HFMA VIEWS

Scott MacStravic, Ph.D.

Like all employers, healthcare organizations (HCOs) are probably considering, if they have not already made the decision to offer, a “consumer-directed health plan” (CDHP) model of sickness care insurance to their employees. A growing percentage of employers, as well as politicians and healthcare reform gurus see this model as promising a “solution” to the sickness care cost crisis.

Critics, however, argue that the high-deductible and health savings account features of CDHPs will make them unattractive, even scary to families concerned about their risks for or existing chronic conditions. If HCOs, and other employers for that matter, cannot attract such high-risk/high-cost employees to CDHPs, they are missing the opportunity to do something about the causes of roughly 70% of all sickness costs, and essentially “preaching to the choir”.

Moreover, chronic conditions and the most powerful risks that cause to them (e.g. smoking, high stress, physical indolence and unhealthy diets) tend to be the major promoters of employee absences and “presenteeism” (reduced productivity when at work). A recent study reported by the proactive health management (PHM) vendor HealthMedia, Inc. in Ann Arbor, Michigan reflects the added costs employees with high-risks and chronic diseases.

The average cost per affected employee for a series of risks and conditions, based on an analysis of 175,000 employees being “treated” by its PHM programs, amounted to:

• Obesity – 29% prevalence, $2760 
• Smoking – 13% prevalence, $2695 
• Stress Problems – 27% prevalence, $4561 
• Depression – 28% prevalence, $4680 
• Sleep Problems – 34% prevalence, $2733 
• Chronic Illness (7 diseases) – 43% prevalence, $3811 
• Nutrition Problems – 43% prevalence, $2050 
• Physical Activity – 61% prevalence, $1876

[These figures are based on the report “Revolutionizing Behavior Change: Achieving and Measuring Productivity Improvements” HealthMedia.com Oct 11, 2006, though the calculations of costs per affected employee were made by the author.]

These costs were based on an average employee annual compensation of $50,000 per year. The average wages for hospital workers, according to Medicare, which uses average wages in calculating DRG payments, is more like $58,000, for example, so these lost productivity costs probably understate the costs to HCOs. Actual costs to particular HCOs will depend on the prevalence rates of these and other disease and risk conditions in their workforces, of course, as well as on their particular compensation levels.
 
These productivity losses were in addition to the sickness care, workers compensation and disability costs generated by such high-risk employees. Of course, a CDHP strategy could ignore such employees and force them into CDHPs as the only option offered by the HCO. Or it could continue to offer traditional sickness care insurance, and force such employees to live with far higher premiums if most of the healthy employees opt for the CDHP option. Employers might simply hope that by making sickness care coverage worse, or more expensive, they will drive high-risk employees and dependents away to other employers.

Of course, with severe shortages in many professional categories a common problem for most HCOs, such a strategy might not be feasible, and is certainly morally questionable. But CDHPs can be made far more attractive to higher-risk employees/families, and by the same token far more likely to reduce both their sickness care costs and productivity losses. A few, relatively simple steps should suffice, according to Michael Parkinson, MD, chief health and medical officer of the Lumenos CDHP insurance plan.

Dr. Parkinson suggested that CDHPs should:

1. Pay 100% of preventive services such as tobacco use cessation, weight management, physical activity promotion, etc.;
2. Ensure that plans are “clinically credible” = seen as offering enough coverage and HSA funds to enable families to manage their health, including incentives for completing HRAs, signing up with a personal health coach, completing (vs. merely enrolling in) risk and disease self-management courses, and thereby mastering competencies in managing whichever of the 15 conditions that account for 70% of all sickness care costs;
3. Ensure that the “donut hole” before full coverage resumes after the deductible is reached is perceived as affordable by employees; and
4. Ensure and show that total out-of-pocket costs and financial risks to employees for the CDHP option will be and be perceived as no worse, and preferably better than they were or are in other coverage options.

[“How to Design Consumer-Directed Plans for High-Cost Members,” Managed Care Week Oct 16, 2006 (www.aishealth.com)]

In addition to ensuring that the CDHP provides these features, a plan that includes full coverage plus meaningful incentives for completing or “graduating from” (not merely enrolling in) proactive self-management courses addressing risks and existing chronic diseases can increase high-risk/cost employees’ confidence that they will be no worse off, since their conditions should be less risky. And in addition to improving employees’ control of their sickness care costs, these features would enable them to improve their productivity, and reduce HCOs’ labor costs and shortages.

Moreover, the CDHP coverage plan, together with HCO incentives and promotion of “worksite wellness” programs that promote employee health, can reduce both sickness care costs and productivity losses when aimed at employees not yet at high risk. Such PHM interventions can reduce the incidence and prevalence of the risks, or at least of the higher levels of risk that tend to promote both avoidable sickness care costs and lost productivity.

When HCOs consider CDHP options, they should also consider how these options affect both significant performance factors.