Surprising Popularity of an Unlikely Benefit

We have to be honest with you. It’s time to come clean.

Despite all the research on the employee satisfaction with pet discount programs… Despite all the positive feedback we received about it…we were still hesitant to offer the CH Complete Card with PetAssure.

We were attracted to the other options instead: to the telemedicine and its logical reward for employers; the travel assist and its appealing offerings; and the fitness club discounts in this age of wellness programs. But pet health care? This seemed frivolous.

Today, let us tell you about how we were wrong, and our experience with this unlikely benefit’s surprising popularity.

Honesty.

It’s been nearly a year since we first rolled out our CH Complete Card with its telemedicine, health club markdowns, and either travel assistance or pet care discounts. The motivations to offer the other non-insurance benefits on the Card were obvious—telemedicine, for example, is proven to decrease both physician visits and non-emergency ER visits by up to 65%. But why pet care discounts? Do employers and employees really recognize pet care as a compensation perk?

Honestly, we weren’t certain of that answer when we were first assembling this product. Despite all the research on employee satisfaction with pet discount programs and despite all the positive feedback we received about it, we were hesitant to offer the CH Complete Card with PetAssure. In fact, we built the Card with an interchangeable option, so that clients can utilize either PetAssure or travel assistance in conjunction with telemedicine and fitness club discounts.

To reference what we’re reading, though, sometimes, in order to see true value, you have to move away from traditional quantitative marketing tools and toward anthropological observation of real employee behavior.

What convinced us

While pet health care discounts may not always appeal to us (or to some C-suite), our consultants have seen it become an instant hit with employees. Sometimes what executives want is not exactly what employees want. These initial client HR teams understood what we failed to immediately recognize: pet health care discounts generate high employee satisfaction at a very low cost.

Plus, any of our lingering doubts were easily put to rest by the quantitative data, which is substantial enough to break down even the strongest C-level argument against it. One of our consultant partners, as you may remember from an earlier newsletter, used the CH Complete Card to drive his client’s conversion to a high deductible plan—using the Card, the enrollment for the HDHP had tripled its enrollment for the previous year and reduced overall health care costs by one percent (even after adding the new employer-paid Card).

A few months after we began offering the CH Complete Card with PetAssure, the Wall Street Journal ran an article titled, “The Dog Maxed Out My Credit Card.” The article highlighted the rise of pet health care costs (rising 47% over ten years for dogs and 73% over ten years for cats… nearly the same rate as human health care costs), as well as some of the new options that individuals have to get pet insurance or discount programs in order to cover those rising costs. Noted in the article was PetAssure, the very program that we had previously debated including in our Card!

Then, a few weeks ago, Employee Benefit Adviser ran a feature of pet discount programs and how they are being utilized by brokers as an additional voluntary offering. Again, it was PetAssure. We don’t offer PetAssure as a standalone option, and, by now, the product had proven itself to us, but it was gratifying to see it highlighted here again: one consultant in the article went so far as to say, “From the producer's standpoint, once you’re in the door, you can talk about anything. [PetAssure] may be the best door opener that we've ever had."

That WSJ article notes, “When asked how much they’d spend to save their pet’s life, 70% of owners said, ‘any amount,’ according to a 2006 survey of VPI policyholders.” What both EBA and the Journal outlined was the conclusion we had already reached: employees want this offering, and they will view this with high satisfaction as a form of compensation on par with other quality voluntary benefits.

Serving you

Since we offer innovative solutions for group benefits, we built the CH Complete Card after looking at it from every angle. The payoff for employers is big, since the Card is an inexpensive new benefit that drives cost savings, but the incentive for employees is big, too. It’s big enough to offset some of the reductions in employers’ major medical programs. It’s big enough to effectively drive engagement of consumer plans, as many of you, our consultant partners, are doing. It’s big enough to get your foot in the door when you’re prospecting for a new client. Big. The reward for our consultants is even more obvious—employee satisfaction equals client satisfaction, and the Card’s low-cost features ease the implementation of other benefit plan strategies.

According to the American Pet Products Association’s 2009-10 National Pet Owners Survey, 62 percent of U.S. households own a pet, which equates to 71.4 million homes. The survey indicated that $12.79 billion is spent annually on veterinary care alone.

So when we tell you we offer a product that bundles telemedicine, fitness club discounts, and pet health care discounts… will you please not laugh? We understand: we laughed once, too. But a Card that offers reductions in claims cost along with features that guarantee high satisfaction levels for employees with minimal cost to the employer—well, that is no laughing matter.

