HEALTH INSURANCE PLANS AND TRANSPARENCY: The Good, the Bad, and the Opportunity

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1 White Paper HealthSparq Health Care Reform + Transparency HEALTH INSURANCE PLANS AND TRANSPARENCY: The Good, the Bad, and the Opportunity Executive Summary The trend in the health care industry towards greater transparency continues, at a rather rapid pace. Much of the shift is increasingly driven by employer (and employee) demand. Insurers are focusing on cost tools when it comes to transparency, somewhat to the neglect of quality, access, and engagement. The smartest plans will utilize transparency tools to demonstrate both their lower cost and higher quality advantages, and will win the enrollment and retention challenge.

2 Connectivity enables transparency for better government, education, and health. It s one of the many things that will help us do a better job. - Bill Gates, Bill and Melinda Gates Foundation Research Summary Following on last year s groundbreaking study of transparency tool development within the health insurance industry, HealthSparq again commissioned The Cicero Group, an independent market research firm, to survey health insurance executives across the United States to better understand how transparency initiatives are changing the industry one year on. In this study, a total of 209 executives at a wide variety of insurance companies responded to the survey. The results are transformational for those looking to implement the newest transparency initiatives. According to The Cicero Group benchmarking study, more than two- thirds (71%) of health plan executives now consider health care transparency to be a corporate priority, compared to 44% in In 2010, the Patient Protection and Affordable Care Act (PPACA) was passed with the objective of developing and supporting a more consumer- oriented marketplace. Since its passing, it is evident that consumers have developed a greater appetite for health care transparency, which includes everything from general information to personalized, decision- making tools. This growing demand for greater health care transparency in the market stems from a variety of factors, one of which being that individuals now have more skin in the game. Increasingly, employers are shifting greater plan management responsibilities to their employees, leaving many individuals to demand greater transparency to ensure informed health care choices. This growing demand has led many health plan organizations to answer the call with a proliferation of consumer- oriented transparency tools. But, it hasn t been until this past year that industry executives began to truly realize the internal benefits of these transparency initiatives. The 2014 study found that an increasing number of health plan leaders are seeing their transparency tools as yielding both cost and retention benefits. As a result, organizations are aggressively expanding their financial commitment to the development of such tools. The 2014 study also found that health plan executives financial commitment is primarily geared towards cost- saving tools (e.g. out- of- pocket and treatment cost estimators). For many organizations, this focus ignores an opportunity to address a more fundamental consumer need, assessing quality and value of health care providers. As employees play a greater role in choosing health care options for themselves and their families, they are increasingly demanding additional information to not only evaluate cost, but provider quality as well. Going forward, the best and most successful health care plans will be those that not only deliver low- cost, high quality health care, but those that are able to engage their members and share information to help educate and guide well informed and wise purchasing decisions. The Health Insurance Industry s Shift towards Greater Transparency Continues Over the past 12 months, health care transparency has continued to gain momentum. Within this time, the number of health plan leaders familiar with the term, health care transparency has increased 25 percentage points to 93%, compared to 68% in 2013.

3 As familiarity of the term grows among industry executives, so does the notion of what is health care transparency. While the majority of industry executives (85%) continue to define transparency in accordance with providing cost data and analysis tools, the term is increasingly being linked to greater physician, network, and treatment information broadly. The growth in demand for health care transparency has prompted many organizations to recalibrate their priorities. In fact, just under three- fourths (71%) of industry executives now consider health care transparency to be a corporate priority, compared to 44% in Most tellingly, as payers have elevated the importance of transparency initiatives within their organizations, they have shifted how they manage their transparency responsibilities. In 2013, transparency responsibilities were primarily held by one of two executives, the Chief Information Officer or the Chief Technology Officer. The shift now is toward placing these responsibilities in the hands of either the CEO, or the Customer Experience, Marketing, or ebusiness/web Strategy departments. This is a key indicator that organizations are recognizing the importance of implementing transparency tools that focus on providing a better customer experience, rather than just adding technology for technology s sake. Payers are increasingly viewing transparency initiatives as key to meeting customer needs, and are crafting the tools to ensure success. Health Care Companies Are Providing More Tools to Members Over the past year, the appreciation of the benefits of transparency tools has also grown. This has come as industry executives are increasingly seeing how such tools aid consumer decision making, help reduce costs, and improve member retention. Over three- fourths (78%) of executives believe that health care transparency tools will help members make more informed decisions about their health care, compared to 68% in Even more telling, nearly three- fourths (72%) of executives also indicated that they anticipate health care costs to decline as members are able to compare providers and secure the best value in health care. This compares to just 52% who held that belief in For health plan executives, the benefits stemming from greater transparency go beyond just saving money. Executives indicated that they see the tools having retention benefits as well. Over half (55%) of executives expect that enhanced transparency will lead to greater member retention and engagement, compared to 46% in An increasing number of executives also see implementation and availability of transparency tools leading to increased visits and traffic to their website.

