Who’s Driving the Bus? The Rise of Consumer-Driven Health Plans

By Steve Toman, Account Director, Palio+Ignite Managed Markets stoman@palioignite.com

It’s no big surprise that healthcare expenditures have risen dramatically over the past few decades. The Centers for Medicare & Medicaid Services estimated that the United States spent nearly $2.6 trillion on healthcare in 2010, which is over 10 times the $256 billion it spent in 1980. And these costs have continued to escalate. Aon Hewitt reported in its “2012 Health Care Survey” that employers have seen the amount they spend on healthcare increase by 40% over the past 6 years, to an average of $8000 per employee. During that same time period, employee payroll and out-of-pocket expenses have increased more than 80%, to an average of $5000 per year. According to the US Bureau of Labor Statistics, healthcare costs represented 5.4% of total compensation in 1999 vs 7.3% of total compensation 1 decade later. This increase in costs to employees has had a significant impact on take-home pay, and has applied negative pressures to the overall economy. Some experts have suggested that the increase in employer health plan costs has been a major contributor to wage stagnation over the past 10 years.

So what are employers and payers doing about rising healthcare costs? One thing they are doing is offering consumer-driven health plans (CDHPs). These are generally defined as tax-advantaged payment accounts (health reimbursement accounts [HRAs] or health savings accounts [HSAs]) coupled with a high-deductible plan (deductibles typically in the thousands of dollars). Because CDHPs are less expensive than traditional low-deductible indemnity plans, as well as PPO, HMO, and POS plans, employers are moving more and more employees into consumer-driven plans. The idea is for employees to assume more ownership of their own health, and to bring some of the efficiencies of consumerism to healthcare. Other factors that are contributing to the development of CDHPs include:

• Health insurance exchanges (HIXs), brought about by the Patient Protection and Affordable Care Act (ACA)
• Legislation providing consumers with more options and transparency
• Increased consolidation of providers (integrated delivery networks [IDNs])
• New care models (accountable care organizations [ACOs])
• Private companies and payers promoting cost-of-care transparency

CDHPs have the potential for significant savings in healthcare costs. Haviland et al studied the potential impact of CDHPs and reported last year in Health Affairs that if enrollment in CDHPs were to increase to 50% of the employer-sponsored non-elderly population, the national savings in healthcare expenditures would total $57.1 billion annually. That’s real money. Potential savings like these are driving the increase in CDHPs. Aon Hewitt found that in 2012, CDHPs overtook HMOs as the second most common benefit design. PPOs are the most commonly offered plans (79%), followed by CDHPs (58%), then HMOs (38%). In addition, 52% of employers who offer a CDHP do so as a choice for their employees, while only 11% offer a CDHP as a full replacement plan.

Although CDHPs may help participants and employers lower costs, participants may not always get the quality they have become accustomed to with more traditional benefit designs. The Employee Benefit Research Institute reported that CDHP enrollees have a lower satisfaction rating (52%) than those enrolled in traditional plans (66%). And only 45% of CDHP enrollees would recommend their plan to friends or coworkers, compared with 55% of those in traditional plans.

Despite these shortcomings, CDHPs are becoming an increasingly popular choice for employers, payers, and employees. These plans represent significant savings in terms of premiums, but employees do need to shoulder significantly higher out-of-pocket payments than they have in the past. With an increasing number of patients behind the wheel of their own healthcare bus, CDHPs represent a unique set of challenges to hospitals, physicians, pharmacies, pharmaceutical manufacturers, and other healthcare providers. 

Source: Haviland A, Marquis MS, McDevitt R, Sood N. Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually. Health Aff. 2012;31(5):1009-1015.

Managed Markets Monday is a weekly series that provides insight into what we think it takes to meaningfully and effectively communicate in the managed markets space. Follow up with Steve at  stoman@palioignite.com.

Palio+Ignite is an advertising agency revolutionizing healthcare and pharmaceutical marketing by leveraging the art+science of today with the technology+imagination of tomorrow.

