Prevalence and Design of Consumer-Directed Health Benefit Models

1. Prevalence and Design of Consumer-Directed Health Benefit Models Meredith Rosenthal, PhD Harvard University September 10, 2004

2. Models of Consumer-Directed Health Benefits in Our Survey • Health Reimbursement Accounts (HRAs) • Plans with tiered hospital or physician copayments • Plans with flexible or tiered benefit options and defined contribution (e.g., Vivius, Humana Smart Suite)

3. CDHB Enrollment

4. Health Reimbursement Accounts, 2003

5. Incentives to Control Spending: HRAs • Because account dollars can be saved for future use, enrollees should try to conserve (Note: Compared to HRAs, Health Savings Accounts should engender stronger response due to portability) • Account-based plans concentrate incentives below deductible (the doughnut-hole) • Coinsurance (10-20%) above deductible, up to out-of-pocket limit resembles current PPOs

6. HRA Benefit Design Elements • Some plans insure inpatient $ from first dollar, others require deductible to be met without using account first • Preventive care often covered with low/no copayment • Separate “riders’ may be added for prescription drug coverage, chronic care services

7. Tiered Copayment Models

8. Incentives to Control Spending: Tiered Copayment Models • Tiered copayment models offer targeted incentives over greater span of total spending (up to out-of-pocket max) • Enrollees face little or no additional cost sharing if they make “preferred” choices, which may be higher value or at least lower cost

9. Flexible Benefit Design/Tiered Premium Models • Tiered benefit design encourages leaner benefits and/or more “managed” models • Elements of managed competition (minus the competition) • Plan design choice • Incentives to choose lower-cost models • More backlash?

10. Transparency: Are Enrollees Armed to Make Value-based Provider Selections?

11. Policy Issues • Is the notion of CDHB just window dressing for a big cost shift? • Will these plans revolutionize health care in the U.S.? • Control spending trend? • Lead to improved quality/value?

12. Cost Sharing • Most CDHB plans quite generous --point-of-service cost sharing similar to alternatives offered by same employers • For small employers, may be designed as palatable catastrophic insurance (and better than not offering insurance) • HRA incentives to control spending limited; no evidence to assess whether copayments differentials in tiered models are large enough

13. Will CDHB Models Enable Consumers to Seek Value? • Comparative cost and quality information severely limited • Data at individual physician level almost never provided • Tiered copayment models, if well designed, can move consumers to higher value providers without informed choice (more backlash?)