Transcript Retail Market Development Evolution and

Realizing the Promise of the Retail Market and
Saving the Private Healthcare System
Presented by ChapterHouse
Tom Main, Managing Partner
September 27, 2007
©2007 ChapterHouse, LLC—Not to be distributed without permission
For additional information, please contact us at (630)968-6880
Agenda

Employer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive
Innovation

Redefining the Sponsored Retail Game
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
1
Unrelenting Healthcare Costs and Shifts in Employer Sponsorship
Are Creating a New Marketplace
6.5M employees or
13M members have
fallen out of the
market—and over
$73B1 in healthcare
costs have been
shifted to employees
over the last five
years
Notes
1. Includes both discontinued employer contributions for members who are no longer covered by a group benefit, as well as cost-shifting to continuing members
2. Average uninsured on any given day; equates to 42M on a full year equivalent basis
Sources: Kaiser Family Foundation, AHRQ-Medical Expenditure Panel Survey, Hewitt Health Value Initiative,
©2007 ChapterHouse, LLC—Not to be distributed without permission
Bureau of Labor Statistics, U.S. Census Bureau (Current Population Survey), ChapterHouse Analysis
II-9000-136_Consumer Driven Summit
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Healthcare Marketplace Scorecard
Health Economy Performance Levers
Sponsorship and the
Economic Value Equation
Consumer
Sponsorship
Employer
Sponsorship
Health Service Exchange
Defining the Competitive Model
Government
Sponsorship
Consumer
Engagement
Marketplace and Business
System Enablement
Government
Programs
and
Regulation
Provider
Engagement
Investment
and
Innovation
Progress
Summary
?

Key Points
Still losing ground in these
key markets

New programs
in place

Strong
momentum

Beginning to get consumer and
provider engagement in the new
model

Unprecedented
government
reform

Robust
investment
climate

Still deeply embedded old market
behaviors and incentives


Mixed focus


Progress is slow
More private/
public
partnership
required
MCOs heavily
favored
The general progress required to shift the basis of competition in healthcare has been slow.
Creating market-based incentives for providers to compete on cost, quality and outcomes—and to
invest in improving their clinical business models is no easy task. Equally difficult is motivating
employers and consumers to become educated buyers of health care. While the industry grapples
with these difficult issues, employer sponsorship is eroding and the social concern about the
uninsured and underinsured is on the rise.
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II-9000-136_Consumer Driven Summit
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Agenda

Employer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive Innovation

Redefining the Sponsored Retail Game
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
4
Sponsored Retail Market Holds the Promise of Driving Durable Market Reform
Finally Unlocking Competitive Market Forces to Dramatically Improve the
Cost/Value Performance Profile of the U.S. Healthcare Delivery System
Building a Sponsored Retail Marketplace
Enabling Market Competitive Forces to Work
Retail Market
 Medical school
 Board certified
 Patient satisfaction
scores
 Quality and outcome
scores
 Location
 Office hours
 Integrated wellness
 Credit card






Healthcare Services
Market Exchange
High quality
Convenient
Available
Spanish speaking
Financing plan
Open to
alternative
medicine
 On-site pharmacy
Industry shifts are increasingly moving the market from wholesale to retail: 1) Consumers selecting
physicians based on performance information, 2) Providers competing for consumers’ business,
and 3) Providers learning about cash businesses. While still in its early stages, the sponsored retail
market holds the promise of driving health market reform through free market competitive forces.
©2007 ChapterHouse, LLC—Not to be distributed without permission
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Sponsored Retail Market Means Sponsored by Employers and Enabled
by Health Plans, Providers, and the Government
Retail Market
 Medical school
 Board certified
 Patient satisfaction
scores
 Quality and outcome
scores
 Location
 Office hours
 Integrated wellness
 Credit card
Building a Sponsored Retail Marketplace
Enabling Market Competitive Forces to Work






Healthcare Services
Market Exchange
High quality
Convenient
Available
Spanish speaking
Financing plan
Open to
alternative
medicine
 On-site pharmacy
Wholesale
Enablement
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II-9000-136_Consumer Driven Summit
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The Sponsored Retail Market is a Work in Process
Building a Sponsored Retail Marketplace
Enabling Market Competitive Forces to Work
Retail Market
 Medical school
 Board certified
 Patient satisfaction
scores
 Quality and
outcome scores
 Location
 Office hours
 Integrated wellness
 Credit card