In this #ChalkChat, Tiffany Ryan, VP, Account Services at Palio shares 4 tenets to cultivating strong agency/client relationships.

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Tiffany at TRyan@palio.com.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

By Carly Israel, Account Executive, Managed Markets at Palio carly.israel@palio.com

Managed care has become an increasingly important concept as the cost of healthcare remains at the forefront of national dialogue. But when did managed care start and how has it evolved since? Let’s take a look at the origins of managed care and the key time periods that have allowed it to evolve.

The Early Years

In 1910, the Western Clinic in Tacoma, Washington began offering a variety of medical services to lumber mill owners and their employees in exchange for a premium payment of $0.50 per member per month. Often cited as the first health maintenance organization (HMO), the Western Clinic provided a range of services exclusively through its own providers. Over the years, this program expanded to 20 sites throughout Oregon and Washington and set the stage for similar prepaid medical care programs to develop.

During the period surrounding World War II, there seemed to be a shift in the way society thought about medical care. Employers began seeking health benefits for their employees, consumers began wanting improved and affordable care, and providers began pursuing enhanced patient revenues. As a result, several examples of early HMOs began popping up ‒ some of which are still in existence today. The Kaiser Foundation, which is still a prominent organization today, began in 1937 to provide medical care for workers who were building an aqueduct in southern California. Though these early organizations offered slightly different services, their goal was the same: provide affordable and improved healthcare and ensure a flow of patients and revenues.

The Adolescent Years

Though HMOs represented a significant shift in the way people sought out healthcare, it was not until the enactment of the federal Health Maintenance Organization Act in 1973 that HMOs began to play a more prominent role in the way healthcare was financed and delivered. The HMO Act, which was enacted during the Nixon administration, authorized start-up funding and ensured access to the employer-based health insurance market. There are several key features of this act that have helped shape the way HMOs operate:

• Grants and loans became available for the planning and start-up of new HMOs
• Specific state laws that restricted the development of HMOs were overruled
• Employers with 25 or more employees were required to offer up to 2 optional HMO plans as part of their employee benefits package            

The HMO Act also established the process in which an HMO could become federally qualified, which had a major impact on the establishment and growth of HMOs. Federal qualification meant that HMOs would have access to the employer market and could receive federal grants and loans. Issuance of these regulations resulted in rapid growth of HMOs.

In the early 1980s, there were several developments that helped further shape the evolution of managed care. Preferred provider organizations (PPOs) were created to have plans contract with a limited number of providers to obtain services for their members at a discount. In addition, utilization review became an important aspect of healthcare management. Plans began to perform analyses of hospital claims to identify utilization, and many corporations initiated programs for preauthorization and review for inpatient care.

The Recent Years

The period between 1985 and present day can be characterized by 3 stages: innovation, maturation, and restructuring. Let’s take a brief look at each stage:

Innovation: Physicians and hospitals began collaborating to form integrated delivery systems (IDSs). IDSs had 2 forms: a single legal entity made up of hospitals and hospital-employed physicians and a physician-hospital organization (PHO) to contract with managed care organizations. PHOs did not become important to the managed care environment because their reimbursement systems did not support the primary goals of managed care, which are cost containment and efficient care.

Another major development during this time was computer technology advancement. Managed care plans began using improved computer systems to generate statistical profiles of the services provided by physicians. This technology served as a means to assess the efficiency and quality of care that patients received, and it provided a basis for the adjustment of payment levels to providers. In addition, advances in computer technology have led to a much more efficient way to process medical and drug claims, which has lowered administration costs and allowed for superior information to be available. The collaboration of physicians and new and improved technology led to rapid growth and success of HMOs.

Maturation: During the early 1990s, the growth of PPOs surpassed the growth of HMOs. Conventional health insurance continually declined, and Medicare HMO enrollment grew from 1.3 to 6.3 million by 1999. In addition, external quality oversight activities became an important aspect of the managed care industry. Entities such as NCQA began accrediting HMOs and many employers started requiring NCQA accreditation of HMOs they contracted with.

