The jury is still out on whether consumer-directed health-care plans are merely shifting cost, or actually changing consumer behavior to improve the overall health/cost equation, as early studies suggested. But clearly CDH is an important battlefront between archrivals UnitedHealth Group and WellPoint.
UnitedHealth Group acquired Definity last December, and had one million lives covered under Definity and UHG's own legacy iPlan by July 1. UHG is targeting a total of 1.5 million members by next January, and will sunset iPlan by 2007.
UHG has aggressive plans for Definity Health. "As we move into 2006, we are going to further expand the reach of a number of the consumer activation capabilities that now reside in that CDH portfolio and extend them across our entire book of business," says Meredith Baratz, former iPlan manager and now vice president, marketing and business development, for Definity Health.
Baratz says capabilities to be extended systemwide may include tools to promote full use of generic drugs, timely individualized health coaching information provided with billing statements and other health-coaching capabilities from the CDH environment. "We think that there are dynamics in play that can and should apply, and be made available to consumers irrespective of the plan they're enrolled in," says Baratz.
In short, efforts to brand the entire organization as "consumer-driven" may get traction at UnitedHealth. Although Definity maintains its identity and keeps its staff, UHG is putting its own stamp on the organization by grafting in new leaders. In addition to Baratz, UHG has brought in Doug Robinson and Greg Kuhn, formerly of Deloitte Consulting; Abir Sen and Kurt Wolf, two of the original founders of Definity Health; and Bob Young, a consumer-preference expert formerly of Harrah's Entertainment.
In June, WellPoint completed its acquisition of Lumenos, the second-largest CDH provider. WellPoint hasn't had time to develop detailed plans beyond integrating Lumenos, chief strategy officer Doug Kronenberg said in mid-July. Like UnitedHealth, WellPoint also has a CDH unit to integrate with its new acquisition, and will leave the Lumenos staff intact.
CDH COST TRENDS
Early studies by Aetna and Humana have shown that costs of their CDH plans are increasing much more slowly than traditional managed-care programs.
Comparing the cost of allowed claims, Aetna HealthFund showed a 3.7 percent increase from 2002 to 2003 among continuously enrolled members, and a 6 percent increase from 2003 through the first three quarters of 2004. That's not a decrease in cost, but it's half the rate of increase of traditional managed care, or less.
In the 2004 Aetna study, a 12.3 percent decrease in primary-care-physician visits was coupled with a 3.6 percent increase in specialist visits. Consumers might be bypassing the traditional primary-care gatekeeper, believing they can make care decisions without that additional expense. Time will tell if this actually is happening, and if so, whether it reduces total cost or increases it.
The study found that half of the enrollees have some fund dollars remaining to roll over at the end of the plan year, evidence that consumers are engaging in cost control.
Enrollees with chronic conditions--diabetes, cardiovascular disease and asthma--held the same level of spending on several maintenance medications or tests. The significant 15.9 percent reduction in emergency-room visits holds out the hope that by maintaining the same level of management, plan members are containing or reducing the total cost of their conditions.
Humana's study began with a pilot in Louisville, Ky., from 2001 to 2002, which included managed-care options, a CDH-PPO plan and "SmartSuite" consumer engagement tools. The study investigates utilization under the CDH plan, plus savings from other changes to maintain parity in employee costs for the various plans.
Among CDH participants in the Louisville pilot, inpatient admissions were down 14.4 percent while outpatient usage was flat, physician visits were up 16.9 percent and prescriptions were up 5.5 percent. Humana concluded this meant that enrollees were essentially taking care down a notch if possible?replacing inpatient with outpatient, outpatient with specialist visits and specialist visits with primary-care physicians.
If the results of early studies play out, CDH plans could reduce total medical cost by improving consumer health-care utilization patterns. Will that happen, or will CDH plans become another strategy to simply shift costs to employees?
