Cats versus Dogs in Consumer Driven Care

In this multi-part series, I'll take a look at the cats and the dogs of electronic health records (EHRs), health savings accounts (HSAs), wellness companies, and the software companies that power them.

As a general rule, cats like places and dogs like people. In electronic health records (EHRs), the cats are the Epic Systems-type databases that capture everything relevant to a particular provider. The dog EHRs follow the patients around, attempting to interface with multiple provider settings, like Athena Health.

In the world of HSAs, the cats like to cuddle up to a place of employment. Credit unions are the most numerous cats of the HSA world. Several large credit unions sponsored by Fortune 500 businesses have more than 90% of the employer group as credit union members. While an employer-sponsored credit union will let you stay a customer if you lose your job, a big chunk of employer-sponsored credit union value proposition comes from the existence of a relationship with the select employer group (SEG). Credit unions with strong SEG relationships tailor their products the sponsoring employee group. Baxter Credit Union, for example, also has SEG relationships with CDW and Cardinal Health, each of which gets to see a differently designed website. The credit union makes sure that HR people at the employer are well-stocked with informational material about the credit union, may offer discounts to current employee within the SEG, and are sure to show up at benefits fairs to answer any questions about complex products like HSAs.

While complex, HSAs offer powerful advantages in a setting of high employee penetration. With more and more employers scaling back to high-deductible health plans (HDHP), we will likely to soon see more Fortune 500 employers go "full replacement" with HDHPs and HSAs. For those large employers with credit union relationships, suppose 90% of the employee group already treats the credit union as its preferred financial institution. That means the transaction accounts for medical spending are likely to be all in one place. This is a tremendous boon for the employer, who with appropriate technology can make sure that those transactions run through the HSA, boosting FICA savings. Using the latest figures from Canopy Financial, which provides HSA account management software for banks, the average family's HSA received $3528 in contributions. [UPDATE: need to double check these figure given recent news on Canopy] This generates FICA and Medicare tax savings of up to $269 for the employer per employee. At the same time, however, half of the people eligible for an HSA don't open one. For a 100,000 person employee group, that adds up to over $13 million in annual payroll tax savings forgone (50,000 * $269).

Technology solutions now exist that automate both creation of the account, and to “touch down” normal checking and credit card transactions for medical purchases in the HSA, so that the employer gets the full tax benefit. For those employees that otherwise would not contribute to the HSA, an automated routine can identify their actual medical expenditures from non-HSA accounts (or EHRs) and momentarily touch down a matching amount from their next paycheck into the HSA prior to moving the funds into their normal direct deposit account. Without any decrease in availability of paycheck funds to the employee, the employee has now accrued a tax advantage. With the average family's out of pocket medical expenses for HDHPs reaching $2620, an employee grossing $44,000 gets a $620 tax savings, equivalent to an $812 pre-tax raise.

In theory, this kind of technology could be deployed anywhere. In practice, it's a lot easier when the normal transaction accounts, direct deposit accounts, and HSA are all in one place. With the upwards of 90% penetration of the employee population select credit unions, the tax benefits are much easier to capture there.

In addition to maintaining stronger employer-sponsor ties, credit unions tend to be more technology savvy than their banking counterparts. Regulations prevented credit unions from running their own back-office systems until relatively recently, so they are much more likely to be real-time central information file (CIF) systems than their banking counterparts. Also, the capital structure of credit unions has necessitated acclimation to technology-powered growth strategies. While banks can raise funds by issuing equity, credit unions are restricted to the paid in capital of their members. With new branches costing $1 million, credit unions have traditionally focused on growing through non capex spending like internet banking.

How will all this fare in the next round of federal healthcare reform? Roy Ramthun, former advisor to the White House on Health Savings Accounts, predicts that credit unions are better poised than banks to influence consumer driven care in federal health reform. First, Roy pointed out the CUs are better positioned financially than banks. Second, Roy indicated that mobilization of grass-roots will be key. While "death panel" screamers at town hall meetings this summer didn't do much for the anti-reform crowd, credit unions have historically been very effective at mounting well-organized shows of support. With the opportunity to save their employer sponsors millions of dollars, my guess is that the credit unions will meow for retaining HSAs and related employer tax breaks.

Pareto-Optimal Wellness Incentives or Big Bad Wolf

The argument that wellness incentives are a "wolf in sheep's clothing" to pass along premium increases for pre-existing conditions assumes that the health plan, government, or employer (the "third party payer") doesn't want the covered individual to meet the wellness targets. The corporate wellness programs surveyed in the recent Washington Post article, however, set fairly low bars for employees to meet. This seems to indicate that incentives drive third party payers to choose wellness targets that are achievable. Looking at UnitedHealthcare’s Vital Measures program literature, for example, “the benchmarks for each category vary, but in all cases are easier to achieve than those published by the National Institutes of Health.” See also the Healthy Blue from Blue Care Network.


