
not counted toward OOP
10% trend premium increases annually??
Old (Traditional)Plan
$0
$3,000
$6,000
$9,000
$12,000
$4,857
$3,000
$8,757
Tax Con-sequence
Annual In-dividual Max Out of Pocket
Annual In-dividual Premium
Series4
New Patient-Centered Plan$213 monthly
individual premium$5,000 deductible$5,000 out-of-
pocketDrugs subject to
deductible3%-5% trend
premium increase annually ??
New Patient-CenteredPlan
$0
$3,000
$6,000
$9,000
$12,000
$2,592
$5,000
$7,592
Tax Con-sequence
Annual In-dividual Max Out of Pocket
Series4
Quick Facts - Qualifying Health PlanMinimum deductible (2009): $1,150/$2,300Out of Pocket Max (2009): $5,800/$11,600No Rx prior to deductible (exception:
preventive Rx)Preventative allowed prior to deductibleOther non-qualifying coverage prohibitedFSA and HRA prohibited unless “limited
purpose”
Side by SideThe HMO out-of-
pocket costs are paid with post-tax dollars
The Patient-Centered Plan trades fixed premium cost for increased and broader deductible
Best and worst-case favors the Patient-Centered
Old (Tra-ditional)
Plan
New Patient-Centered
Plan
$0
$3,000
$6,000
$9,000
$12,000
$4,857
$2,592
$3,000
$5,000
$8,757$7,592
Tax Con-sequence
Annual In-dividual Max Out of Pocket
Annual In-dividual Premium
Series4
Health Reimbursement Arrangement (HRA)
Employer promises to reimburse employees for the last $3,850 of the deductible.
Administered by TPAOOP reduced to
$1,150Expected HRA
utilization (30%) ER cost $96.25
PMPM
New Patient-CenteredPlan
$0
$3,000
$6,000
$9,000
$12,000
$2,592
$1,150
$3,850
$7,592
Tax Con-se-quence
HRA
Annual Individ-ual Max Out of Pocket
Can be attached to any health planFunded by employerAdministered by a Third Party AdministratorEmployer flexibility regarding reimbursed
expensesCan have rollover provisionStructured as “promise to pay”Not portable to employee
Quick Facts - HRAs
Health Savings Account (HSA)Triple tax advantaged
checking accountEmployer and/or
employee depositsFunds can cover any out-
of-pocket medical, dental, vision expenses +
Fully portable, owned by the employee
No employer liabilityCritical component for
patient-engagementER Cost - $83.33 PMPM
New Patient-CenteredPlan
$0
$3,000
$6,000
$9,000
$12,000
$2,592
$1,000$150
$3,850
$7,592 HRA
Annual Individ-ual Max Out of Pocket
HSA
Requires qualified health planFunded by employee, employer or bothSelf administered with assistance of
custodianEligible expenses determined by IRS (213D)Unused funds rollover (Use it or Save it, not use
it or lose it!)Employee owned and controlled account
(portable)
Quick Facts - HSAs
Quick Facts - HSA Contributions2009 contribution limits: $3,000/$5,950Partial year qualified plan coverage
allowedEmployer, employee, and family can
contributeContributions not limited by deductibleEmployer does not pay FICA on
employee’s HSA contributions made through payroll deduction
Fund lump sum or periodic (may accelerate by need)
April 15, 2010 deadline to fund 2009
Side by SideOnly the premium is
a fixed expense in the patient-centered plan
The same dollars have provided more comprehensive coverage
There is opportunity for substantial savings from the prior fixed cost
Old (Tra-ditional)
Plan
New Patient-Centered
Plan
$0
$3,000
$6,000
$9,000
$12,000
$4,857
$2,592
$3,000
$150$1,000
$3,850
$8,757$7,592
HRA
Annual In-dividual Max Out of Pocket
HSA
Annual Individual Premium
Total Monthly CostEmployer Perspective
Old ModelNew Patient-Centered
Model
Premium - $405 Premium - $216
HSA - $83 ER contribution
HRA - $96 est. cost
$405 $3965 years later (2014) – total costs
With 10% premium trend With 5% (10%) premium trend
$652 $455 ($528)
5-Year Trend - Employer
