Health Care Reform

Health Care Reform Consumerism, Personal Care Accounts & Health Reform September 14, 2010 Ron Bachman President and CEO Healthcare Visions, Inc.

Patient Protection & Affordable Care Act GET OVER IT! IT’S THE LAW

Four Phases of Health Reform Legislation Regulation Compliance Litigation

Legislation • Look for follow up legislation, especially if Dems. Retain control of House & Senate. • PPACA may likely require a large “technical corrections” bill. • Politicians and special interests can use a technical corrections bill to pass new provisions and mandates. • A technical corrections bill could include entirely new provisions not a part of the original law. • For example, the public option could return as a “technical correction

Compliance • Consultants and lawyers will find expanded needs for their services. • Insurers will need to determine if they are in compliance. • Employers not in compliance will be subject to large penalties and fines. • Self-insured employers will require compliance audits to assure required essential coverages and mandates are included. • Each employee contribution will need to be measured against the government affordability standard. • Each year will likely produce new regulations and changes that must meet with compliance standards or employers will suffer penalties and fines.

Regulation • The regulatory process is likely to be a nightmare of delays, missed deadlines, and confusing interpretations. • In the bill there are scores of references to decisions to be made by the Secretary of H.H.S. • Major areas of implementation and coverage determinations for “essential benefits” are left to the discretion of the Secretary. • Lobbyists from every provider and self-interest group will converge on the bureaucracies to have their services included through regulation. • Ultimate coverage mandates are likely to go beyond what employer plans typically consider as medical/surgical benefits.

Litigation • Courts will decide what the language of the laws 2700+ pages mean. • New laws require a period of adjustment that can take decades to sort out the meanings and conflicts of legal interpretations. • Given the national impact and financial consequence of any single coverage requirement, every self-interest group wanting to be included in the essential benefits package will push litigation to add or solidify their coverage demands.

The Circle of Life The never ending cycle will then repeat itself, as new laws will be passed to respond to court decisions and off it goes again to repeat the four phases of legislation, regulation, compliance and litigation.

Megatrends, and Consumerism Megatrends represent major movements so powerful that the direction of change cannot be stopped. Federal laws can speed up or slow down megatrend forces. But, like dammed rivers megatrends will redirect themselves to achieve the inevitable result. Healthcare consumerism is such a force.

Consumerism Megatrend • Americans who: • bank electronically at ATMs, • purchase stocks over the internet, • buy and sell goods through eBay, • maintain their music with iTunes, • keep personal videos on Facebook, • seek employment through LinkedIn, and • control television programming with Tivo, will not accept limits, restrictions, waiting lines, or other barriers to their health - their most personal asset.

You Can’t Fight Megatrends

Healthcare Consumerism Healthcare Consumerism is about transforming a health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants. It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors.

Healthcare Consumerism Healthcare Consumerism is independent of plan design. Healthcare consumerism is a compelling force because it embraces lowering costs, improving quality, enhancing choice, and expanding access by empowering individuals and reinforcing personal responsibility. It is the force operating throughout our economy and is just beginning to be structured into healthcare and insurance.

Growth of Account-Based Health Plans More than fifty percent (50%) of employers now offer consumer-driven options. In 2010, nearly 18 million lives will be covered by consumer-driven plans.

The Core of Consumerism Personal Responsibility & Behavioral Change

The Evolution of Healthcare ConsumerismFuture Generations of Consumerism 2nd Generation Consumerism Focus on Behavior Changes Traditional Plans with ConsumerInformation 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare 3rd Generation Consumerism Integrated Health & Performance Traditional Plans Behavioral Change and Cost Management Potential Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

The Promises of Consumerism Major Building Blocks of Consumerism Personal Care Accounts The Promise of Demand Control & Savings It is the creative development, efficient delivery, efficacy, and successful integration of these elements that will prove the success or failure of consumerism. Wellness/ Prevention Early Intervention The Promise of Wellness Disease and Case Management The Promise of Health Information Decision Support The Promise of Transparency Incentives & Rewards The Promise of Shared Savings

