1. The CDHP Implementation Experience Briefing for 2 nd National Consumer Driven Healthcare Summit September 26, 2007 Melinda Beeuwkes Buntin, Ph.D. The RAND Corporation (Roland McDevitt, Ryan Lore, and Hayoung Park also contributed to this presentation).

2. Copyright © Watson Wyatt Worldwide. All rights reserved 2 Agenda  Overview of study and participating employers  Employers' goals and challenges  Employee communication  Information tools and resources  Lessons learned and future role of CDHPs

3. Copyright © Watson Wyatt Worldwide. All rights reserved 3 Overview of study  Study of CDHPs –Adopted by 42 employers –2003 through 2007  CDHP defined as –Deductible of at least $500 for single coverage –With or without an HRA or HSA –Emphasize consumer engagement  Reports will focus on –Cost and quality outcomes –Implementation experience  RAND Corporation/Watson Wyatt with funding from –California HealthCare Foundation –Robert Wood Johnson Foundation

4. Copyright © Watson Wyatt Worldwide. All rights reserved 4 The 42 participating employers offered 58 high-deductible plans Number of plans adopted in each time period HDHP implementation year NOTE: Some employers offered multiple plan designs with the same account type (i.e. three HRA options with different deductibles). These plans are counted only once for each employer.

5. Copyright © Watson Wyatt Worldwide. All rights reserved 5 Member cost sharing varies in HRA, HSA and no account plans (ranked by average deductible) DeductibleNo accountHRAHSA Lowest third$500$869$1,088 Middle third$500$1,393$1,230 Highest third$1,000$1,738$1,925 Employer account contribution Lowest third$0$456$125 Middle third$0$694$240 Highest third$0$800$313 Bridge (deductible – employer contribution) Lowest third$500$413$963 Middle third$500$699$990 Highest third$1,000$938$1,613

6. Copyright © Watson Wyatt Worldwide. All rights reserved 6 2006 CDHP penetration rates ranged widely (8 employers went to full replacement) Penetration ranking of employer (lowest to highest) 2006 CDHP penetration rate

7. Copyright © Watson Wyatt Worldwide. All rights reserved 7 Key ways employers can influence penetration level of CDHPs Average penetration level for CDHPs (excluding full-replacement firms) Deductible Less than $1,000 $1,000 - 1,499 $1,500 or more Eliminate popular plan Yes No 6+ months 0-5 months Advance communication

8. Copyright © Watson Wyatt Worldwide. All rights reserved 8 Only one CDHP in the study does not pay for preventive services before the deductible is satisfied Percent of Employers

9. Copyright © Watson Wyatt Worldwide. All rights reserved 9 Financial incentives are often offered to engage employees 92% 84% 66% 58% Percent of Employers

10. Copyright © Watson Wyatt Worldwide. All rights reserved 10 Agenda  Overview of study and participating employers  Employers' goals and challenges  Employee communication  Information tools and resources  Lessons learned and future role of CDHPs

11. Copyright © Watson Wyatt Worldwide. All rights reserved 11 Cost control, consumer engagement top goals identified in open-ended interviews with HR executives Percent of HR Executives 85% 78% 27% 15% 12%

12. Copyright © Watson Wyatt Worldwide. All rights reserved 12 Communication biggest challenge cited by HR executives during initial rollout and open enrollment Percent of HR Executives

13. Copyright © Watson Wyatt Worldwide. All rights reserved 13 Agenda  Overview of study and participating employers  Employers' goals and challenges  Employee communication  Information tools and resources  Lessons learned and future role of CDHPs

14. Copyright © Watson Wyatt Worldwide. All rights reserved 14 Multiple communication modes used -- rollout through enrollment Percent of Employers 90% 85% 75% 52% 38%

15. Copyright © Watson Wyatt Worldwide. All rights reserved 15 Multiple communication modes used -- 1st year of CDHP operation Percent of Employers 82% 69% 36% 39% 59% 66%

16. Copyright © Watson Wyatt Worldwide. All rights reserved 16 Over half of employers involved employees in creating communication materials Percent of Employers

17. Copyright © Watson Wyatt Worldwide. All rights reserved 17 Nearly 80% of employers used external help for communication and rollout Percent of Employers