And if you are still laughing, at least check out the travel assistance option instead.

This article was first featured in the June 12th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

A Quiet Revolution

The New York Times published an article Sunday about the slowing of health care inflation over the past two years. Health care costs are down 4% (adjusted for inflation: 3.1%), over the past two years. The reporter interviewed a handful of experts, from Harvard economists to the president of the Commonwealth Fund to the former head of Medicare and Medicaid. All of them said the same thing, best summed up by one expert in particular: ““The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and, three, you’d be foolhardy to say that we can understand it.”

Well, you can call us foolhardy, because our extensive work with a large number of clients has resulted in a confidence that we understand why health care inflation has slowed over the past few years. Let’s talk this through.

The preamble

Not to be picky, but before going any further, we have to make a comment about the routine (and incorrect) use of the term “health care inflation.” While we are not economists, most of us took a few econ classes in undergrad, and we learned enough to know that “inflation” is a general increase in prices as a result of too much money chasing too few goods. What passes for inflation as it relates to health care is actually increased consumption – in both quantity and through the consumption of higher priced treatments. In fact, many health care prices are actually moderating on a unit cost basis, owing to competitive pressures and patent expirations. People can’t fix what they don’t understand, and using incorrect terminology doesn’t help. We expect better from The New York Times, and we bet you do, too. OK, now that we’ve cleared that up…

After years of health care costs increasing as a percentage of the gross domestic product, 2009 and 2010 showed a significant slowing down of the health care cost curve. In fact, the total national health care spending growth of less than 4% per year is the slowest annual pace in more than fifty years. If it continues to hold steady at 17.9% of the GDP, there is hope for long term fiscal health for both national and household income, but in order to capture that slowing and replicate it year over year, we have to know why it’s happening.

And, according to the New York Times article, experts have no idea why this is happening.

Is it the recession?

Keeping with the zeitgeist of the time, the article first points the blame at the recession. The slowdown did occur during the same time as employer-based insurance options dipped for many Americans due to job loss. The recession may have made Americans more aware of health costs, who cut back on non-urgent care while money was tight. Gail Wilensky, speaker of our “foolhardy” quote, headed Medicare and Medicaid under President George Bush and believes the dip was caused by decreased income and decreased wealth during the recession. She fails to mention, however, that the COBRA subsidy program under ARRA artificially suppressed the number of “uninsured” you would typically expect when jobs are cut. And the fact these people stayed insured should have resulted in less of a drop in consumption than typically found in recessions.

The experts in the article all agreed that mitigation caused by recession would not be surprising or unexpected.

No, it’s not the recession (at least not entirely)

But a lot of the data points to a cause beyond the recession. States that weren’t hit too badly by the recession had some of the most rapid abatement in health care inflation. And some of the slowed spending occurred in market segments that shouldn’t have been recession-sensitive, like those on Medicaid and Medicare.

“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Obama. “I think there’s much more going on. If you asked me, ‘How confident are you that this is not just the recession?’ I’d say 75 percent.”

Well, then, is it health care reform?

The president of the Commonwealth Fund, Karen Davis, makes the case that health care reform is the cause: “A lot of the big gains have come from keeping people out of the hospital and the emergency rooms.”

No, it’s not health care reform (at least not entirely)

While a reduction in those big price-tag claims would account for the decreased spending, it’s unlikely that health reform has drastically reduced hospital and emergency room visits at this stage.

As we discussed last week, the high risk pool, PPACA’s interim solution to improve access to health coverage, has low engagement rates, and the uninsured rate has remained steady through 2010. Even for the 18-25 year old age range, the uninsured rate has declined from 28% to about 24% and has now leveled off over 2011.

Additionally, many economists believe costs may go up as tax incentives and new programs come into effect.

Is it… consumerism?

The Times article starts to hint at this option, but it fails to establish a conclusion. The author discusses the growth of high-deductible plans, cited as growth from 3% in 2006 to 13% in 2011, and how those plans impact the way that people think about health care. The author notes, “A broad, bipartisan range of academics, hospital administrators and policy experts has started to wonder if what had seemed impossible might be happening — if doctors and patients have begun to change their behavior in ways that bend the so-called cost curve.”

But we believe there’s no need to wonder. This behavioral change is well documented, from a recent Reuters article about the growth of consumer-direction coverage to the RAND study that shows high deductible plans may reduce spending by as much as 14%.

Our foolhardy proposition

Consumerism, we believe, is the key to the mitigation of health care inflation. As we pointed out earlier, in all other aspects of economics, inflation is a rise in cost of goods, but as it pertains to health care, inflation is a rise in use and engagement. Therefore, increased health care costs are increased use of the goods. Consumerism has everything to do with slowing health care spending.