Healthcare Services
Market Exchange
High quality
Convenient
Available
Spanish speaking
Financing plan
Open to
alternative
medicine
 On-site pharmacy
2. Payer’s health management and provider network
models are just starting to be architected to drive
real improvements in the practice of medicine
Wholesale
Enablement
1. Consumer engagement models are just beginning
to be designed to increase consumer involvement
in health and benefits management
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Sponsored Retail Market Development Barriers
Challenges by Constituent
Employer & Broker
Consumer
Provider

Sponsorship is eroding

Low trust of the health plan


Engagement is weak


Worksite education
programs are not well
supported
Limited engagement in
managing health
Focused on transactional
medicine

Unprepared for new
responsibilities
Misaligned economic
incentives

Limited care collaboration

Significant practice
variability

Brokers still focus on
traditional solutions

Benefit buy-downs are
working in the short-term


Big gaps in tools, support
and reliable information
Consumer driven healthcare models and health savings accounts alone are not sufficient to
effectively address the root cause problems driving medical trend or to solve the growing employer
affordability crisis. Health plans must partner with consumers in the change process while
leveraging their collective market clout to drive essential market changes with providers and
employers that are well beyond the reach of the consumer.
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
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Agenda

Employer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive Innovation

Redefining the Sponsored Retail Game
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
9
Current Solutions—Product Benefits Continuum
Focused Benefit
Solutions
Integrated Product
Solutions
Health and
Wealth
Solutions
Network
Solutions
Affordability
Solutions
Value-Based
Benefit Designs
Catastrophic
Plans
Integrated
Medical/Disability
Savings Account
Based
Tiered Networks
High Deductible
Plans
Value-Based
Benefit Designs
Mini-Med
Integrated
Medical/
Behavioral Health
Defined
Contribution
Specialty
Network-Based
Products
EngagementBased Products
Discount Cards
Health, Wealth
and Retirement
Planning
Integrated
Medical Homes
Outcome-Based
Products
Short-Term
Coverage
A la Carte
Health/Wealth
Solutions
Health
Focused
Benefits
Focused
Product Benefits Continuum
Voluntary
Products
Critical Illness
Products
Health plans mainly compete on point solutions without addressing trade-offs in health management,
networks or value-based benefits.
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
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Evolving Product Categories

Product
Types






Market
Examples
Integrated Product
Solutions
Focused Benefit
Solutions



Catastrophic Plans
Mini-Med
Discount Cards
Short-Term
Coverage
Voluntary Products
Critical Illness
Products

Aetna SCR
BeniCard
UnitedHealthcare
Belay
Conseco Cancer
Secure



Health and
Wealth Solutions
Integrated Medical
and Disability
Benefits
Integrated Medical
and Behavioral
Health Benefits

CIGNA Disability
Solutions for Chronic
Conditions
Humana/Corphealth
Integrated Healthand-Wellness
Program







Network
Solutions
Savings Account
Based
Defined Contribution
Health, Wealth, and
Retirement Planning
A la Carte
Health/Wealth
Solutions

Fidelity (“Health
meets Wealth”)
Wells Fargo
Ameriprise
Aetna Accelerated
Death Benefits







Affordability
Solutions
Tiered Networks
Specialty NetworkBased Products
Integrated Medical
Homes

Aetna Aexcel
UnitedHealthcare
Premera Blue Cross
Medica Focus
Blue Shield Net
Value HMO








Value-Based
Benefit Designs
High Deductible
Plans
Engagement-Based
Products
Outcome-Based
Products

Value Based Benefit
Designs based on
assessment of the
clinical benefits to
specific patient
populations such as
diabetics or asthma
patients to improve
treatment regimen
compliance
WellPoint TONIK
Humana No Worry
BCN Healthy Blue
Living
United Healthcare/
BeneComp
Accretive Care
RedBrick Health

Marriot International
Inc./Hewitt
Associates/Active
Health—Reduced
co-payments for
diabetes, asthma,
heart disease,
colonoscopies,
mammograms and
childhood
immunizations
Eastman Chemical/
Towers Perrin: Free
drugs and supplies
for diabetes, free
mammograms and
childhood
immunizations