When the government pays, the benchmarks have tended not to be outcomes-based. Florida's Medicaid reform efforts have entailed:

• a $ 15 credit for six months of success in an alcohol or drug treatment program, a smoking cessation program, a weight loss program and an exercise program  
• two $ 15 credits for keeping all of his primary care appointments 
• one $ 25 credit for a colorectal screening per year
• up to $ 125 in credits per year, and then they may use those credits to purchase first aid supplies, cough and cold medication, and other items at any Medicaid participating pharmacy.

The move from "pre-existing condition" to "wellness incentive" emphasizes personal responsibility and the possibility for future improvement. Certainly there will be some people who try very hard and cannot hit the wellness outcomes required for the premium discount, but they are likely in the minority. Moreover, in many cases the behavior of the majority is positively impacted by a shift towards wellness incentives in plan design.

Employees who bear direct increased financial costs due to a wellness incentives can still end up in a better overall financial position. A number of options exist for a Pareto optimal outcome, where the gains from a change to the system can be used to compensate those harmed in the system. Failure to achieve a wellness target, for example, could function like a health risk assessment to trigger more coordination of care through a disease management program. If a group plan were designed so that some of the savings from the healthy behaviors were used to pay for disease management for the less healthy, everyone would be better off. I don't see requirements for this in current versions of the legislation, but those concerned with system fairness might pursue this approach.

Aside from concerns about system fairness, wellness plans may wish to offer disease management services as a “reasonable accommodation” in order to comply with the Americans with Disabilities Act (“ADA”). Wellness programs that target employees with chronic conditions (often the cost-driver employees) will inherently face legal requirements under existing federal ADA regulations and local analogues. Consider the individual with diabetes, who is often the focus of a wellness plan. Diabetes is sometimes a disability under the ADA if, for example, the individual proves that she was substantially limited in the major life activity of eating because of a severely restrictive and highly demanding diabetes treatment plan. Fraser v. Goodale, 342 F.3d 1032 (9th Cir. 2003). Or consider the two municipalities in California which prohibit employment discrimination on account of physical appearance, which lends some protections to overweight employees. Santa Cruz, Cal., Or. 92-11 § 1(9.83.010) (1992); City & County of San Francisco, Human Rights Commission, Compliance Guidelines to Prohibit Weight and Height Discrimination (2001), http://www.naafa.org/fatf/sf_height_weight_ guidelines.pdf.

Taking a health risk assessment arguably places the same burden on every employee, but the individualized health goals often will be much more arduous for an individual with diabetes. The net result: an employer is treating an employee with a disability differently than other employees. Thus the logic of the wellness plan offering disease management services which serve as the functional equivalent of a "reasonable accommodation".

Data Liquidity, not Coffee, in the Donut Hole

“The future is here, it’s just not widely distributed yet” -- William Gibson

Looking at the tags for this blog, high deductible plans and health savings accounts figure prominently. According the Health 2.0 festival pundits, however, we may soon be witnessing a shift from consumer-driven healthcare to consumer-participatory healthcare. Data liquidity, among other trends, is giving consumers information as well as incentives to hold down health care costs.

As an executive at HSA Bank, we constantly reminded our customers to ask for generic drugs. Consumer Reports, the federal government, and insurance companies have all been doing this for over a decade, but many patients still don’t get engaged in seeking generics. AARP, for example, provides a tool powered by DestinationRx with one of the best online calculators for helping seniors avoid the Medicare donut hole. Approximately 30% of people still prefer name brand drugs, however.  The next generation of online decision tools could change that.

Companies at the Health 2.0 conference last week in San Francisco would make the search for not just generics, but alternative courses of therapy, harness the wisdom of crowds (including group psychology). The Health 2.0 conference explored the possibility that Web 2.0 tools like Facebook could better engage patients in making behavioral changes. CureTogether.com, for example, allows users to compare the effectiveness of name brands, generics, as well as other approaches to management of diseases and symptoms. You can quickly become a member and see what others with similar health conditions are doing, and how successfully. While not enough data exists for all conditions, your participation will help the site gain critical mass. This kind of group-oriented psychology has been an enormous success in social and business networking, and just might work in health as well. If anecdotal evidence of the boomer generations' enthusiasm for sharing photos and chain emails is any indication, chances are this kind of Health 2.0 technology will make a difference in the donut hole.