In all segments, people are becoming more aware of the cost of health care. Insurance plans are becoming less rich, and people are more price-sensitive. That applies even in the Medicare world, as retiree health plans start to disappear.

As patients become consumers, they pay more attention to the market and to the costs of services. A September RAND study shows that patients with consumer-directed health plans not only reduce their costs through initiating health care less frequently, but also by reducing costs after they’ve begun care, sometimes through electing less expensive treatments or medications.

The past few years have seen a dramatic growth in the consumer-directed plans and the awareness of health care costs. With that, people are becoming more aware of their own consumption. Reduced consumption equals mitigated health care inflation.

We like the way Dr. Drew Altman, the president and CEO of the Kaiser Family Foundation, sums up the rise in consumer-directed plans: “Well you know, I think we've been so focused on health reform in Washington, what we have missed is there is a quiet revolution happening in health insurance out in the country.”

So how are you engaging in the quiet revolution? Are you helping your clients implement high deductible plans? And if so, have your clients seen a decline in health care spending? Is it just a coincidence that the “minimum” level of an acceptable employer-provided plan mirrors a high deductible health plan (without HSA contribution)?

This article was first featured in the May 7th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services

Increasing the Adoption Rate of an HDHP

High deductible health plans can lower health risks, reduce total medical costs and increase employee engagement in benefits. Why, then, are they sometimes so hard to implement? Let’s take a look at one company’s successful conversion to a high deductible plan and see what tools they employed to facilitate the change.

Recent reports show that health care costs will “only” rise by 9.9% this year. After running our CHROME Compass analysis, a recent client realized that maintaining their same plan for the 2011 renewal would result in health care costs increases by 21%. Changing their carrier and keeping the same plan options would still cause the national food production company to see an 11% increase in health care costs. A high deductible health plan could offer significant savings, but this food production company had offered a high deductible health plan in 2010 and had achieved low conversion. Leadership knew that this plan could be better for both the company and their employees, but they were having a hard time making employees see the benefit.

After walking through the options with their consultant and one of our CHROME Navigator counselors, the company’s leadership team decided to modify their contribution strategy, changing carriers and offering three main plans for the 2011 year:

The first plan had a $250 deductible, the most expensive coverage option for the food production company. This was a plan they’d offered previously and, in 2010, it had the highest enrollment. For 2011, the company increased the employee contribution.

The second plan was a more middle-ground option, with a $500 deductible. Only about twenty percent of employees with coverage chose this plan in 2010, but the plan still had higher enrollment than the high deductible health plan at that time. Leadership increased employee premium costs slightly in 2011.

These changes facilitated employee movement toward the final plan, a high deductible health plan that that allowed the company to optimize their investments in employee benefits. In order to make the high deductible health plan a good value for employees, as well as the employer, the food production company reduced the deductible for the plan. They also increased the employer contribution to the high deductible plan for 2011, and introduced two new employer-paid benefits for employees who enrolled in the high deductible plan:  an accident plan and the ContinuousHealth Complete Card. 

The cornerstone benefit of the CH Complete Card is unlimited telemedicine access for employees (and their entire families) through a unique discount medical plan without a co-pay or consulting fee. With this inexpensive card, employees get faster access to critical assistance and increase their productivity, while the company was able to provide a much-needed benefit at a cost significantly less than traditional office visits. The card also offers a fitness discount and either travel assistance or pet health discounts, benefits that show high satisfaction levels for employees with minimal cost to the employer.

Because the CH Complete Card plan isn’t insurance, the card was a supplement to the high deductible plan that controlled costs and encouraged employee migration to the consumer option. This allowed the food production company to continue offering valuable benefits despite health care inflation.

By the end of enrollment, it was clear that the incentives made it hard for employees to want any other plan: enrollment for the $250 deductible plan decreased by 54%, and the $500 deductible went down by 16%. The high deductible health plan tripled its enrollment for 2011, and, even with the new employer-paid benefits, the strategy reduced overall health care costs by one percent.

The key for this employer’s conversion to the high deductible plan was making the plan as attractive as possible to their employees. The employees, most of whom had minimal understanding of their benefits, were interested in the tangible CH Complete Card offered with the high deductible plan, and since the CH Complete Card is a fairly new product, we wanted you to see one way that a consultant partner used it to benefit her client.

Let us know if you’re interested in more information or the statistics of this conversion.

This article was first featured in the April 17th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.