18. Copyright © Watson Wyatt Worldwide. All rights reserved 18 Implementation costs were substantial for external help, staffing, and advance communication MeanRange (25 th -75 th percentile) Estimated external cost of consulting and other labor, per employee $10.95$1.55-$13.89 Estimated external cost of producing materials, per employee $7.48$1.38-$11.11 Annual full time equivalents (FTEs) devoted to implementation 3.4 FTEs1-3 FTEs Number of months of communication of CDHP in advance of enrollment 4.3 months2-6 months

19. Copyright © Watson Wyatt Worldwide. All rights reserved 19 Agenda  Overview of study and participating employers  Employers' goals and challenges  Employee communication  Information tools and resources  Lessons learned and future role of CDHPs

20. Copyright © Watson Wyatt Worldwide. All rights reserved 20 Information is key to consumer engagement HR Executives emphasized consumer engagement: –“How do people get the information they need to make good choices?” –“How many people are seeing highly-efficient providers, and how can that behavior be rewarded?” –“[We need to] get people to take health risk assessments, push people towards healthy behaviors, then see if these people reduce their medical costs.”

21. Copyright © Watson Wyatt Worldwide. All rights reserved 21 HR Executives’ overall ratings of information tools is low N=41 Percent of HR Executives

22. Copyright © Watson Wyatt Worldwide. All rights reserved 22 Only five tools used to introduce the CDHP rated highly Percent of Employers Offering 100% 92% 89% 79% 78%

23. Copyright © Watson Wyatt Worldwide. All rights reserved 23 Many respondents rated prescription drug information as excellent or good N=38 Percent of Employers Offering 92% 81% 78%

24. Copyright © Watson Wyatt Worldwide. All rights reserved 24 Fewer respondents rated information about hospital cost and quality as excellent or good N=38 Percent of Employers Offering 76% 73% 77% 71% 65%

25. Copyright © Watson Wyatt Worldwide. All rights reserved 25 Very few respondents rated information about physician cost and quality as excellent or good N=38 Percent of Employers Offering 69% 66% 58%

26. Copyright © Watson Wyatt Worldwide. All rights reserved 26 Most employers offer some health management resources and rate them highly N=38 Percent of Employers Offering 92% 87% 86%

27. Copyright © Watson Wyatt Worldwide. All rights reserved 27 Use of most tools is not tracked, even if offered N=38 Percent of Employers Offering 31% 44% 59% 69% 72% 51% 44%

28. Copyright © Watson Wyatt Worldwide. All rights reserved 28 Agenda  Overview of study and participating employers  Employers' goals and challenges  Employee communication  Information tools and resources  Lessons learned and future role of CDHPs

29. Copyright © Watson Wyatt Worldwide. All rights reserved 29 CDHP implementation is a major change and requires extensive employee communication  80% of HR executives cited the importance of employee communication “There’s no such thing as too much personal communication, especially face-to-face.” “Assume no one has read anything. Dumb down the materials. Communicate it once and then do it again 4 or 5 more times in different ways.”  Need senior management to help promote the CDHP  Allow plenty of time and effort to roll out the plan  The first year is the hardest

30. Copyright © Watson Wyatt Worldwide. All rights reserved 30 How employers addressed communication challenges during initial rollout and enrollment  Repetitive and sustained communications through multiple channels  Tailor to structure of company –Face-to-face meetings when employees in a few locations –E-mail and intranet site when employees on-line –Mailings and newsletters when employees in many locations and not on-line –Diverse company cultures  Train people to “do the math” –Example employees under each plan option –Modeling tools to calculate out-of-pocket costs  Force everyone to re-enroll each year so they pay attention

31. Copyright © Watson Wyatt Worldwide. All rights reserved 31 Lessons about plan design and operation  Stick with standard products that are proven  Pick vendors carefully and make sure they can do what they claim  HSAs have advantages over HRAs –Better incentives/engagement for consumer –Portability –But also require employees to open accounts  Two schools of thought regarding full replacement: –Much more payoff for the same amount of work –Many employers want to continue offering choice

32. Copyright © Watson Wyatt Worldwide. All rights reserved 32 HR executives see continued commitment to CDHPs

33. Copyright © Watson Wyatt Worldwide. All rights reserved 33 Questions & Answers