L. L. Andreatta & Associates Livio L. Andreatta, President

1. L. L. Andreatta & AssociatesLivio L. Andreatta, President • Advanced Chartered Benefit Consultant • State Public Relations Officer & National Public Affairs Officer for the National Association of Alternative Benefits Consultants (NAABC) • Special Consultant: Corporate Benefit Consultants • Certified Senior Advisor (CSA) • Financial Consultant • Over 35 years experience in Group and Individual insurance and corporate benefit plans. • Member: Chicago Southland Chamber of Commerce

2. BASIC FACTS Of those covered by group health plans, 50% will spend less that $1,000 per year on their health care.25% of those will spend NOTHING at all!8% of those covered spend 70% of all the dollars spent on health care.Employees pay for only about 20% of their health care expenses.

3. HIDDEN TAXES 20-30% of your premium is cost shifting and goes to cover Medicare and Medicaid due to inadequate government reimbursement.Another5-7% of premium cost shifting goes to cover the care of the uninsured at hospital emergency rooms.

4. CONSUMER EDUCATIONIn a recent study...50% of respondents were uncertain how much they paid for their monthly health insurance premium.55% were uncertain about their annual deductibles.77% reported that they were less than sure of what the terminology used in their health insurance policy actually means.80% do not know what PPO stands for.

5. Consumer Driven Health Plans Individual & Group

6. Can we keep funding Health Care the way we are doing it now? • Six straight years of double-digit increases, with more projected. • Vision is seeing the future now and acting upon it.

7. KEY QUESTION? • How do you slow down utilization without rationing health care?

8. THREE PLAYERS IN THIS CONCEPT SALE • INSURANCE COMPANIES: • EMPLOYER EDUCATION: • AGENCY/AGENT:

9. Consumer Driven Health Plans (CDHP's) • KEY ELEMENT: CDHP’S have to have $$ controlled by the employee with incentives/rewards to use these dollars more effectively. NO GIMMICKS!!!!! • High deductible plans center piece. • The human nature factor.

10. Three Consumer Driven Health Plan Designs 1. The insurance company keeps the premium savings with the promise that they will reduce future renewal increases. 2. The premium savings are primarily directed to the employee and are put into a claims account they own and control. (HSA’s) 3. The premium savings are primarily directed to the employer and are put into an account the employer owns, but that the employee controls and has incentive to use more wisely. (HRA’s)

11. Traditional Pre-paid Plan True HSA Plan Insurance Company Co-pays Insurance Company Co-Insurance Deductible Deductible Rx Co-pays Office Co-pays Variation 2 Variation 3 Co-paysRx Insurance Company Rx % Insurance Company Deductible Deductible

12. Traditional Pre-paid Plan American Community HSA Plan Insurance Company Co-pays Insurance Company Co-Insurance Deductible Deductible Rx Co-pays $500 Preventive Care Office Co-pays Variation 2 Variation 3 Rx Co-pays Insurance Company Rx % Insurance Company Deductible Deductible

13. Traditional Pre-paid Plan American Community Common Family Plan Insurance Company Insurance Company Single $2,700 Insurance Company Family $5,450 Co-pays Co-Insurance Deductible Deductible Deductible Rx Co-pays Office Co-pays American Community Embedded Family Plan Insurance Company Single $2,700 Insurance Company Family $5,450 Deductible Deductible 100% $2,700 $2,700

14. KEY INTERNAL COST CONTROL FACTORS Discretionary medical costs vs. societal changes and attitudes.

15. “Whereas once health care and health insurance were understood as activities related to acute injuries and illnesses, they have expanded to include preventive and mental health services, long-term care, complementary medicine, and the ability to maintain psychological, social, spiritual, and sexual performance far into the golden years.” James C. Robinson, PhD

16. Entitlement Factor in America • Corporations are Bottomless Pits • Unrestrained Desires • “Want-it-All” Attitudes Access to everything for a $10 co-pay

17. Consumers are not paying the bills • No Skin in the Game!!!

18. What it Really Costs!!!!! • Average Doctor’s Office Visit (w/tests) $250 • Average Co-Pay $10-30

19. Phase Industry is Now In • Bringing consumers into the game as educated and informed purchasers…

20. Key To This Transition • EDUCATION !!!!!! • EDUCATION !!!!!! • EDUCATION !!!!!!

21. As consumers, the idea of people learning how to save their own money is powerful

22. KEY INTERNAL COST CONTROL FACTORS • Discretionary medical costs vs. societal changes and attitudes. • Reigning in Rx cost explosion.

23. REIGNING IN Rx COSTS • Rx costs have increased from 5% of total claims in 1990 to over 18%. • More money is spent on advertising Rx’s than on research & development. • Market forces and education have to be brought into this Rx equation.

24. Can your company continue to take these projected increases without changing your strategy?

25. Address Cost • The Employer’s Options • Drop Coverage • Absorb the costs themselves • Pass premium costs on to their employees • Reduce benefits or Try a bold new approach that gives employers more control over cost while giving more choice to employees

26. SOLUTION: GETTING BACK TO RISKED BASED INSURANCE

27. Milliman & Robertson, Inc.

28. THREE LITMUS TESTS FOR CDHP’s • How does your plan design treat employees with catastrophic or chronic conditions?

29. THREE LITMUS TESTS FOR CDHP’s • How does your plan design treat employees with catastrophic or chronic conditions? • How does it treat the 55+% of employees who spend less than $1,000 per year?

30. THREE LITMUS TESTS FOR CDHP’s • How does your plan design treat employees with catastrophic or chronic conditions? • How does it treat the 55+% of employees who spend less than $1,000 per year? • How does it curb the abuser/user?