Health
Focused
Benefits
Focused
Product Benefits Continuum
The current product landscape is marked by innovation in plan design and integration, but not the
fundamental health management that underlies medical trend abatement and disease market reform.
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
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Current Solutions—Level of Development
Product opportunities based on their level of maturity and their target market segments
More
Mature
Early
Stage
Level of Development
High Deductible
Health Plans
All
Segments
EngagementBased Products
Savings Account
Based
Integrated
Medical/Disability
Health, Wealth
and Retirement
Planning
Outcome-Based
Products
Tiered Networks
Integrated Medical/
Behavioral Health
A la Carte
Health/Wealth
Solutions
Specialty
Network-Based
Products
Integrated
Medical Homes
Value-Based
Benefit Designs
Employer
Sponsored
Defined
Contribution
Catastrophic
Plans
Discount Cards
Mini-Med
Short-Term
Coverage
Individual
= Focused Benefit Solutions
= Integrated Product Solutions
Voluntary
Products
Solution focus shifting to
consumer health management
from benefit buy-downs (only)
Critical Illness
Products
= Network Solutions
= Affordability Solutions
= Value-Based Benefit Designs
= Health and Wealth Solutions
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
12
Success of Early CDH Innovators
Success of Early CDH Innovators

Aetna’s HealthFund
has improved:

– Medication
compliance among
chronic patients
– Decrease in
emergency room
utilization
– Generic drug
utilization


– Lower utilization of
non-preventive care
services
– Preventive care
screenings

United’s Definity
product has
experienced:
CIGNA’s Choice
Fund results included:
– Members compliance
with maintenance
drugs
– Higher degrees of
engagement
– Annual medical cost
range (4 to 5%)
– More frequent use of
preventive care
– Pricing information
for 100k providers
– Increased use of
medications to treat
chronic conditions
like diabetes
– Higher generic
substitution rate
– Quality information
for 22k specialists
– Employer renewal
rates below national
trends
– Greater awareness
of health care cost
and quality
Aetna’s Aexcel
performance network
expands to 31
markets

United’s Simply
Engaged program
offers rate discounts
in exchange for
employer
commitments

Humana’s SmartSuite
improved:
– Lower costs of
health care for
CDHP members
– Fewer hospital
admissions
compared to
industry
Aetna spearheads
provider transparency

Integrates CareGain’s
Defined-Care
platform to further
customize and
enhance Choice Fund



– Increased knowledge
of managing their
health care
– Improved healthrelated behaviors,
such as exercise and
eating healthier
Humana introduces
“No Worry” rate cap
product for 51 to 99 to
ease employers into
CDH
Introduces “Smart
Results” product for
ASO 300+ groups that
reduces fees if
employer lowers claim
expenses
WellPoint’s Lumenos
customer survey
revealed:
– More engaged and
more likely to use
Lumenos' online
health site

Offers first full-service,
FDIC-insured HSA
plan on the market

One of the first payers
to bring across-theboard support to the
Small Group Market
CDH pioneers have driven meaningful breakthroughs—where innovative solutions have resulted in
positive measurable outcomes.
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
13
Agenda

Employer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive
Innovation

Redefining the Sponsored Retail Game
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
14
Today’s Market
Tomorrow’s Market
Retail Consumer Market Evolution—Building Momentum or Stalled?
Stage IV:
Transforming
Collective consumer voice
driving market reform
Stage III:
Maturing
Increased health management
engagement resulting in behavior
changes and improved outcomes
Stage II:
Developing
Informed and improved
healthcare decision making
Stage I:
Emerging
Financial engagement
stimulated by buy downs and
costs shifting
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
15
Expect Disruptive Innovation
Health
Benefits
Services
Pharmacy
& Biotech
Financial
Services
Core Competencies
Disease
Management





Medical
Products &
Services




Provider &
Payer
Solutions
Consumer Brand
Consumer Trust
Consumer Innovation
Health Benefits Expertise
Clinical Expertise
Financial Expertise
Personal Services, Coaching
and Intimacy
Local Market Knowledge
IT, Integration, Decision
Support
and Procurement
Consumer
Software
& Services
Healthcare
Delivery
Insurance
Products
Consumer
Products
Retailers
©2007 ChapterHouse, LLC—Not to be distributed without permission
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Emerging Competitors and Niche Players
Non-traditional competitors are entering the broad health and wealth space to fulfill unmet needs and have
the potential to disrupt the market.

