In Conjunction with MassMEDIC, WGA is Pleased to Present:

1. In Conjunction with MassMEDIC,WGA is Pleased to Present: Employee Benefit Trends In The Medical Device Industry: An Overview Presented by: Louisa C. Bolick, Senior Vice President William Gallagher Associates Employee Benefits Practice September 19, 2006 WGA Employee Benefits Practice

2. WGA & The Medical Device Industry • WGA is the largest independent insurance broker in New England, with Property & Casualty and Employee Benefits services, comprised of many specialty practices. • For over 23 years, WGA has specialized in working with companies in the Life Sciences, High Technology, and Health Care sectors. • WGA works with over 400 Life Science and Health Care companies, almost 100 of which are Medical Device. • While industry does not play the same role in benefits as it does in other types of insurance, it is a significant factor when designing a competitive program. WGA Employee Benefits Practice

3. The Medical Device Industry –Companies Discussed • Medical Device is so diverse, ranging from companies whose primary focus is manufacturing components to those companies researching and developing brand-new technologies. • Size also varies widely, from start-ups to industry “giants”. • Within the industry, benefits can vary significantly depending on size (number of employees) and their demographics – with demographics driven by type of work conducted. • For this discussion, the focus will be on small to mid-size companies whose employees are working primarily in research, development, design, support & marketing. • In order to attract and maintain these key personnel, Medical Device companies need a strong compensation program, of which benefits are a significant component. WGA Employee Benefits Practice

4. The Medical Device Industry –Standard Plan Offerings • The Basics: • Medical • Dental • Basic Life AD&D • Short & Long Term Disability • Flexible Spending Accounts • 401K Retirement Plan (matching varies) • Paid Sick / Vacation / Personal Time • The Extras: • Vision • Employee Assistance Plans (inc. Work/Life) • Business Travel Accident • Tuition, Transit, Adoption Assistance • Group Voluntary Benefits (Life, AD&D, Vision, Home & Auto, Long Term Care, Pet Insurance, etc.) WGA Employee Benefits Practice

5. The Employee Benefits Market –Health Care Trend • Rising health care costs – and how to control them – are near or at the top of everyone’s list of concerns today, and is the # 1 priority among benefits specialists*. • Health care trend, or inflation, has remained stuck in the double digits for the last several years. • Although the rate at which trend is increasing has slowed slightly in the last year or so, various industry surveys are estimating average trend to be 11.9% for 2007. • It’s predicted that health care costs will continue to rise steadily, largely due to the aging population and growing demand for better (and more costly) services, particularly in the medical technology area – devices, testing, drugs, and hybrid technologies, etc. • Med Device companies are acutely aware of this, from both a general business as well as benefits cost perspective. WGA Employee Benefits Practice * Deloitte’s Top 5 Total Rewards Priorities Survey, 2006

6. Employee Benefits Trends –Consumerism • Consumerism is hot - talking about it, not adopting it (at least not yet). • Forrester Research predicts that by 2010 24% of employees will be enrolled in a CDHP . • In general, companies are interested in consumer driven health plans (CDHP) as a way to contain costs. • In Medical Device, the interest is two-fold: in addition to cost containment, there is genuine interest in the transparency aspect and in making employees (and customers) better consumers of health care services. • In MA, adoption of these plans in the Med Device sector will be gradual, with start-ups and industry giants leading the way. • In mid-size companies, the trend will likely catch on in the next year or two, with a CDHP as a option rather than a full replacement (Want to get started now? Try a Section 105 feature, or perhaps an HRA). WGA Employee Benefits Practice

7. Employee Benefits Trends –Wellness • Wellness is also a very hot benefits trend – and Med Device companies are actually doing something about it. • Individuals are drawn to this industry because they want to improve the health & quality of life for people worldwide, but are they taking care of themselves? • Med Device companies are more committed than most in promoting health & wellness initiatives. • Although reducing costs over the long-term is clearly beneficial, most Med Device companies want to encourage healthy habits and employee wellness because it’s the right thing to do. • Companies are taking action – quarterly wellness newsletters, lunch & learn workshops, discounted fitness memberships, annual wellness fairs, incentive programs. • Take advantage of what your carriers offer, particularly Medical and EAP providers. WGA Employee Benefits Practice

8. Medical Device in MA – General Benefits Profile • Small to mid-size Medical Device companies in MA have a very well-educated, highly skilled work force. • Benefits are a large component of overall compensation, and expectations are high for a comprehensive & generous package. • This high expectation is both regional and industry-driven, as benefits in MA tend to be more generous overall than in other parts of the country. • Historically, the benefits “budget” has been somewhat smaller for Med Device than for some of its Life Science counterparts. Careful analysis and planning go into every benefits decision. • So when MA-based Medical Device companies promote a “competitive” benefits package to prospective employees, what does this entail…? WGA Employee Benefits Practice

