True Consumer Engagement Helps Lower Health Care Costs

May 2006 issue of Health Insurance Underwriter, by Jonathan T. Lord, M.D.,

Few can argue that health care is increasing at a record rate in America… and that it will continue. With that in mind, and in an effort to control health care spending and ultimately reduce annual premiums, employers have begun focusing more on consumer-driven health plans. Now, nearly five years since their introduction, the question remains: Can CDHC be the next best strategy to controlling health care inflation and unnecessary utilization?

A recent Towers-Perrin analysis revealed that over the past four years employee health care costs have risen 56%, while employer costs have gone up 63%. According to the Kaiser Family Foundation, two-thirds (66%) of those with health insurance say their premiums have increased over the past five years, including 38% who say premiums have gone up “a lot.” Around half of insured adults say their co-payments for provider visits (51%) and health insurance deductibles (49%) have risen in the same period.

While much has been said of consumer-driven health plans, concerns still exist about their long-term viability. While many see them as the latest alternative to shift costs to employees, others say they will only attract the healthiest employees, thereby artificially lowering rates in succeeding years. Yet there are some who see them as a true opportunity to connect consumers to their own care and related costs.

Believing that consumer-driven plans can significantly lower costs, Humana conducted a three-year study of its own consumer-driven health products, the results of which seem to indicate potential for broader success and marketplace adoption as one answer to rising health care costs. In short, CDHC just might work through thoughtful and consistent application of a consumer-engagement strategy.

The Study

Though the study used Humana actuarial data, it is relevant across industry sectors. It illustrated how, through true consumer engagement, employers and health plans can ultimately enjoy lower year-over-year health insurance costs when compared to today’s more traditional offerings.

The “Health Care Consumers: Passive or Active?” study looked at 143,000 health plan members in 155 employer groups of different sizes across a variety of industries between 2002 and 2005. A key finding was that any group, regardless of size, industry type or employee demographics, was able to reduce its medical costs while maintaining appropriate access to care and the quality of care.

In fact, when offering employers and employees new and innovative tools beyond more traditional materials, members were better able to help themselves fully utilize health benefits. The following outcomes were reported as a direct result of the enhanced “consumer-engagement” strategy:

• Premium increases remained at single digits compared to national double-digit average increases.

• Claims trends were in the five- to six-percent range, compared to a national trend of 12-14%.

• There was a cumulative savings of $32 million and an average savings of nearly $625 per employee over the three-year life of the study.

• Future benefits costs became more predictable via more stable premium increases each year.

• Savings were achieved without having to restrict employees to just low-cost plan options; an array of plans and benefit designs were offered to reflect personal health care and budgetary needs.

• Prescription drugs compliance rates for chronic illness (heart disease, diabetes and depression) were in line with national quality score averages at non-CDHC health plans.

• Preventive health care services were on par with national utilization standards.

Lowering Costs through Engagement

Evidence to support consumer-driven plans, such as this study, is beginning to appear as the plans gain in popularity and become more widespread. Consumer-choice plans enable consumers to make smarter health care decisions and be more involved in the overall health care process, while offering employers the opportunity to more effectively hold the line on annual benefits costs.

Some argue that consumer-driven plans will drive people to stay away from the doctor because of costs. However, the study showed that employers that opted for employee self-enrollment tools and Web-accessible information saw better results than those who used traditional enrollment and plan-administration services. CDHC users saw medical spending decline by 10.8% versus employers that did not take full advantage of the tools.

Others argue that these plans are merely a way for employers to shift costs to their employees. Running counter to that theory, the study showed that overall employee benefit costs (those borne directly by consumers) stayed at approximately 21% over the three-year study for CDHC and non-CDHC groups. Likewise, the employer share remained static at about 79%. This result counters the notion that consumer-driven plans drive up premium costs more than traditional plans.

How Savings Are Achieved

Consumer-driven health plans, by design, engage consumers in their health benefits and ultimately guide them to make more educated decisions. Behavior change is one example – a change both in how they choose and use their benefits. Participants in this study modified their behavior regarding medical care – they chose different kinds of care in different settings for different situations.

The study showed that members were more likely to use preventive services, thereby relying less on costly interventions like inpatient hospital stays. Higher prescription drug compliance rates were seen in those enrolled in consumer-directed plans. In fact, the survey showed that those enrolled in consumer-directed plans had a more than 76% utilization rate of medications for chronic conditions, as compared to roughly 62% for those in traditional plans.

According to the data, it appears that when provided with the education and opportunities needed to better understand health plans, consumers create opportunities for reducing unnecessary medical spending while decreasing the threat of rising premiums.

Consumer-Directed Plans Gain Ground

Though relatively new, these plans are gaining momentum and becoming more commonplace. The study showed that, over time, employees tended to select the consumer-choice plans where savings and consumer engagement opportunities are maximized. For plans sold in “bundles,” 41% of employees chose the consumer-choice options, compared to an industry average of 16%.

For agents and brokers seeking better insight into how to take such offerings to market, four distinct disciplines appear as building blocks for acceptance among the successful consumer-driven plans examined in the study:

Product Design: A wide spectrum of plan choices, from traditional managed care to consumer-choice options, are offered to all of a company’s employees – not just those who opt for a “consumer-directed” plan.

Clinical Programs and Forecasting: Predictive modeling identifies and helps the “pre-sick,” thereby enabling members to seek preventive care before they have a chronic condition.

Financial Analysis and Forecasting: Budgeting tools let employers “pick their trend” by aggregating the risk pool and offering various contribution strategies for the employer to choose.

Consumer Education and Engagement: Interactive tools enable consumers to choose and use their benefits with confidence and success.

Agents and brokers ought to consider plans that provide employees with the essential tools and information needed to make their consumer-driven plan a success. Continuous education is a critical component when dealing with consumer-driven plans and that is why communication tools, whether online, via mail or in-person presentations, are critical to successful adoption.

If employees are regularly educated on a such things as health plan options and related costs and their previous year’s claim costs, they will become more involved in their overall health, which ultimately provides them the opportunity to achieve positive results and save money.

There is no question that health insurance in the United States has undergone tremendous change and will continue to pose challenges for consumers in the future. This study revealed that by providing consumers with the appropriate information and guidance, unnecessary medical spending can be successfully reduced and rising premiums can be stabilized, which is something that benefits us all.

Source: Health Insurance Underwriter magazine, May 2006 issue,

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