Description
A health services company that
utilizes financial tools, incentives,
personalized wellness plans, and
independent customer service
advocacy to achieve greater
accountability, behavior change
and return on healthcare
investments


A new business focused on
reducing total medical costs by
providing a high touch patient
guidance system
Assumes total risk by
guaranteeing trend/savings


A leading provider of business
and financial management
solutions for consumers,
accounting professionals and
small to mid-size employers
Declared healthcare as new
business vertical introducing
personal healthcare financial
management programs


Mission is to organize the world’s
information and make it
universally accessible and useful
Recently declared and
established focus on healthcare
“What’s needed is an independent
advocate on behalf of customers.”
Kyle Rolfing,
CEO
“…Guiding each of your employees,
their families and their physicians to
personalized, high-quality
healthcare allows us to grow
employee satisfaction…”
Tom Spann,
CEO
“The personal intimacy and drop“Focus on the user and all else will
dead ease of the solutions is only
follow.”
possible if you’re a consumer-driven
Larry Page and Sergey Brin,
company.”
Co-Founders
Scott Cook,
Chairman and Founder
Approach
Direct to employer
Direct to employer
Direct to consumer
CustomerCentric
Initiatives

Philosophies


Goal is to help people be healthy
Concierge services to be offered
through the website and through
a call center
Elected new board member
focused on “creating a consumercentric system”





Key Assets

Credible track record with
innovative employers
Entrepreneurial spirit

Help patients navigate healthcare
system
Establish trust-based relationship
with customers
Backed by investors that “deliver
meaningful and unique value to
their customers”
Only pursue opportunities that
provide incremental value over
other options for the consumer

No barrier mentality with
expertise outside of healthcare






Direct to consumer
“Follow them home” approach
Vision of the customer:
aggregates all consumer touch
points
Web communities
Responses to feedback buttons
within the software
Intuitive experience

Brand
Consumer experience and
expertise




Most services are free
Global access by supporting 90
languages
Develop services that significantly
improve the lives of as many
people as possible
Brand
Consumer experience and
expertise
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
17
Agenda

Employer Sponsored Affordability and Coverage Crisis

Promises and Challenges of the Sponsored Retail Marketplace

Current Solution Landscape and Breakthrough Innovations

Retail Market Development Evolution and Disruptive
Innovation

Redefining the Sponsored Retail Game
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
18
The New Competitive Landscape—Charting Your Course
Health
Management
Consumer Health/
Wealth Service
Market
From Insurance to Health Management
Employer Healthcare
Affordability Market
Healthcare
Services
Market
Exchange
Value-Based
Reimbursement
and More Patients
High Quality and
Cost-Effective
Care
$2.0T Marketplace Driving
Competition and Investment
Employer Benefits
and Product Market
Consumer Benefits
and Product Market
Today Market
Products/
Benefits
Wholesale
(Employer)
From Wholesale to Retail
Retail
(Consumer)
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Health Plans and Innovators are Defining New Markets
Health
Management
and Delivery
Companies
Current Landscape
Health
Management
From Insurance to Health Management
Employer
Healthcare
Affordability Market
Consumer Health/
Wealth Service
Market
Employer Benefits
and Product Market
Consumer Benefits
and Product Market
Today Market
Consumer
Product
Companies
Products/
Benefits
Wholesale
(Employer)
From Wholesale to Retail
Retail
(Consumer)
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
20
Moving the Retail Market Forward
Design Guidelines
Stage IV:
Transforming
Collective consumer voice
driving market reform
Stage III:
Maturing
Increased health management
engagement resulting in behavior
changes and improved outcomes
Stage II:
Developing
Informed and improved
healthcare decision making
Stage I:
Emerging
Financial engagement
stimulated by buy downs and
costs shifting

