BENEFITS BUSINESS
Communication and education were two of the major aspects of marketing C-DHP products. It is a continuous sales process that requires many layers of education of both employers and employees.
By Michael J. Moody, MBA, ARM
(This month's column is written by guest columnist Mike Moody, who reports on the Consumer-Driven Healthcare Congress meeting in Miami. Mike is a frequent contributor to Rough Notes. Len Strazewski will return next month.)
That is the $64,000 question that the Consumer-Driven Healthcare Congress' Winter Symposium tried to answer. About 120 interested individuals gathered in Miami in November 2002, to listen to speakers from a variety of backgrounds. Headlining the one-and-a-half-day event were presentations from insurers, quality care vendors, actuaries, consultants, law firms and companies that have implemented consumer-driven health plans (C-DHP).
Early adopters
Several far-sighted employers could see the value of consumer-driven health plans early in its evolution. As a result, some of these employers are now moving into their second year of participation. One of the highlights of the symposium was reports by several employer sponsors on the status of their C-DHP program implementation.
One of the companies attracted to the C-DHP concept early on was Hannaford Bros., a retail supermarket chain located in Maine. Peter Hayes, Hannaford's health benefit strategist, reported on the firm's progress to date. He noted that it is impossible to "manage something you do not understand," and this was clearly the case with health care. Like consumers across the country, Hannaford's employees were insensitive to health care costs since their out-of-pocket expenses were limited. However, after observing double-digit cost increases for the past few years, Hannaford decided it had to do something to stop the bleeding. After researching the marketplace, they chose Definity Health, due to their practice of working with "best in class" vendors.
Hayes stated that his firm did not decide to move to the C-DHP to save money, but rather it was the recognition that there is a new paradigm whose core focus is consumerism. The advent of consumerism coupled with concerns about quality care was the driving force for Hannaford's movement to C-DHP. Results to date have been very encouraging. The C-DHP has the highest employee satisfaction among health plans offered by Hannaford. This is confirmed by re-enrollment figures that are in the high 90% range. Company management believes that C-DHPs are a win-win scenario, since increased consumerism in the long run will save money for both employers and employees.
Charter Communications in St. Louis, Missouri, was another early adopter of the C-DHP concept. And, according to Don Broecker, director of employee benefits, one of the company's primary strategies was to "provide medical benefits with high value." Charter was like a lot of other employers--despite offering good health care programs, they were not appreciated by the employees. In late 2001, Charter decided to offer the Definity Health option to their employees. Initial participation was about 5% of the company's population. During the 2002 policy period, they provided significant amounts of information to the employees and felt that they would obtain a higher level of interest in the C-DHP option.
Among Charter's observations during the first policy period was the value of the "tools and resources" that were provided as part of the Definity program. The employees participating in the C-DHP were very pleased with these various information services. As a result, Charter decided to offer Definity's "tools and resources" to all of its employees, regardless of which health plan they were in. Although the addition of these services was an extra cost to Charter, the company believed that it was warranted. "While the C-DHPs are the end game," Broecker stated, "we still need to educate our entire staff." The second year, enrollment in the C-DHP options (currently there are two) increased to about 10.8%.
Providers on parade
As the C-DHP movement begins to gain momentum, it is catching the interest of many. While only a handful of innovative start-up companies introduced this concept several years ago, old-line health carriers are now introducing new C-DHP products. A number of these traditional health providers made presentations at the symposium, but it was a panel discussion by the "founding fathers" of the C-DHP movement that provided the most interest.
Participants in the panel discussion included Kyle Rolfing, senior vice president and co-founder of Definity Health; Doug Kronenberg, chief strategy officer of Lumenos; Chris Henchey, chief operating officer of Choicelinx Corp.; Marty Reader, senior vice president of eBenX, Inc.; and Lindsay Resnick, chief marketing officer of HealthMarket, Inc. The panelists were given an opportunity to provide an overview of their firm's current situation and were asked a variety of questions regarding their company's business model.
While the information provided during the panel discussions was wide ranging, several specific areas dealt with the marketing of C-DHPs to employers and employees. Most of the panelists agreed that communication and education were two of the major aspects of marketing C-DHP products. Resnick noted that for the most part, it was a continuous sales process that requires many layers of education of both employers and employees. Kronenberg stated, however, that consumers are getting smarter--"they get this, and they get it fast."
Those carriers that market through the independent agency system noted that it takes a special knowledge to effectively market these products. Resnick said that HealthMarkets's primary prospects are small employers, and initially they use local sales people to assist the agent until the agent is comfortable with the information and the process. At that point, they will allow the agent to prospect on his or her own.
There was agreement that the start-up firms had a number of advantages over the traditional health carriers. The obvious advantage is that they can take maximum advantage of today's technology, while their traditional counterparts have to struggle with outdated legacy systems.
Additionally, the start-ups have complete flexibility to associate with only "best in class" partners. Kronenberg stated that it was important to continue to provide innovation since that was what got them there initially. "You need to stay ahead of the curve." All agreed that it was also important to maintain the 90+% customer satisfaction and re-enrollment figures gained to date.
While each participant believed that the industry faces a number of challenges, they all believe that C-DHPs are the wave of the future. Henchey said that one of the biggest problems was trying to meet employers' expectations for a speedy implementation within short time frames.