This phase also saw the change of cost management efforts, which were almost exclusively inpatient hospital utilization. A significant amount of attention started to be paid to ambulatory services, such as prescription drugs and disease management, in addition to inpatient utilization.

Restructuring: In the late 1980s, the relationship between managed care, the healthcare delivery system, and the overall marketplace began to change. Payers began creating hybrid products, which led to a restructuring of services by the players in this space. As group-model HMOs declined, HMOs began expanding their offerings to include PPOs, while some contracted with employers on a self-funded basis so the risk for medical costs remained with the employer. Major commercial health insurance companies significantly increased their involvement in managed care. As you can see, the managed care environment became more and more complicated.

As anti-managed care rhetoric became popular in political debates during the early 2000s, employers began competing for employees by offering fewer managed health plans. HMOs saw periods of decline and periods of growth, mainly as a result of increasing Medicare enrollment. Insurance carriers found it necessary to sell hybrid products that combined elements of HMOs and PPOs, in combination with an increase in cost-sharing with consumers.

Perhaps most importantly, this time period saw a significant amount of consolidation. Many small health plans were acquired by larger ones, and employers began moving towards national companies at the expense of local health plans. As you can see, the managed care environment has continued to become more complex as it has evolved.

It is clear that managed care has dramatically changed over the years. From its inception in the early 1900s up until the present time, managed care continues to evolve as new advances become available and as changes in the market and economy occur. With the advent of the Affordable Care Act, managed care is sure to play an increasingly important role in the healthcare industry. It will be fascinating to see how it evolves even further in the coming years.

Source: Kongstvedt P. Managed Care: What It Is and How It Works. 3rded. Sudbury, MA: Jones and Bartlett Publishers, LLC; 2009.

Managed Markets Monday is a weekly series that provides insight into what we think it takes to meaningfully and effectively communicate in the managed markets space. Follow up with Carly at  carly.israel@palio.com.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

In this episode of #ChalkChat, Leah Warner, Account Director at Palio, provides a 101 on orphan drugs and the challenges associated with successfully marketing these products.

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Leah at ljwarner@palio.com.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

By Jim Mittler, PhD, Medical Director, Palio jmittler@palio.com

Ask any professional athlete, and they’ll tell you: The key to peak performance lies in awareness and measurement. Awareness means knowing how you’re performing and how the surroundings – whether it’s the lay of a particular green at Augusta National or the distance to the right field bleachers in Yankee Stadium – impact that performance. And measurement means tracking what’s working (and what isn’t) with ever-increasing precision.

Together, awareness and measurement can turn an average performer into a superstar. And it turns out that, in healthcare, those two disciplines can have similarly big payoffs.

Healthcare professionals have known for years that feedback loops – whether it’s a blood-sugar measurement or a heart rate monitor – not only tell the patient how he or she is doing at the moment; such indicators also provide the patient with tangible metrics. People inherently want to do better; thus, providing relevant, real-time, personalized data can motivate them to change their behavior.

Biofeedback isn’t just a 1970s golden oldie idea – it’s a core tool for wellness. The current plethora of mobile healthcare apps springing up on phones shows that many pharmaceutical and healthcare companies know the value of helping patients record and monitor key data. But now, a Silicon Valley–based start-up is showing off a prototype device that takes such monitoring to the next level.

The company, Scanadu, plans to produce a small device that, held to the head for a few seconds, transmits readings of the patient’s heart rate, breathing rate, temperature, and other medical data to a nearby smartphone.

It’s a world of difference from the once-every-six-months collection of data taken during regular check-ups – and that’s the point, according to entrepreneur Walter De Brouwer, founder of Scanadu. De Brouwer says that rapid, hassle-free checking allows for long-term data collection and also allows patients to see how their health varies over time and in response to various life events and patterns.