4 With the momentum surrounding the value of transparency, it is no wonder health plan organizations are also increasing their financial commitment to the development of transparency tools. Over half (55%) of industry executives noted that their organization s transparency tool budget was growing, compared to 33% in In addition, those providers who have gone the furthest in transparency adoption are those that are implementing engagement tools such as incentive programs, utilization campaigns, and pre- emptive health alerts. Employer Demand Is Driving the Shift The trajectory of health care transparency has traditionally been driven by two forces: legislation and organizational leadership. Interestingly, the recent shift toward greater health care transparency is increasingly stemming not from these two motivators, but from health plan members, particularly employers and their employees, who are demanding greater transparency to aid in their health care decisions. With employers gradually shifting greater plan management responsibilities to employees, individual members are acquiring a new hunger to understand the cost and quality of their health care purchases. In a recent study by the National Business Group on Health, by 2015, nearly one- third of large employers plan to offer only high- deductible plans. This is up from 22 percent in 2014 and 10 percent in It is these higher out- of- pocket costs that are in part escalating the demand for greater transparency in pricing, quality, and services. In 2013, one- half (50%) of health plan executives indicated employers were driving the shift toward health care transparency. Today, that figure has jumped 20 percentage- points to 70% making it the strongest driver for transparency, well ahead of health plan leadership initiative and health care reform legislation. Health Care Companies Are Focusing on Tools that Provide Cost Transparency In 2014, the growing demand for transparency was met with an increase in implementation of tools, with much of the emphasis placed on implementing basic tools such as cost estimators. The percentage of large plans (over 1 million members) who have implemented some form of cost estimator jumped 37 percentage- points year over year, from 46% to 83% as such tools are quickly becoming the standard. Other tools that are becoming more commonplace include prescription information (73%), mobile web access (68%), health care concierge service (58%), and benefit plan design capability for employers (56%).

5 When asked about the importance of various tools, it is clear that as health plan executives and managers evaluate transparency opportunities; features such as cost control and convenience are taking precedence over features focused on service quality. Just under half (40%) of executives consideration, a trend present across all company sizes, is being geared toward out- of- pocket costs and treatment cost estimators these same tools only accounted for 24% of providers consideration in Moreover, greater consideration (13%), particularly among organizations with over a million members, is being placed on mobile access, which accounted for 8% of consideration in While Missing Opportunities to Highlight Service Quality To effectively shop for care, patients need to know provider pricing, particularly out- of- pocket costs. As such, health plan executives are wisely making the decision to allocate resources to the development of cost- saving tools. However, most consumers will tell you that cost is not the only driver in their decision- making process, and this is most certainly true when it comes to health care. Members want high quality care when it comes to taking care of their bodies, and implementing transparency tools that help assess care quality may well become a key to member retention, particularly in a marketplace where members are increasingly making the health insurance purchase decisions. Interestingly, many health plan executives do not seem to be seeing things this way. In 2013, executives indicated the relative importance of quality tools such as provider comparisons and patient reviews was 33% relative to other tools, while in 2014 that number decreased to just 21%. This trend is particularly noteworthy in light of a number of recent studies that indicate there is little to no correlation between health care cost and quality of care (Hussey, et al., 2013). This trend highlights an opportunity, particularly for those executives who are already ahead of the game, to highlight their success on both the cost and quality front. As other plans focus more on cost- saving tools, the most successful plans can carve a highly attractive niche by openly sharing data evidencing how well they do in caring for both patient s health and their financial peace of mind. This success is likely to lead to increased enrollments, creating a virtuous cycle of improved quality, improved access, and reduced cost the Holy Grail of provider success. Engagement is by Far the Biggest Challenge and Opportunity In 2013, the largest perceived challenges for developing a health care transparency tool were unavailable funding (23%) and unavailable resources (20%). With the influx in transparency tool funding over the past year, new products are now coming to market, and executives are facing a new challenge, consumer engagement. In 2013, only a handful (14%) of health plan executives cited consumer engagement as a prominent challenge today, that figure has soared to 51%.

6 The problem is not new. A 2013 report by Catalyst for Payment Reform (CPR) noted that 98% of health plans offer some type of transparency tool, but only 2% of enrolled members use the tools. This has resulted in increasing focus, particularly by larger plans, to develop engagement tools such as incentive programs, pre- emptive alerts, and online member communities. For instance the percentage of plans utilizing online communities increased to 45%, almost double the 25% of a year ago, and plans employing incentive programs increased to 53% from 39% in The data shows that larger health plans are more likely to be the ones paving the way in engagement, while plans with under one- million members are so far, less inclined to push forward on the engagement initiatives. Going forward, finding a way to build engagement will be critical to all plans, regardless of size, to ensure they reap the cost and enrollment benefits of increased transparency. Today, most transparency tools are focused on cost control features (e.g. out- of- pocket costs and treatment estimators), which is to be expected since this is how many health plan executives define health care transparency. While the aforementioned products are in high demand, as they become more commonplace, supplemental transparency tools (e.g. member incentive programs, pre- emptive alerts, online communities, etc.) appear to be the wave of the future, and as such may very well become not a key, but the key to plan success. About HealthSparq HealthSparq develops health care transparency tools for health plans and employers to offer to their members and employees. HealthSparq s software- as- a- service (SaaS) platform delivers provider search, cost and quality information, and community engagement to consumers via their health plan and employer websites. About The Cicero Group The Cicero Group is a data- driven market research and strategic consulting firm utilizing both quantitative and qualitative approaches to address business challenges in virtually all industries. HealthSparq The Cicero Group M/S C East 100 South 100 SW Market Street Suite 300 Portland, OR Salt Lake City, UT SPARQ- IT HealthSparq is part of the Cambia Health Solutions family of companies. To learn more about HealthSparq, visit HealthSparq.com and on Twitter. Sources The Association between Health Care Quality and Cost: A Systematic Review. Annals of Internal Medicine. Peter S. Hussey, Samuel Wertheimer, Ateev Mehrotra. 2013; 158(1): How Will Health Insurance Price Transparency Affect You? Healthline News. Shawn Radcliffe. May 21, news/effects- of- health- insurance- price- transparency Employer Health Benefits Survey. The Henry J. Kaiser Foundation. August 20, section/2013- summary- of- findings/ National Scorecard on Payment Reform. Catalyst for Payment Reform. March,