Employer and consumer-centric model

Positive, constructive work site environment

Personal relationship with every member with aligned health and
finance goals

Balanced consumer accountability with real decision consequences

Proactive integrated whole person consumer engagement model

Evidence based medicine (clinical efficacy) and informed treatment
options

Aligned provider economic model with role clarity

Provider information integration and advanced medical homes
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II-9000-136_Consumer Driven Summit
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Sponsored Retail Business Model—A New Value Chain
Sponsored Retail Business Model
Market
Development
Consumer
Relationship
Initiation
Promising lower
Establishing the
costs, improving trend
consumer as the
performance, and
customer and building
increasing customer
an information and
satisfaction through
relationship
superior consumer
foundation for
engagement and
personalized
provider integration
integrated
health/wellness
management
Consumer
Engagement
Management
Engaging the
consumer through a
personalized
integrated experience
leading to improved
health, high levels of
satisfaction and
increased value
Care and
Provider
Integration
Management
Partnering with
providers through the
medical home model
to improve the quality
of care and facilitate
care coordination and
information flow
between/among
providers, consumers,
and health plans
Performance
Management
Relationship
Extension
Evaluating
performance
demonstrating total
value for consumers
and employers and
determining program
refinements
Expanding customer
relationships through
deep understanding of
needs and
differentiated
experience and
outcomes
©2007 ChapterHouse, LLC—Not to be distributed without permission
II-9000-136_Consumer Driven Summit
22
Building the Health Plan Business Model for the Consumer
Sponsored Retail Business Model
Consumer
Engagement
Management
Care and Provider
Integration
Management
New Market Development
Model With Employer
Partnership and
Consumer Engagement
Developing the
Consumer as a
Customer and
Establishing the
Foundation for
Partnership
and Advocacy
Consumer Engagement
and Integrated Health,
Wellness, Finance and
Lifestyle Management
Refining Provider
Partnerships and
Integrated Care Delivery
Employer
Profiles
Employer
Segmentation
Model
Employer
Segments
Fragmented
Behavioral
Benefits Coaching
and Financial
Management
Financial
Attitudes

Demographics

Workforce
profile

Labor market

Beliefs about
roles
Segmentation
Model

Frozen in
Place

Partners in
Health

Price
Buyers

Demographics
and Culture
Personal
Planning
Family
Integrated
Consumer
Experience
Attitudinal
Provider
Selection
Patient
Health
Plan
Personalized integrated
health/wellness and financial
management plan (including
assessment) with shared goals
Measuring Employer
and Consumer
Performance Against
Goals and Refine
Programs to Improve
Total Value
Using Deep Customer
Understanding to Renew
and Expand Relationships
Consumer Performance Evaluation
Payer as the Trusted Resource
Personal Plan
Coordinated
Care with Shared
Health Benefits
and Household
Expense
Information
Care
Management
Desperate
Trailblazers
Relationship
Extension
Advanced
Medical
Home
Goal
Actual
Performance Perspective
Result
20%
100%
Weight
208
200
100%
Cholesterol
200
225
90%
Blood pressure
120/75
135/90
90%
Fitness program
attendance
3x wk
1x wk
33%
1x day
1x day
100%
$300/mo
$325/m
o
80%
Insulin
management
Household budget
for healthcare
15%
90%
80%
10%
70%
5%
60% Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Healthcare Trend

Whole
Person
Health
Performance
Management
Consumer Satisfaction
Consumer
Relationship
Initiation
Market
Development
0%
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23
A Dozen Innovations Required to Shift the Model
Sponsored Retail Business Model
Market
Development
New Market
Development Model
With Employer
Partnership and
Consumer
Engagement
1
2
Employer
segmentation and
consultative sales
approach
Broker
segmentation and
broker service
model
3
Consumer
Relationship
Initiation
Consumer
Engagement
Management
Developing the
Consumer as a
Customer and
Establishing the
Foundation for
Partnership and
Advocacy
Consumer
Engagement and
Integrated Health,
Wellness, Finance
and Lifestyle
Management
Worksite
education
programs
promoting a
culture of health
5 Personalized
integrated health
and finance plan
with goals
6 Benefits models
4
Consumer profile
development
replacing current
enrollment
process
to align incentives
and promote
health
Care and
Provider
Integration
Management
Refining Provider
Partnerships and
Integrated Care
Delivery
8 Integrated or
partnered
provider
relationships with
aligned
reimbursement
model
Performance
Management
Relationship
Extension
Measuring Employer
and Consumer
Performance Against
Goals and Refine
Programs to Improve
Total Value
Using Deep
Customer
Understanding to
Renew and Expand
Relationships
11 Consumer
performance
management
capability tied to
personal plan and
integrated
rewards
12 Integrated
product, solution
and service
offerings based
on deep employer
and consumer
knowledge
9 Advanced
medical homes
7 Whole person
consumer
engagement
model tied to
personal plan
10 Shared evidence-
based medicine
guidelines and
preference
sensitive
treatment options
©2007 ChapterHouse, LLC—Not to be distributed without permission
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