The Best of Health 2.0 Conference, San Francisco, 2009

1.     Social networks as a part of health (1) -- “You spend 15 minutes with a doctor, and the rest of the time with everyone else” – Chris Schroeder, HealthCentral, as interviewed by Elizabeth Cohen from CNN

2.     Social networks as a part of health (2) – “make personally relevant information clinically relevant” – anonymous

3.     Competition – “Our competitors are cheeseburgers, couches, and intertia” – Alexandra Drane, Eliza

4.     Hype Cycle – “We should pay people to smoke [because in the short term, longer lives are more expensive to the system]”. -- J.D. Kleinke, Mt Tabor Online Services

5.     Slices of a blunt object – “It’s a big jump to ‘manage your condition online’. Maybe we need to take a step back and start with ‘schedule an appointment’.” – David Cereno, Microsoft

*approximate

  

Audacious Goals at Health 2.0: rounded tabs, perfect shading

What is Health 2.0?

After spending 14 hours at the Health 2.0 conference in San Francisco today, the pessimistic answer is that Health 2.0 is rounded corners and perfect shading. Many of the web technologies were accessed through a browser, so I started to get browser navigation fatigue.

Health 2.0, ultimately, is more audacious. My favorite proposition was by a Kaiser manager brainstorming a portable device that would assist patients with maintaining healthy behaviors. The use case described was a cross between a mood ring and LiveStrong bracelet. As described, such wristband would be deployed to a clinically obese patient, providing biofeedback and behavioral support. In this blog post I go a couple more steps to describe some of the possibilities that this could entail.

Device activation could occur by the wearer switching it on, or by an automatic trigger based on a biological indicator of increased risk of harmful behavior. If I start craving candy, for example, I could first switch on the device on my double-tapping or twisting the bracelet. Alternatively, a red LED on the wristband could take a glucose reading before I was conscious of wanting sugar.

In the scenario of automatic activation based on biological monitoring, the wristband could simply change colors to bring the wearer’s attention to the existence of a risk factor. Additionally, the device could provide various forms of explicit support. First, it could provide the opportunity for encouraging tweets from a community of peers in a weight loss program. Second, a brief message could be drawn from a database of tailored suggestions. Third, the message could come from a professional counselor or physician, likely segueing into a more traditional means of doctor-patient communication.

As an alternative, or in conjunction with these responses from the device, an opportunity would exist for the wearer to take action in response to the messaging from the device. A symbolic action to “take control” of the situation would be simply switching the device from red to green, an outward sign of the patient’s commitment and coping skill. Monitoring could be tied to whether or not such an action occurred; if the device was not acted upon, cell phone and other email alerts could be triggered to the patient and other stakeholders.

Such a device could have broad use for all manner of behavioral problems, not just behavioral problems tied to a current medical problem. Robust federal incentives for employer-based wellness programs, including meaningful incentives to participating individuals, could make these high tech mood rings a popular engagement tool for EAP and wellness programs.

Health Exchanges: Reform Impact to "Ancillary" Health Services

I received a great set of questions on yesterday’s Wyden and Wellness posting:

"Regarding employees' purchase of government plans, what will happen to ancillary plans like Dental, Vision, and Mental? Many employers offer these, which are also very important from wellness viewpoints.  Many cases, insurance brokers even package EAP, wellness programs, newsletters, together with physical health plans. What will insurance brokers will do? Or will employers basically offer a government plan as just one of the option through brokers?  For example, most employers offer a few choices, e.g. BCBS, Aetna, Kaiser, etc. I can easily see they can add government plan on top of the list of offerings." 

The questions were intended to be simple, but unfortunately the answers are not. A comprehensive account of how Wyden’s original bill, Wyden’s amendment, the House bill, and the two senate bills would impact each of the “ancillary” health benefits is beyond the scope of this blog. I will provide just the highlights and some speculative conclusions on how proposed legislation will collide with the provision of ancillary health benefits.

I’ll answer in reverse order.

Yes, Wyden’s Free Choice Act would allow an employer to add access to a government-sponsored exchange alongside its traditional health plans. This assumes that by “government plan” you mean a private insurance plan purchased through a government-sponsored exchange. The technical mechanism by which an employer would grant employees access to a government-sponsored exchange would be to pay out the employer’s contribution to the employee in cash and then leave it to the employee to shop around on the exchange. In fact, the employer would be required to do this in certain circumstances.

The degree to which a broker would be involved in setting up the “cash out” process is questionable. If the Free Choice Act is adopted, the federal government will specify regulations detailed to guide the cash out process. The end result will probably be more like COBRA administration – highly automated and low touch.