"That's certainly not how health plans describe their motivations," says Jay Savan, Health and Welfare Group leader in the St. Louis office of Towers Perrin. "Aetna, Cigna, UnitedHealth and WellPoint all understand that if their value proposition to an employer is, 'I can do a better job of helping you shift costs to your employees,' they're going to have a real short-term run at this. Some employers are going to be interested in that for a whole variety of reasons. But in the long run--36 to 60 months--that's a failed strategy."
Will employers agree? Among members of the National Business Group on Health, including many of the largest U.S. corporations, 8 percent now offer a CDH plan, 18 percent intend to offer them in 2006, and another 47 percent are considering such plans. Most members offer CDH plans as one option, and the CDH plan must be generous to compete with their other plans, "especially during the transition," notes NBGH President Helen Darling.
Employers offering CDH as one option should make it attractive enough to get 20 percent to 40 percent participation for a good distribution of healthy and unhealthy people in the plan, and to gain the full effect of utilization change, says Bill Sharon, Aon Consulting's national practice leader for consumer-driven health care.
"The greater the enrollment, the greater the savings--so the ultimate goal is to get as many people into a CDH plan as possible," says Sharon. "Employers who have done full replacement get even better savings than those who have done it on a 'slice' basis." Ultimately, he believes CDH plans will achieve the same penetration level as managed care. The components of a CDH plan can be overlaid on an existing managed care network, so CDH could be called an evolution of managed care.
If Sharon is right, the closest thing to a preview of the future is found at employers doing a "total replacement" of traditional managed care with consumer-driven health.
One such employer is PW Eagle, the second-largest U.S. pipe manufacturer with 11 plants and 870 employees, headquartered in Eugene, Ore. PW Eagle was one of the early adopters, doing a total replacement of traditional managed care with a Definity program on July 1, 2002, and is now in its fourth year.
PW Eagle offers 12 choices including base, standard and premium options. Preventive care is covered 100 percent, and the company funds a personal care account for each employee. Roughly 35 percent of employees carry a balance forward from year-to-year in their PCA. "A health reimbursement account is too complicated (for employees) to get just yet," says the company's vice president of human resources, Neil Chinn.
In the first year, 80 percent of employees enrolled in the premium plan, but now only 9 percent use it. PWEagle raised the employee contribution so the premium option is now more than twice the monthly premium of the base option. The base and standard options have a larger out-of-pocket deductible spending gap between the PCA funds and the plan coverage. Chinn likes a larger deductible gap: "Behavior doesn't change until people are in their gap," he says.
"Of course, you get a cost-shifting effect with a CDH plan as higher users pay more out of pocket than a traditional design," says Chinn. "However, there is, I believe, a depression-of-demand effect as the plan design encourages people to be more rational in their use of health care."
PW Eagle employee Mark DeGroot, a maintenance supervisor, and his wife both have jobs, giving their family a larger pool of employer-provided funds, and they don't need a primary-care referral to see specialists. DeGroot has the standard option now, but plans to bump back up to the premium option in a few years when they expect medical costs to rise.
For lower-income employees with little discretionary income, any gap spending can create real problems. Production worker Will Irvin didn't understand how the new plan worked, and his family ended the first year with a $1,600 balance due. They're reducing the balance, but the normally cheery Irvin filed a complaint through the U.S. Department of Labor.
Production worker Steven Woodford has to ask his wife to cut back on doctor visits and on some prescriptions, but not others--a tricky juggling act that gave her a rocky first year in the plan.
Shipping worker Dick Loomis has avoided out-of-pocket spending, despite his wife's cardiac condition. Some co-workers have "sold" vacation time back to the company to fund their plan, Loomis says, but he hasn't had to.
These four employees in a CDH early-adopter workplace have all changed their health-care behavior. They know that American health care is changing, but only one sees any positives.
Like America's consumer economy itself, consumer-driven health gives more control and choices to well-heeled consumers, but may leave others feeling stranded.
PETER MEAD, a writer living in Oregon, writes regularly about benefits issues.
October 15, 2005
Copyright 2005© LRP Publications