Consumers faced with new products or services are often skeptical. This is particularly true in health care. But when packaged with effective tools and communicated with plain language, the right innovations can move quickly into the mainstream.
Consider shopping online, listening to music on an iPod or doing taxes with TurboTax. Any one of these activities could have been viewed as overly technical and potentially daunting to consumers — and could have failed miserably. Instead, their architects looked at complex consumer needs, invested in R&D and developed solutions that consumers could use and understand. The result? Genuine consumer behavior change.
Consumer-directed health plans (CDHPs) haven’t enjoyed quite the same surge in popularity, but their broad impact across the entire health care industry is indisputable.
The rate at which organizations are adopting a CDHP increased by more than 20 percent between 2007 and 2008, according to a recent annual employer survey conducted by Watson Wyatt and the National Business Group on Health (NBGH). And companies with a CDHP report a two-year average cost trend significantly below that of companies without a CDHP (5.5 percent vs. 7 percent).
Like those other consumer-driven examples, organizations that have experienced CDHP success have done it by getting to know their consumers, testing the product and communicating clearly.
Today, 47 percent of large employers offer a CDHP of some type; for 42 percent of these employers, enrollment in the CDHP is over 20 percent, according to the survey. No one is sure what the enrollment in CDHPs will be going forward, but some are predicting more than 40 million by 2010.
While the number of plans in place has been increasing, so has the number of carriers. The few key players in the early years (Definity Health, Inc., Lumenos, Inc., and Destiny Health) have been joined by virtually all health plans and large third-party administrators.
Why the popularity? Employers offer CDHPs in hopes of reaching two primary goals: consumer engagement and cost control. Ideally, a properly designed and implemented CDHP is a vehicle for achieving both. When a plan is implemented and communicated well, employees of all risk categories understand how it supports them and their individual health needs.
Identifying and prioritizing the goal depends on the culture and strategy of the organization. For medical technology giant Medtronic, one of the early adopters of a CDHP with a health reimbursement account in 2001, the goal was — and still is — employee engagement.
“Medtronic wanted a different approach to improving employee awareness and increasing employees’ involvement in health management. For us, it was much more about engaging our employees than about networks and cost control,” says Roger Chizek, Medtronic’s director of U.S. benefits.
Roger Chizek, director of U.S. benefits, Medtronic
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Early adopters will tell you the CDHP journey hasn’t always been smooth sailing. Many have faced administration, communication and integration challenges, and some have found low enrollment numbers disheartening. Lessons learned from these trailblazing employers should be taken to heart:
1. Communicate, communicate, communicate.
2. Change or eliminate the popular benefit plan so employees have to pay attention at enrollment.
3. Allow enough lead time to thoroughly test systems and plan setup and data flows between vendors and administrators.
4. Reduce CDHP premium contribution levels to be lower than in current plans to drive enrollment.
The effort is about the same whether you achieve 2 percent enrollment or 50+ percent enrollment, so getting it right is crucial.
Medtronic’s CDHP Results
With about 20 percent enrollment in its CDHP, Medtronic has seen favorable health care cost trends for the past two years — with costs below national averages.
Medtronic employees have reported high satisfaction with their CDHP plan, especially the account balance feature and tools. Some employees even serve as informal plan advocates with co-workers.
Compared with their peers in other plans, CDHP members use tools more often, call the nurseline more frequently and have fewer emergency room visits. And their use of preventive services matches or exceeds that of non-CDHP participants. CDHP members also are using generic substitution (when available) 90+ percent of the time.
“When we first implemented our CDHP, our concern was more than access to care; our employees could get care anywhere,” says Chizek. “What we really liked was the account feature, the new, fresh ideas and the tools that encouraged consumers to become more involved in managing their health. In addition, we wanted them to understand the connections between cost, care and coverage. At the same time, we wanted to provide our employees with a very different type of plan — one in which they had control rather than a managed care plan.”
Have the Plans Worked?
CDHPs have worked in a variety of ways. Employees are managing their health and making health care choices differently. They’re using more tools and changing some of their behaviors.
“In the first few years, employees in the CDHP were better consumers than those in other plans,” says Chizek. “But today, there’s been a carryover effect. We think everyone has become a better consumer regardless of the health plan they may participate in.”
Even for companies that don’t have a CDHP, the energy around individual consumerism has been beneficial. Many health plans and plan sponsors offer the same portals, same tools and similar services (e.g., health coaches) to employees regardless of which plan they’re enrolled in.
Perhaps more significant is the way the insurance industry has responded to these models.
“At the time CDHPs were introduced, big plans were not willing to move to something so radically different than their standard products and stayed on the sidelines as reluctant observers,” says Chizek. “Since then, those plans have all developed their own CDHPs or bought some of the early innovators. Now virtually all health plans have components of the early CDHPs. And there is increased awareness around cost and treatment options on the part of all participants.”
Down the Road
As CDHPs evolve, Chizek foresees greater emphasis on consumers managing their own health and financial responsibility and less on the deductible or the account. “Moving forward, employers should use marketing and more communications to increase awareness about health management programs,” Chizek says. “They should use incentives to encourage healthy behaviors, with consumers earning points or other incentives for various activities and programs. Plans are now being integrated with a variety of wellness programs and ‘health coaching’ of employees. The goal is to assist them in accessing the right kind of care and improving their health status.”
Incentives are just one piece of the CDHP puzzle, however. Employers that offer CDHPs are wondering where to go next. These organizations need to balance the role of health care benefits related to attraction and retention with the goal of financial metrics that call for lower trends.
The plans, and the industry as a whole, should respond by leveraging lessons learned from marketing other consumer products:
The industry also should keep in mind that, even in this real-time world of text messaging and e-mail, employees sometimes still want to talk to a person to wade through complex questions.
As the CDHP journey progresses, innovations will continue to emerge. Some models are building broad databases and aggregating data from health risk assessments, claims, preferences, health monitoring devices and other sources. Several FORTUNE 500 companies are doing it now. Combining this information with Web and telephonic resources, CDHPs will continue to introduce new tools, services and programs to consumers.
Even for those who were skeptical in the beginning, itís hard to deny the impact of CDHPs on all consumers, in all plan designs. The market is now well-positioned to expand its focus beyond deductibles and account features to an ongoing objective of healthy consumer habits.
Best-Performing Company Results
The 13th annual National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care found that enrollment rates in CDHPs are strongly linked to lower health care cost trends. And companies with at least 50 percent of their population enrolled in a CDHP have a two-year trend about half that of non-CDHP sponsors.
The 2008 survey showed five key areas where best-performing companies get results: