Tarren Bragdon The Maine Heritage Policy Center

How Does Insurance Work? Employee Perspective Best case– have coverage, dont 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 between Important Terms Premium Deductible Maximum Out-of-Pocket 13% 5% 82%

How Much Health Care Do People Actually Use? Adults age (privately insured all year in Northeast, 2005) Median (half more/half less) - $626 Average (mean) - $2,178 Source: Medical Expenditure Panel Survey, 2005,

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.

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

Family ChamberChoice Plans

Changing your approach… Employer Perspective Old ModelNew Patient-Centered Model Premium Health savings account (HSA) with optional employer contribution Health reimbursement account (HRA) employer promise to pay

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??

New Patient-Centered Plan $213 monthly individual premium $5,000 deductible $5,000 out-of-pocket Drugs subject to deductible 3%-5% trend premium increase annually ??

Quick Facts - Qualifying Health Plan Minimum deductible (2009): $1,150/$2,300 Out of Pocket Max (2009): $5,800/$11,600 No Rx prior to deductible (exception: preventive Rx) Preventative allowed prior to deductible Other non-qualifying coverage prohibited FSA and HRA prohibited unless limited purpose

Side by Side The 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

Health Reimbursement Arrangement (HRA) Employer promises to reimburse employees for the last $3,850 of the deductible. Administered by TPA OOP reduced to $1,150 Expected HRA utilization (30%) ER cost $96.25 PMPM

Can be attached to any health plan Funded by employer Administered by a Third Party Administrator Employer flexibility regarding reimbursed expenses Can have rollover provision Structured as promise to pay Not portable to employee Quick Facts - HRAs

Health Savings Account (HSA) Triple tax advantaged checking account Employer and/or employee deposits Funds can cover any out-of- pocket medical, dental, vision expenses + Fully portable, owned by the employee No employer liability Critical component for patient-engagement ER Cost - $83.33 PMPM

Requires qualified health plan Funded by employee, employer or both Self administered with assistance of custodian Eligible 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 Contributions 2009 contribution limits: $3,000/$5,950 Partial year qualified plan coverage allowed Employer, employee, and family can contribute Contributions not limited by deductible Employer does not pay FICA on employees HSA contributions made through payroll deduction Fund lump sum or periodic (may accelerate by need) April 15, 2010 deadline to fund 2009

Side by Side Only 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

Total Monthly Cost Employer Perspective Old ModelNew Patient-Centered Model Premium - $405Premium - $216 HSA - $83 ER contribution HRA - $96 est. cost $405$396 5 years later (2014) – total costs With 10% premium trendWith 5% (10%) premium trend $652$455 ($528)

5-Year Trend - Employer

Employees 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

Keys to An Effective Patient-Centered Benefit Fostering 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 At $2,500 deductible: 76% of patients control all health care dollars used All 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: Participated 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

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

Tarren Bragdon The Maine Heritage Policy Center Joel Allumbaugh Maine Association of Health Underwriters

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,

How Much Health Care Do People Actually Use? – Middle Age Adults Adults age (privately insured all year in Northeast, 2005) Median (half more/half less) - $1,700 Average (mean) - $4,122 Source: Medical Expenditure Panel Survey, 2005,