Another challenge will be continued growth, according to Rolfing. He said that Definity has plans for 500% growth per year for the next five years. Sustaining such growth without sacrificing customer satisfaction will be a real test. All agreed, however, that getting the consumer engaged and educated to appreciate that all doctor visits are not $10 will be a major hurdle for the entire industry.
Aetna is one of the traditional health carriers that has recently introduced a C-DHP option. Paul Shumway, vice president of national accounts, provided details of their offering. Shumway stated that Aetna believes that consumers are empowered patients who have access to useable and actionable information and a financial incentive to use it. While many people have negative feelings towards managed care, he said, "We never had managed care, just managed contracts."
While educating the consumer is important to Aetna, one of its key strategies is to concentrate on critically ill employees. Aetna's current book of business shows that "1% of the claims drives 32% of the claims costs, while 62% of the insureds do not spend any amount on claims." In order to address this issue, Aetna will need to "find potentially catastrophic patients at the right time" and get them into a disease management program quickly. By doing so, they believe that they can reduce overall costs and improve outcomes.
Kim Bellard, vice president of e-marketing for Highmark Blue Cross Blue Shield, provided an overview of his organization's movement to C-DHPs. One of the primary findings thus far is that the movement has changed the time line of the sales process. They are realizing that C-DHPs are a much longer term sale. Additionally, it also requires a special force that is able to discuss the many aspects and advantages of the C-DHPs.
Currently, Highmark, which was one of the first "Blues" to adopt a C-DHP model, has more than 100 of these accounts. From a planning standpoint, Bellard believes that C-DHPs will be a key product for Highmark in future years. He also noted that many of the other regional Blue Cross Blue Shields have expressed significant interest in these products. However, he thinks that currently only about 10 other "Blues" are offering C-DHPs.
Quality takes center stage
One of the collateral benefits of the overall consumer health movement and more specifically consumer-driven health plans is the renewed focus on quality health care. While most people believed that quality was a necessary part of health care, they are now beginning to see that that is not necessarily the case. As a matter of fact, the quality of health care can vary greatly from one setting to another.
One of the presenters speaking on this issue was Larry S. Boress, executive director of the Chicago Business Group on Health, one of the chapters of the Midwest Business Group on Health (MBGH). In 2002, MBGH published a pioneering study titled "Reducing the Cost of Poor Quality Health Care." The study's bottom-line conclusion was that approximately 30% of the dollars spent on health care today was for poor quality care and that amounts to $1,700 to $2,000 per employee, per year.
Boress said that consumers must begin to be concerned with their health care choices. "More information is obtained in selecting a refrigerator, than selecting one's doctor," he stated. Based on MBGH studies, as well as the work completed by the Leapfrog Group, it has been found that there are "significant differences in health care, both from quality and safety standpoints, and the consumer needs to know this."
A number of organizations are trying to fill this information void by providing "credible data" to consumers. One of the companies that is assisting consumers with state-of-the-art decision tools is Subimo. The company's president, Ann Mond Johnson, provided an overview of how quality metrics can assist a consumer. She noted how much consumer needs differ with consumer-driven health plans. Previously, consumers needed to make only one decision per year at open enrollment and all the rest were made for them. Now, however, cost/quality decisions will need to be made frequently during the policy period, on a variety of topics. While it may appear that this is an overwhelming task, Johnson stated, "When given basic information, people get it." The key, however, is providing the information in a format that is actionable.
Another firm that is developing a unique information service in determining the most appropriate health care decisions is iHealer. Its services are designed to assist consumers after the initial diagnosis, explained Chris Saigal, MD, the firm's chief medical officer. Their approach is to provide specific information that is based on an analysis of all available literature on each medical condition. The information service is called Healthcare Intelligence Technology (HINT). The HINT program provides accurate patient treatment decision support systems, which combine patient preferences for quality of life with evidence-based outcome data. Data generated by the RAND Corporation can assist in providing optimum treatment strategies for individual patients.
It's clear from the tone of most presenters at the symposium that quality health care will be a key component to the consumer-driven health movement. As Larry Boress of the CBGH noted, "we are now entering the decade of accountability" where engaged consumers need access to credible, actionable information on a timely basis. Based on the presentations provided, there are a variety of vendors who are offering these services.
Final notes
The presentations at the symposium were good and generally well received by the audience. Several impressions lingered after the meeting. The first is that, at this point, there is no denying that C-DHPs are becoming the only game in town. Most people recognized that managed care is at the end of its usefulness and there are few alternatives. Accordingly, many companies are committing people and dollars to the development of C-DHP options.
Additionally, it looks like most employers are willing to introduce C-DHPs only via a sliced approached (one option in their benefit health program) despite the fact that they offer limited cost effectiveness on this basis. Many presenters noted that employers will be forced to adopt them as replacement programs as they watch double-digit increases in the traditional market in the coming years.
Due to the newness of the product, C-DHPs continue to offer significant opportunities to those property and casualty agents who want to expand their operations into the life and health arena. Corporate America in general and CFOs in particular are looking for innovation with regard to their health insurance programs. Forward looking P-C agents should grasp this opportunity to offer value-added products and services to their business clients. This "window of opportunity" will be short lived, so P-C agents need to implement strategic plans to incorporate C-DHPs into their 2003 marketing programs. *