As intriguing as the device is, the story of how Scandau tweaked it on the way to market is just as interesting – at least for pharma marketers:

• Several designs and sensors were tested before getting to the goal of a 10-second test. More-accurate readings were sacrificed to keep the cost down – and keep the device from being seen as a major purchase needing approval from an insurance company
• Picking where to test for readings was a marketing exercise as well – some locations gave good information for one reading but not others, and some testing methods were deemed too invasive
• Even the color of the device was driven by data: Black, while helping to keep out light, was scary to children compared to other colors

Scanadu currently has an alpha-stage prototype but the commercial product is anticipated to be available in late 2013. The company’s ultimate goal? The medical equivalent of Star Trek’s Tricorder – and a more feedback-driven, participatory framework for medicine in which doctors and patients collaborate to make better decisions about health care.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

In this week’s #ChalkChat, Rob Kempton, VP, Brand Strategy Director at Palio, discusses how fire drills can burn brands and how to successfully avoid these situations.

Fire Drills Can Burn Pharma Brands

The most valuable asset of a pharma company is its product “brand” – the intangible that exist in the minds of the customer. Great brands are trusted and evoke a positive emotional response.

It takes significant investment and discipline to build a great brand with a clear and consistent purpose, but too often as a marketing or brand manager it can feel like your getting sucked into the weeds, where everyone is focused on the hot topic of the day – or what I call “A FIRE DRILL”.

It could be a competitor press release; a regulatory body requesting you pull a campaign; internal personnel changes, or more commonly it is internal politics, where competing interests are challenging your resolve. It can derail your big picture focus, and before you know it, you’re chipping away at the brand equity (or the trust) that you’ve worked hard to earn in the eyes of your customer. So how do you know if these fire drills are having an effect on your decisions?

“Playback”

Playback is essentially a quick brand audit – an internal exercise you can do right now. Gather together all the product data, services and communications that make up the total brand experience, and lay them out on a table. Make sure you’re bringing in historical branded engagements because your customer has probably interacted with your brand from Day 1.

Now, with a bird’s eye view, what can you see? Is the brand promise clear? Is it consistent? Is there confusion? Is there complexity where there doesn’t need to be?

Next, sketch out the journey your customer takes (before treatment, at the point of treatment and while they are on treatment). Now layer all the brand engagements your product has created on-top of that customer journey.

Is your brand engaging with your customer at a point of relevance to them – or to you? Are we using the appropriate media? Have we understood the context of need at each point along the journey? Hopefully this exercise can go some way to showcasing where your brand may or may not be meeting all of its obligations to the customer.

The kids keep demanding more and more…

How many times have you been in market research and a few of you in the back room jump on a comment that a grumpy customer makes? Before you know there is talk of a new campaign!

How many times have you presented to the sales team, and been told that the campaign is getting old, and we need something new to talk about?

Don’t get me wrong. I’m not suggesting we should be blind to feedback. Brands should be dynamic. As a brand steward, you should be opportunistic about offering new ways of telling the story, but it when it comes to changing fundamentals – brand stewards must stick to clear brand management principles:

1. Have a clear brand strategy process (or annual brand planning)
2. Have effective internal structures
3. Have a monitoring process in place

Regarding point 3, when it comes to monitoring, pharma companies typically measure brand success based on financial goals. But the best companies (Gilead and Pfizer being two such example), set up controls to understand and track their brands equity – the emotional relevance to their target customer – and have a clear sense of what services and communications matter. (note – digital media has also opened up new opportunities in regards to how we can measure relevance, with real time analytics)

Summary

In conclusion brand stewardship is hard. You’ve got to set direction; be opportunistic, but at the same time maintain strategic integrity in the face of competing interests.

If “FIRE DRILLS” are overwhelming, empower your communications agency to help. The best agencies can be an effective strategic partner, setting up process, providing brand strategy leadership, identifying insight, and implementing measures that can help direct decision-making and build consistent customer communications and services.