More broadly speaking, what role will brokers play with regard to the procurement of ancillary healthcare services? Let’s assume that brokers exist today to help employers and individuals sort through the details of ancillary plans and other complexities. Exchanges will supposedly simplify those complexities through mandated disclosures and coverage standards, reducing the role that the broker plays. I say “supposedly” because the fine print on your bank and credit card statements are government-mandated disclosures that fall short of simplicity. If the broker’s traditional role is lessened, however, brokerage firms could redeploy themselves towards winning lucrative government “navigator” contracts, where government funding is directed towards helping disadvantaged groups use exchanges effectively.

One of the possible standards that will be required in order to list a medical policy on the exchange will be that the policy must include some form of ancillary coverage. The House bill (HR 3200), for example, requires that the medical carrier itself include dental coverage for children. This would require some significant reshuffling of responsibilities from ancillary dental plans to the medical plans. According to Delta Dental, 97 percent of employer-sponsored dental contracts are written separately from medical coverage. Delta Dental is not happy about any decrease in that percentage.

In the case of wellness programs, the main reform legislation bills provide a variety of incentives, and do not appear to require bundling.

• Wyden’s original Healthy Americans Act would require exchange listed policies to include wellness programs and mental health parity.
• The House bill would require development of a national strategy for wellness activities and mental health parity.
•  The Senate HELP Committee bill would require health insurers to provide financial incentives to providers to promote wellness. It would also encourage employers to provide wellness programs by conducting targeted educational campaigns to raise awareness of the value of these programs and by increasing the allowable premium discount for employees who participate in these programs from 20 percent to 30 percent.
• The Senate Finance Committee bill would provide grants to small businesses to establish comprehensive, evidence-based workplace wellness programs; it would also permit employers to offer employees rewards of up to 20% of the cost of coverage for participating in a wellness program.

My take-away is that wellness program will grow in the short term. As I posted yesterday, however, the separation of certain wellness programs from the rest of an employer’s benefit package could cause the efficacy of the programs to decrease.

Expanded mental health parity requirements signed into existence late last year, supported by Senator Obama, are taking effect January 1^st 2010. These provisions had an exclusion for small business, but the HELP Committee bill makes full parity a requirement for any medical policy listed on an exchange. The ultimate compromise reform bill will probably also require full parity. Parity provisions don’t require that mental health coverage be included, however – just that any mental health coverage be similar in scope to traditional medical coverage.

Some have argued that extra taxes being levied on rich benefit plans, as planned in the Senate Finance Committee bill, would cause employers to drop ancillary coverage. I doubt that this prediction will come to fruition – the employer will likely be able to play with the numbers to keep ancillary plans included in mainstream health plans. Normally a broker would be making those calculations, but in the brave new world of health exchanges, the intent is to have it be simple enough for employer HR staff (no offense, HR people) to calculate.

Wyden and Employee Wellness

In theory, Wyden’s Healthy Americans Act and Free Choice Act create an ideal blend of market-driven solutions from the right and mandates with subsidies from the left. There is inconsistency, however, in Wyden’s approach to wellness programs. Each of the major reform bills, including Wyden's, identifies wellness programs as a key cost containment strategy. Only the Healthy Americans Act and Free Choice Act, however, would allow employees to “cash out” of an employer-sponsored health plan in favor of a plan from a government run exchange. Allowing this kind of cash out may look like a great compromise, but it could undo much of the potential benefit from employer-sponsored wellness programs.

First, employee attrition to exchange plans decreases the population in the employer-sponsored plan. A smaller population in the employer-sponsored plan results in limiting the extent to which a wellness program can create productivity and premium savings for the employer. At a certain point, a paucity of participants in the program will make it difficult for the employer to justify the fixed costs of running the program. Moreover, if the government does a risk adjustment at the end of the year between those people who cashed out and those who stayed in the employer plan, it could wash out any savings from employer-run wellness programs.

Second, employee assistance program experts like Tom Bjornson and Asako Tsumagari believe that the social environment of the workplace is a deciding factor in the effectiveness of employer-sponsored wellness programs. If support for healthy behaviors does not coalesce from the “bottom up”, positive changes are likely to be short-lived. Employees cashing out of employer-sponsored health plans and wellness initiatives will no longer be contributing to the momentum of the employee social network, which would likely decrease the likelihood of the wellness initiatives’ success.

The other major reform bills currently under consideration do not contain these powerful disincentives to employer-sponsored wellness plans. The Healthy Americans Act had the foresight to mandate that wellness programs be included in any exchange listed medical policy, provide a tax deduction for employers offering wellness programs, and allow carriers to promote wellness programs through premium deductions. It is not clear, however, that these measures would preserve employer-sponsored wellness plans in the long term.