Sick, Healthy Participants to Decide Health Care | Health Care Solutions and Benefits Management

By Ronald E. Bachman, Chairman of CDHC Solutions Editorial Advisory Board

Health care consumerism is about transforming an employer’s 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 health care purchasing behaviors.

The five key building blocks of health care consumerism are:

Personal accounts (FSAs, HRAs, HSAs)
Wellness/prevention and early intervention programs
Disease management and case management programs
Information and decision support programs
Incentive and compliance reward programs

The 2009 American Academy of Actuaries multi-year study of health care consumerism concluded that first year claims could be lowered by 12%-20% with future cost trends decreased by 3%-5%. Employers and insurers would be wise to consider health care consumerism as allowed under the Patient Protection and Affordable Care Act (PPACA).

Under the legislation, financial rewards based on health status are increased from 20% to 30%. The Secretary of Health and Human Services has the authority to increase that limit to 50%.

In addition, PPACA allows unlimited rewards and incentives for participation and engagement. It is the creative development, efficient delivery, efficacy, and interaction of these elements that will prove the success or failure of health care consumerism.

There are two basic requirements for a successful health care consumerism strategy. A plan based on health care consumerism must:

Encourage and attract enrollment from the sickest members, as well as the healthy; and
Work for members not wanting to get involved in decision-making as well as those who do.

Four Generations of Health Care Consumerism

Experience from the early adopters of CDHP plans formed the basis for improved versions, creative new ideas, and exciting product designs. First-generation health care consumerism focused on plan design and discretionary expenses (prescription drugs, office visits, and emergency room use). These plans mainly impacted the 80% of members who generate only 20% of total health care costs. Second-generation products are now available that focus on behavior changes, including chronic and persistent diagnoses (e.g. diabetes, asthma, congestive heart failure, depression).

More improvements are rapidly on the way to effectively deal with the 20% of the population that generate 80% of total costs. Second, third, and even fourth generation products are being developed and envisioned as the transformation to health care consumerism is now well under way.

First-Generation Consumerism—Focus on high-deductible plan designs, implementation of personal care accounts (HRAs, HSAs, FSAs), and basic decision support tools. Impact: discretionary expenses.

Second-Generation Consumerism—Focus on behavior changes and the use of all plan designs with individual and group incentives/rewards to effectively change health and health care purchasing behaviors. Impact: chronic and persistent conditions, prenatal, wellness and preventive care.

Third-Generation Consumerism—Focus on health and organizational performance and the integration with how consumerism and behavior change affects work performance and the corporate bottom line. Impact: Organizational health, turnover, absenteeism, productivity, disability, unscheduled sick days, creativity, teaming.

Fourth-Generation Consumerism—Focus on lifestyle, life cycles, personal health needs, and the impact of how behavior change affects personal health and health care. Impact: Life cycle needs, personal health, genetic predispositions, predictive modeling, healthy habits, and wellness.

It is important to recognize that each generation builds on and includes the previous generations. One generation of health care consumerism does not necessarily replace the prior generation.

Also, no one stakeholder (e.g. employee, employer, insurer, provider) can advance too far into the future without the involvement and participation of the others.

As such, we can expect a slow but methodical advancement over the next few years as the iterative process of demand for products and services are met and new demands are made and needs surface to challenge the entrepreneurial spirit of the market.

About the Author:

Ronald E. Bachman FSA, MAAA, is president and CEO of Healthcare Visions Inc. He is a senior fellow at the Center for Health Transformation, the Georgia Public Policy Foundation, the Wye River Group on Health, and the National Center for Policy Analysis. Ronald is the chair of the editorial advisory board of CDHC Solutions and can be reached at #ronbachman[at]healthcarevisions.net. For an expanded version of this article, please see the Health Care Consumerism community at CDHCSolutionsmag.com.