American Academy of Actuaries 2009 Non-partisan CDH Consumerism Studies • 1st Year Savings: The total savings generated could be as much as 12 percent to 20 percent in the first year. • All studies showed a drop in costs in the first year of a CDH plan from -4 percent to -15 percent. A control population of traditional plans experienced increases of +8 percent to +9 percent. • 2+ Year Savings: At least two of the studies indicate trend rates lower than traditional PPO plans by approximately 3 percent to 5 percent. • If these lower trends can be further validated, it will represent a substantial cost-reduction strategy for employers and employees. • Cost Shifting: The studies indicated that while the possibility for employer cost-shifting exists with CDH plans, (as it does with traditional plans) most employers are not doing so, and might even be reducing employee cost-sharing under certain circumstances.

AAA Consumerism Study – Quality of Care • Preventive Care: All of the studies reviewed reported a significant increase in preventive services for CDH participants. • Chronic Care: Three of the studies found that CDH plan participants received recommended care for chronic conditions at the same or higher level than traditional (non-CDH) plan participants. • Physician Treatments: Two studies reported a higher incidence of physicians following evidence-based care protocols. • Care Avoidance: All of the studies indicated that cost savings did not result from avoidance of inappropriate care and that necessary care was received in equal or greater degrees relative to traditional plans.

Potential Savings from Full Implementation of Consumerism Achievement of savings and improved outcomes is dependent upon both the Type and Effectiveness of the programs implemented. *Excludes Carry-over HRAs/HSAs and any added Administrative Costs of Specialized Programs

PPACA & Consumerism Under PPACA, financial rewards based health status are increased from 20% to 30%. The Secretary of Health and Human Services has the authority to increase that limit to 50%. PPACA still allows unlimited rewards and incentives for participation and engagement.

Incentives & Rewards Rewards can include activities such as: • Participation in a wellness assessment, • Compliance with a condition management program (e.g. taking medications, diet, exercise, office visits), and • Maintenance of good health characteristics (e.g. blood pressure, cholesterol, nicotine use, body mass index) using bio-metrics.

The Evolution of Encouraging Personal Responsibility • Plan Design • Education Incentives & Rewards • Participation • Engagement • Compliance • Outcomes • Health Status

The Future of Healthcare Consumerism - Post PPACA • The employer world has moved to next generation healthcare consumerism with member engagement, rewarding healthy behaviors, and promoting personal responsibility. • Plans are now focusing on rewards and incentives. • Health Incentive Accounts (HIAs) are a special form of HRA that builds value only from rewards and incentives. • There are many other special use HRAs that may become the channels for healthcare consumerism.

The Future • Government and the movement to a political “nanny state” is a strong force in and of itself. • Cynics will point to increasing demands for federal support and government dependency by large parts of our population. • That may be a current political direction, but growing welfare and expanding entitlements is not a financially sustainable path and therefore cannot be a megatrend. • The future is not the opiate of government welfare, but the citizen empowerment of “Healthcare Consumerism.”

2nd Generation Consumerism Focus on Behavior Changes The Future of Healthcare Consumerism 4th Generation Consumerism Personalized Health & Healthcare 1st Generation Consumerism Focus on Discretionary Spending 3rd Generation Consumerism Integrated Health & Performance Personal Care Accounts Wellness/Prevention Early Intervention Disease and Case Management Information Decision Support Incentives & Rewards

Healthcare Consumerism The right strategy for employers wanting to protect their “Human Capital” with or without the influence and requirements of national health reform under PPACA.

Navigating Health Reform It is difficult to absorb the full implications of the health reform bill. Each week new regulations are being produced by the DOL, HHS, and IRS. With so much happening so fast how can employers, insurance agents, consultants, lawyers, or insurance companies make rational choices and be legally compliant? Adam Health Reform Navigator & Adam Preventive Care Navigator at www.adamhealthreformnavigator.net

Health Care Reform