A Case Study in Health Plan Responses: WellPoint
National Health Policy Audioconference
Dana E. McMurtry
Vice President, Health Policy & Analysis WellPoint Health Networks Inc.
July 30, 2002
1
Agenda
• Current Cost Trends • Customer Challenges • WellPoint’s Response
• The Future?
2
Current Cost Trends
Health Benefit Cost Inflation
Employers Expect Health Care Costs to Continue Rising All Employers
20 16 12 8 4 0
1987 1988 1989 1990 1991 1992 1993
18.6% 16.7%17.1%
12.1% 10.1% 6.9% 8.0% 6.1% 2.1% 2.5% -1.1%
1994 1995 1996
12.7%* 11.2% 8.1%
7.3%
0.2%
1997 1998 1999 2000 2001 2002E
-4
* Estimate Source:Mercer/Foster-Higgins, 2001
3
Current Cost Trends
Hospital, Physician and Rx Costs
Annual Percentage Change Per Capita in Health Care Spending
20
Prescription Drugs
15 10 5 0 -5 -10
* Data through March 2001, compared with corresponding months in 2000. Source: Health Care Financing Administration, 2000
4
11
15.2 12.5 Hospital Outpatient Physician Services 4.8 3.5 Hospital Inpatient
7.7
1.6
1996
-4.4
1997
1998
1999
2000
2001*
Current Cost Trends
Multiple Cost Drivers
• Hospital Consolidation • Pharmaceutical Practices • Consumer Expectations • Aging Population • Medical Technology • Legislation
5
Current Cost Trends
Summary of Cost Drivers
The Factors Driving Costs in Health Care 2001-2002
Increased Consumer Demand Litigation & Risk Mgmt Other General Inflation (CPI)
Drugs, Medical Devices & other Medical Advances
Government Mandates & Regulation
Source: PriceWaterhouseCoopers, 2002
6
Rising Provider Expenses
Agenda
• Current Cost Trends • Customer Challenges • WellPoint’s Response
• The Future?
7
Customer Challenges
What Employers Want
Administrative Ease
Budgetability
Choice
8
Source:PriceWaterhouseCoopers LLP, 2001
What Employers Want
Customer Challenges
Strategies to Control Costs
Actions Employers Anticipate Taking to Manage Health Care Costs in Next 12 Months
Increase Consumerism
Add high-deductible plan Increase employee choice Use ROI calculations in decision-making Purchase DM programs Develop direct contracts
19% 28% 19% 8% 5% 8% 11% 10% 20% 30% 15% 15% 11% 14%
43% 19%
Use clinical risk adjustment 3% in plan selection & pricing
0%
40%
50%
60%
Currently in place
Source: Watson Wyatt Worldwide, 2002
9
Planned in the next year
Customer Challenges
What Consumers Want
Competing demands of...
• Choice • Unlimited benefits • Access to new medical technologies • Brand name drugs • Broad / less restrictive networks
…All at an affordable premium
10
What Consumers Want
Current Cost Trends
U.S. Employers Shoulder the Burden
Consumer Out of Pocket Spending as a Percent of Total National Health Spending, 1986-1996
30 25 20 15 10 5 0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Source: OECD, 2000, in PricewaterhouseCoopers’ HealthCast 2010, 1999
11
Austria Denmark Finland Germany Ireland United Kingdom New Zealand United States
Agenda
• Current Cost Trends • Customer Challenges • WellPoint’s Response
• The Future?
12
WellPoint’s Response
WellPoint’s Response
• Participation in All Markets
• The “Health Security” Model • Focus on Product Innovation
13
WellPoint’s Response
Participation in All Markets
Size
Individual 1 Senior 1 Small Group 2 – 50 Key Accounts 51 – 250 Major Accounts 251 – 2000 Special Accounts 2001+ Public Entities State Sponsored Programs Organized by Customer Segment
14
WellPoint’s Response
The “Health Security” Model
• Choice of Products • Network Development • Clinical Collaboration • Targeted Medical Management • Member Information
15
Focus on Product Innovation Individual & Small Group
PlanScape
LOWER PRICED
PlanScape Products
WellPoint’s Response
MEDIUM PRICED
HIGHER PRICED
HMO Coverage
Basic PPO 1000 PPO Saver PPO Share 2500 EPO
FlexScape
LOWER PRICED
PPO Share 1500 HMO Saver PPO Share 1000 Individual HMO PPO Share 500 BC Life Share 1000 BC Life Share 500
MEDIUM PRICED HIGHER PRICED
Basic PPO High Deduct. PPO Saver PPO Saver HMO
16
PPO $40 Copay PPO $30 Copay
HMO 100% PPO $20 Copay PPO $10 Copay Ultra Premium PPO $10 Copay
Focus on Product Innovation Individual & Small Group
WellPoint’s Response
Further choice at the member level
• FamilyElect for Individuals
• EmployeeElect for Small Groups
17
Focus on Product Innovation Large Group
WellPoint’s Response
• ASO Services
• Rental Networks For Self-insured
• Network-Based Products
• Consumer-Driven Plans
18
Focus on Product Innovation Consumer-Driven Plans (Large Group)
Component
HSA
WellPoint’s Response
Experimenting with Defined Contribution
Features
• • • • • • Employer funded First dollar coverage Funds can be used for any service covered by the plan Applies toward deductible Access to negotiated discounts Unused funds roll over to following year
FSA
• Employee funded • Pre-tax • Funds can be used for out of pocket services if HSA depleted, copays and other IRS allowed services not covered by the plan • May apply toward deductible • Use it or lose it
• • • • High deductible Preventive care may be covered not subject to deductible 90%/70% or 80%/60% once deductible met OOP maximums
PPO Plan
19
Focus on Changing Industry Practices
WellPoint’s Response
Council for Affordable Quality Healthcare
A coalition of 24 health plans (representing 100 million members) & 3 principle health plan associations who:
• Are committed to improving the health care experience for consumers and their doctors • Share a common vision that some of health care’s pressing concerns can best be addressed collectively
20
Industry Collaboration
WellPoint’s Response
CAQH Projects
• • •
Save Antibiotic Strength Partnership with CDC & physicians to educate public on antibotic resistance Formulary Website - Easily accessible, standardized, web-based database of health plan formularies Physician Credentialing - Centralized electronic database for national single credentialing application
21
Agenda
• Current Cost Trends • Customer Challenges • WellPoint’s Response
• The Future?
22
The Future?
• More consumer choice and
involvement
• The potential of disease management
is realized
• Genomics (and cloning?) will result in
new therapies not yet contemplated
• The interaction between aging, medical
and technological advances, and consumerism will challenge everyone
23
24