Thanks for following…

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Rob Kempton @robonthemoon.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

By Micahlyn Whitt-Flicker, Copywriter, Managed Markets at Palio, micahlyn.whittflicker@palio.com

Putting Your Money Where Your Health is in 2013: Plan-Sanctioned Wellness Programs and Member Incentives

It’s no surprise that the most popular New Year’s resolutions still revolve around making healthy lifestyle choices and smarter financial decisions. But it may raise a few eyebrows to learn that in 2012, US commercial healthcare plans spent upwards of $60 billion dollars on wellness programs designed to encourage members to turn annual health-related resolutions into long-term commitments. That’s some serious money to ensure that we hit the gym, eat our broccoli, and get regular checkups.

In previous years, beginning in 2009 and then increasingly more following ratification of the healthcare reform bill, plans rewarded enrollment in wellness programs mostly through financial incentives ‒ usually 1-time payouts made directly to members through their employers. The impact on enrollment statistics has been positive, with 61% of employees enrolled in plan-sanctioned wellness programs vs 26% enrollment for similar programs without incentive bonuses attached.

Though these statistics are impressive and demonstrate that members (consumers, in general) respond very well to cash incentives (rebates for gym memberships, enrollment in smoking cessation programs, etc), many plan managers feel that meaningful outcomes for plans and their members have not improved enough to justify the money invested in the development and administration of wellness programs. For example, 1 study showed that the percentage of wellness visits logged by members enrolled in wellness programs has not improved significantly for many plans. So, it seems enrollment in these programs is not working to inspire better preventative care practices. Also, costs associated with direct and indirect treatment for wellness program enrollees are, in many cases, comparable to members who are not enrolled.

Despite underwhelming ROI, it seems that plans are still very keen on making wellness programs work. According to a recent article in Managed Healthcare Executive, incentivizing consumer participation in wellness programs will become an even bigger priority for health plans in 2013, but the way in which programs and associated incentives are designed and managed will change to drive ROI and promote long-term behavior changes in member beneficiaries.

Plan managers now believe that more tailored, personalized wellness and incentive programs designed to suit individual member needs are the key. The hope is that this approach will create and perpetuate a true paradigm shift for better living that leads to better outcomes for all.

Incentive programs will now be geared toward connecting rewards to long-term outcomes and to encouraging the emotional affinity felt by participants toward those earned rewards. One way this emotional bond to wellness may be achieved is with what has been called the “gamification” of wellness program design ‒ incorporating employee challenges that infuse healthcare education, competition, fun, and a sense of community recognition into the experience. Gamification will likely be adopted more widely by healthcare networks and plans. 

Cash rewards aren’t going away, but will likely be linked to member performance and outcomes instead of a single payout upon initial engagement of a health-related product or service.

Rewards and recognition may also be tailored to individual member needs, as defined by employers and individual employees on an annual basis.

Does all of this mean that if a person enrolled in a wellness program loses 25 lb and/or quits smoking over a 1-year period, he or she may be eligible for a year-end wellness bonus and additional vacation time? Maybe. But he or she may also have to jump through a few hoops as well, literally.

Managed Markets Monday is a weekly series that provides insight into what we think it takes to meaningfully and effectively communicate in the managed markets space. Follow up with Micahlyn at  micahlyn.whittflicker@palio.com.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

In this #ChalkChat, Jim Mittler, PhD, Medical Director at Palio, discusses how social networks can improve and sustain positive health behaviors and health outcomes.

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Jim at jmittler@palio.com or @jim_mittler.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

In this episode of #ChalkChat, Langdon Jenkins, Associate Creative Director at Palio, shares 3 immutable laws of advertising.

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat. Follow up with Langdon at ljenkins@palio.com.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.

In this episode of #ChalkChat, Neall Currie, VP, Creative Director at Palio, shares insights into group think and the importance of decisiveness.

#ChalkChat is a weekly video series that brings you insights on branding, marketing and multichannel integration within the pharmaceutical industry. Follow us at #ChalkChat or follow up with Neall @neallcurrie.

Palio is an advertising agency revolutionizing pharmaceutical and healthcare marketing to create experiences that will Never Be Forgotten.