The Future of Consumer Driven Healthcare

1. The Future of Consumer Driven Healthcare Washington, D.C. February 16, 2010 Washington, D.C. February 16, 2010 Ronald E. Bachman FSA, MAAA President & CEO Healthcare Visions 404-697-7376

2. Healthcare Consumerism the Key to Cost Control • “Only Consumers Can Bend the Cost Curve” - CAHI • Have we Lost the American Character of • PersonalResponsibility?

3. The Missing Link Future State A Common Vision Process for Change POSITIVE CHANGE + + = Vision Process for Change Expensive False Starts + + = A Vision for Transformation NOT Cost Shifting, Tweaking, or Reform Creating a Healthcare Strategy Starts with a Clear Vision Desire for Change Desire for Change

4. Your Choice:Supply Controls or Demand Controls? • Plan Sponsors and Members have two basic choices to control costs: • 1. Managed care & HMOs - The “supply of care” is limited by a third party who controls the access to medical services (e.g. utilization reviews, medical necessity, gatekeepers, formularies, scheduling, types of services allowed), or • 2. Consumerism - The member controls their “demand for care” because of a direct and significant financial involvement in the cost of care, rewards for compliance, and the information to make wise health and healthcare value driven decisions.

5. Mega Trends Creating Demand Control Initiatives • Personal Responsibility • Self-Help, Self-Care, Self Reliance • Individual Ownership • Portability • Transparency (the Right to Know) • Consumerism (Empowerment)

6. 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.

7. The Core of Consumerism • The Unifying Themes • For • Healthcare Consumerism is: • Personal Responsibility & Behavioral Change “Implement only if it supports behavioral change consistent with the strategy”

8. 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

9. 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

10. 2nd Generation Consumerism Focus on Behavior Changes 4th Generation Consumerism Personalized Health & Healthcare 1st Generation Consumerism Focus on Discretionary Spending The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Care Accounts Wellness/Prevention Early Intervention Disease and Case Management Information Decision Support Incentives & Rewards

11. Company Data Warehouse & Metrics Process Integration & Disciplined Improvement Integrated Health Management ProgramAn Implementation Option for Multiple Generations General Manager The secret is cooperation and synergy between components supporting the corporate strategies Personal Care Accts. FSAs, HRAs, HSAs Integrated Absence Mgmt Acute Case Mgmt Disease Mgmt Programs Demand Management Prevention Wellness Utilization and Case Management NETWORK A / TPA A NETWORK B / TPA B

12. Potential Savings from Full Implementation of ConsumerismAchievement 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

13. 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.

14. 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.

15. Circle of LifeHow Long Do We Have? 1. From bondage to spiritual faith; 2. From spiritual faith to great courage; 3. From courage to liberty; 4. From liberty to abundance; 5. From abundance to complacency; 6. From complacency to apathy; 7. From apathy to dependence; 8. From dependence back into bondage