1. Consumer-Driven Health Plans: Are They More Than Talk Now? Jon Gabel Anthony Losasso Thomas Rice

2. How Did We Get to Consumer- Driven Health Care? Managed care backlash Reemergence of health care inflation

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

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

5.  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 and Defined Contribution Plans: What is the Difference?

6.  Increased financial risk for consumers  Increased choice of providers and/or benefit design  Use of e-health insurance medical information products Common Elements of Consumer-Driven Products

7. Three models –MSA type plans (Personal Spending Accounts) –Personalized plans i.e., Vivius –Customized plans i.e., Health Partners The upgrade is a tiered network More than start-ups today Cash-out is a non-starter Consumer Driven Health Care

8. An Overview of Consumer Driven Health Plans Total enrollment – 1.5 million The Upstart Startups (100,000) –PSA plans – Definity, Lumenos –Personalized plans – Vivius, MyHealthBank The Health Plans Cometh (1.4 million) –PSA plans –Customized plans – most of enrollment

9.  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

10.  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 Driven- Health Care

11.  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- Driven Health Care

12. Key Issues Use of information –Will consumers use the web tools? –Can we provide information on individual physicians? –Can consumers understand the information? Cost control Access 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

13. 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?