9. Medical Device in MA – Benefits Benchmarking • Medical plans tend to be fully insured (self-funding for larger companies) and include MA mandates. The most popular carrier is, overwhelmingly, BCBS of MA. • For companies whose employees reside primarily in NE, an HMO plan with an “out of area” PPO is the most popular model. HMO and PPO are also offered as a buy-up dual option, with High / Low PPO plans gaining in popularity (addresses the out of state employee parity issue). • The most popular PPO plan in MA is still 100-80, and HMO coverage remains at 100%, with no deductible. OV copays remain low by national standards (avg. is $15-$20) • Hospital & Outpatient copays (i.e. $250 / $500) are now a standard feature of these plans, while the most common Rx copays are $10 / $25 / $45, 2x for 3 month MOD. • Average employer contribution is between 75-80%. WGA Employee Benefits Practice

10. Medical Device in MA – Benefits Benchmarking • Dental plans also tend to be fully insured (although self-funding has little risk), and the most popular carrier is, again overwhelmingly, Delta Dental. • A single DPO+ offering is the most popular option. • When getting started, some Med Device companies go with a more basic plan and gradually upgrade to include Major Services and a higher benefit maximum. • The most common Calendar Year Maximum is still $1,000, but this is gradually increasing (a handful are even at $2K). • A number of companies do offer Orthodontia, primarily for children only, but it’s still considered to be an “extra”. • Employer contributions typically follow Medical, at 75-80%. • Stand-alone Vision plans are not particularly common in the industry. Companies rely on basic Medical carrier coverage & discounts, and encourage FSA utilization. WGA Employee Benefits Practice

11. Medical Device in MA – Benefits Benchmarking • Life/AD&D benefits are employer-paid, usually 1x or 2x salary (some include an Executive class). • Short Term Disability benefits are typically employer-paid and are often self-funded. The most common benefit is 60% for 13 weeks. • The industry-standard Long Term Disability benefits are also 60%, with a 90-day elimination period and a 2-year own occupation clause (may also include an Executive class). • Giving employees the option to pay the premium (for tax advantage) is becoming the norm. • Flexible Spending Accounts are a standard offering. • 401K plans are by far the most popular retirement benefit. Companies will often start a plan with no match (or a discretionary one), but gradually work up to a defined employer-match with a vesting schedule. WGA Employee Benefits Practice

12. Medical Device in MA – Competing with Large Companies • How do you compete with those extremely comprehensive benefit plans that large companies provide? Don’t! • There may be less variety, but less really can be more. Small things that can make a difference: • Don’t forgo a good EAP and BTA policy – they’re not overly expensive, and these benefits do matter to people • Do cover Domestic Partners, and students to age 25 • Don’t have a benefits waiting period • Do offer tax choice LTD, and consider a parental leave policy • Do offer employee-paid insurance options (Vision, Auto, Pet, etc.) • Don’t be shy about “selling” your benefits program • Do establish a wellness plan, and then back it up with regular communication and small incentives WGA Employee Benefits Practice

13. Medical Device Benefits – General Observations • Employees are overwhelmingly satisfied* with their jobs, due in large part to competitive wages and attractive benefit packages. • The Medical Device benefits approach in MA is one of cautious generosity. Benefits are definitely competitive, but they are practical, not extravagant. • Companies actively solicit feedback from employees on the benefits programs - what’s working and what might need improvement. • Med Device companies are very focused cost containment, but not at the expense of quality and taking care of employees. • As an industry, there is more interest in health care cost transparency and consumer-driven models, as well as promoting wellness initiatives. WGA Employee Benefits Practice * MDDI 2003 survey

14. In Conclusion for MassMEDIC Members • The cost of providing benefits, particularly Medical, will continue to rise. Do not hesitate to tell employees how much you’re spending on them! One suggestion – simple employee benefit statements. • Sometimes small improvements can make a big difference. Add an EAP with good work / life benefits, and then encourage utilization. • As the demand for experienced, senior-level employees grows, you may want to considerexecutive benefits such as supplemental Life, LTD, Long Term Care or perhaps a Deferred Compensation plan. • Add voluntary benefits to the menu. They don’t cost the company money, and employees do appreciate the convenience. WGA Employee Benefits Practice

15. Thank You! Any Questions? The following sources were reviewed in developing this presentation: WGA’s book of business and Medical Device clients Booz Allen Hamilton’s “State of the Medical Device industry and Trends for 2006” “The Medical Device Industry In MA”, UMass Boston (for MassMEDIC) “Innovation and the MA Medical Device Industry” (MassMEDIC, 2002) MDDI Salary Survey, 2003 (devicelink.com) Deloitte’s “Top Five Total Rewards Priorities for 2006” WGA Employee Benefits Practice