Alan Katz Testimony Before Assembly Health Committee Hearing on Health and Wellness Programs
4/10/2012 4:30:50 PM
Testimony of Alan Katz, SeeChange Health EVP
Assembly Health Committee Special Order Concerning Health and Wellness Programs
AB 1636 (Monning)
April 10, 2012
Mr. Chairman, Members of the Committee, my name is Alan Katz and I’m the executive vice president for sales and marketing at SeeChange Health. Your deliberations today are extremely important to SeeChange Health as we are a value-based benefits company that incorporates wellness initiatives into all of our products. For several years now we have provided value-based benefit platforms and services to self-insured plans and carriers through our SeeChange Health Solutions division. And last year we launched statewide coverage to California’s fully-insured small and mid-size businesses through SeeChange Health Insurance. To the best of our knowledge, SeeChange Health Insurance is the first new carrier to enter the California small group market in at least two decades, delivering some of the expanded competition promised by federal health care reforms.
At SeeChange Health we believe that the best way to improve the quality of life of our members and to reduce health care costs is through positive reinforcement that leads to early and appropriate intervention in chronic and serious conditions, not by structuring products to punish individuals for having conditions over which they may have only limited control.
Our approach to wellness is based on three proven strategies. First, the financial rewards we offer members are meaningful, consistent and recurring. Studies—and our own observations—indicate that the most cost effective incentives are those perceived as having a value of about $500. Not all rewards “feel” the same, however. For example, our experience indicates reducing a member’s out-of-pocket exposure by $1,000 is perceived as roughly the equivalent of a $500 cash award. We have also learned that rewards provided on a one-time basis have less impact than ongoing incentives in improving health. So we incent members to complete age and gender-specific health actions on an annual basis.
Second, taking the steps necessary to earn rewards in our plans is voluntary and rewards are based on members taking specified actions, not on what those actions reveal of their medical condition. Put another way, our rewards are based on what members do, not on who they are. Yes, we want those actions to lead to better health. That is why members receive personalized health education and customized wellness tools designed to help them address their own, unique set of medical conditions. In addition, several of our plans offer additional financial rewards to members who take recommended steps to address their chronic conditions.
Third, we define our Preventive Health Actions based on guidance from objective third parties such as the American Heart Association, the American Diabetes Association, the US Preventive Services Task Force, and the National Asthma Education and Prevention Program. This keeps the requirements current and ensures they reflect the best available science.
This three-pronged approach can have a powerful and positive impact on both the quality of life of our members and the cost of medical care. In a case study of 500,000 members in a value-based benefits plan managed by SeeChange Health Solutions, the year-over-year cost trend was just 2.3% compared to the industry trend of 7.0%. This bending of the cost curve was achieved in spite of increased utilization because at the same time, overall per member per month costs dropped by 8.9% from the previous year.
This bears repeating: utilization increased while spending per member fell.
The reason is that our approach to value-based benefits often brings to light serious and chronic conditions earlier than would otherwise be the case. The resulting savings can be substantial. To cite just one example, early-stage breast cancer treatment costs, on average, slightly less than $14,000 per year while late-stage treatment averages nearly $61,000—a difference of $47,000 for one patient in one year.
This reality is often overlooked in efforts to reduce health care spending: instead of reducing utilization through denying treatment, savings can be achieved through improved patient outcomes—even if those outcomes result in increased utilization in the short-term. Better still, early intervention saves lives and can greatly improve patients’ quality of life.
As this Committee considers legislation concerning health and wellness programs, we urge you to take a sophisticated and targeted approach. There are numerous ways to implement value-based benefit plan designs. Care must be taken to encourage innovation and assure carriers can responsibly deliver on the promise of value-based benefits: healthier Californians, more productive businesses and lower overall health care spending.