2009 2010 2011 2012 2013 2014 $-
$250
$500
$750
$405 $445 $490 $539 $593 $652
HMO Premium
2009 2010 2011 2012 2013 20140
250
500
750
$216 $227 $238 $250 $263 $276
83 83 83 83 83 8396 96 96 96 96 96 $396 $406 $418 $430 $442 $455
HSA PremiumHSA-ER ContributionHRA-ER FundingSeries4
Employee’s Cash Position in 2013 (Patient-Centered v. Traditional)
Assumes employee contributes $1,000 a year & increases contribution by 5% annually, 5% annual interest on HSA, and $800 a year in health care used on average or employee hits max OOP for worst case
2009 2010 2011 2012 2013 $(7,500)
$(5,000)
$(2,500)
$-
$2,500
$5,000
$7,500
$10,000
$12,500
$(5,931)
$-
$4,602
$7,239
$11,603
HMO - Best Case (20% EE paid) HMO - Best Case (0% EE paid)HSA - Worst Case HSA - Average HSA - Best Case
Keys to An Effective Patient-Centered BenefitFostering a culture of health care consumerism among
all employees, beginning with senior executives
Implementing a focused employee education campaign
Offering wellness programs and incentives for healthy behaviors, as well as 100 percent coverage for preventive care
Carefully constructing a benefits package that includes appropriate levels of employee financial responsibility
Patient-Centered Plans – Majority of Patients Control All Their Spending
0 10 20 30 40 50 60 70 80 90 100 $-
$2,500
$5,000
$7,500
$10,000
$12,500
$15,000
Percent of All Patients
Healt
h C
are
Used
by
Pati
en
t
At $2,500 deductible:76% of patients control all
health care dollars usedAll patients collectively control
41% of all health care dollars used
Key Findings of Patient-Centered Employees – 1. Committed in Wellness The Blue Cross Blue Shield Association 2007 CDHP Member Experience Survey showed HSA plan members were more engaged in wellness and prevention:
Exercise program
Nutrition/diet program
Stress management
Smoking cessation
-5% 0% 5% 10% 15% 20% 25% 30%
12%
12%
8%
6%
29%
27%
22%
20%
Patient-Centered Traditional
Participate
d in
The Blue Cross Blue Shield Association 2008 CDHP Member Experience Survey showed HSA plan members researched cost and quality of providers much more:
Key Findings of Patient-Centered Employees – 2. Focused on Cost & Quality
Choose lower cost treatment option
Ask doctor about cost of treatments
Use mail order Rx
Search the Internet for a lower priced Rx
0% 10% 20% 30% 40% 50% 60%
36%
52%
43%
21%
23%
33%
30%
15%
Traditional Patient-Centered
The Blue Cross Blue Shield Association 2008 CDHP Member Experience Survey showed HSA plan members planned for health expenses more thoroughly:
Key Findings of Patient-Centered Employees – 3. Saved for the Future
Tracked Health Care Expenses
Estimated Future Health Care Expenses
Discussed Health Expenses with Physician
0% 10% 20% 30% 40% 50% 60% 70% 80%
72%
38%
38%
40%
22%
27%
Traditional Patient-Centered
Patient-Centered Health Benefits:How to Reduce Premium Costs and
Improve Employee Health
Tarren BragdonThe Maine Heritage Policy Center
Joel AllumbaughMaine Association of Health [email protected]
How Much Health Care Do People Actually Use? - Kids
Children (privately insured all year in Northeast, 2005)
• Median (half more/half less) - $466
• Average (mean) - $1,935
Source: Medical Expenditure Panel Survey, 2005, www.meps.ahrq.gov
9%
43%
17%
20%
11%
$0 $1-$500 $501-$1,000$1,001-$2,500 $2,501+
How Much Health Care Do People Actually Use? – Middle Age Adults
Adults age 45-64 (privately insured all year in Northeast, 2005)
• Median (half more/half less) - $1,700
• Average (mean) - $4,122
Source: Medical Expenditure Panel Survey, 2005, www.meps.ahrq.gov
8%
17%
10%
24%
41%
$0 $1-$500$501-$1,000 $1,001-$2,500$2,501+