31. HOW IT WORKS:

32. How does the HRA concept work? PPO PREMIUM PPO BENEFIT DESIGN $5 MILLION 100% PREMIUM $ 90% Rx, treatments, surgery Hospital, doctor, lab tests $250 deductible Rx $10/$20/$35 co-pay ER $75 co-pay Office Visit $20 co-pay $1,000 Out-of-pocket 10% R E D U C E D B Y 4 0 % HRA REDUCED PREMIUM HRA BENEFIT DESIGN $5 MILLION 100% Rx, treatments, surgery Hospital, doctor, lab tests NO CO-PAYS $2,000/$2,250/$2,500 Deductible Fund actual claims under deductible Rx, treatments, surgery Hospital, doctor, lab tests $ Use 60% of premium to pay for Catastrophic Insurance Unused premiums are retained in your checking account $___________ Out-of-pocket Owner’s choice when used

33. Most Expensive of Health Care Designs are called “Prepaid Medical”Plans 1. Deductible 2. Office Co-Pays 3. Co-Insurance 4. RX Cards 5. Typical Out of Pocket

34. How does the HRA concept work? Facts Pre-Paid PPO Premium PPO Benefit Design 100% PREMIUM $ Surgery Hospitalization Office co-pays ER co-pays Treatments X-rays Lab Tests Specialists Rx co-pays Large Claims Small Claims 90% Rx, treatments, surgery Hospital, doctor, lab tests 10% out-of-pocket $250 deductible Rx $10/$30/$50 co-pay ER $75 co-pay Office Visit $20 co-pay Why do we have health insurance? Most people can’t afford to write a check for $50,000 - $100,000 - $1,000,000 Those covered never see the actual cost of their health care Most don’t care... as long as they’re covered R E D U C E D B Y 4 0 % INSURED NEVER SEES THE ACTUAL COSTS OF TREATMENTS, OFFICE VISITS, AND PRESCRIPTION DRUGS HRA Reduced Premium HRA Use 60% of premium $ to pay for Catastrophic Insurance 100% Rx, treatments, surgery Hospital, doctor, lab tests NO CO-PAYS $2500/$5,000 Deductible Fund actual claims under deductible Rx, treatments, surgery hospital, doctor, lab tests etc. You only pay for what you use Remaining unused HRA funds at the end of each year roll over and are retained in your checking account. Unused premiums are retained in your checking account Owner’s choice when used

35. Employer Can Decide Design. Pay same Claims, BUT in a Different Manner • Premium Savings • Tax Savings • Key Point – Claims Paid when used. BOTTOM LINE… ON AVERAGE, COMPANY WILL SAVE BETWEEN $1,000 TO $3,000 PER PERSON PER YEAR.

36. CURRENT STARMARK PLAN $1,500 Deductible 90/10%% Co-Insurance X 2 90% Co-Insurance Individual OOP $2,000 Family OOP $4,000 Rx Card $10/$25/$40/30% $20 OV MEDICAL RATES PER MONTH 13 Employee Only $ 224.83 1 Employee/Spouse $ 1 Employee/Child $ 689.57 3 Family $ 975.29 Total Premium $6,538.23 Savings with HRA Plan 44% No Employer Deposit to HRA Account Maximum OOP Exposure w/deductible Individual $3,500 + Co-pays Family $7,000 + Co-pays TOTAL COST OF HRA Monthly Premium $3,672.56 HRA Contributions $3,319.17 HRA Administration $ 119.00 Total Cost $7,110.73 AMERICAN COMMUNITY HRA Deductible $2,700 Single $5,450 Family 100% Co-insurance 100% Co-Insurance Individual OOP $ 2,700 Family OOP $ 5,450 Rx Discount Card MEDICAL RATES PER MONTH 13 Employee Only $ 141.25 0 Employee/Spouse $ 1 Employee/Child $ 353.14 3 Family $ 494.39 Total Premium $ 3,672.56 Monthly Premium Savings $ 2,865.67 Annual Premium Savings $34,388.04 Employer Deposits to HRA Employee $ 1,890.00 Family $ 3,815.00 Maximum OOP Exposure Individual $ 810.00 Family $1,635.00 TOTAL SAVINGS OF HRA Guaranteed Monthly Savings ($ 572.50) Guaranteed Annual Savings ($6,869.96) Expected Annual Savings $13,045.04

37. G & G MFG Renewal 11-01-2008 Carrier AC Previous $141.25 $353.14 $277.19 $494.39 AC Renewal $151.14 $377.86 $302.28 $529.00 Aetna $240.00 $457.00 $404.00 $662.00 Blue Cross $296.14 $666.32 $666.32 $799.58 Humana Declined to quote – rates not competitive PhysiciansCare $215.17 $418.19 $379.32 $647.07 Starmark $174.31 $401.49 $343.76 $570.94 Unicare $170.91 $396.60 $396.60 $506.53 • With your Starmark traditional plan, you would have spent $78.458.76 on premiums for 2008 • With your American Community HRA, you have spent $44,070.72 on premiums for 2008 • You have saved $34,388.04 on premium over the past 12 months • Your employees utilized 13,000 in HRA reimbursements through your renewal date. • That means you have kept over $21,000 in your checking account during your first year of your HRA • Your 7% renewal increase amounts to $3,084.95. With your Starmark plan, this 7%% increase would have amounted to $5,492.11. • Your Starmark renewal premium would have been $83.950.87 • Your American Community HRA plan renewal is $47,155.67 • That’s an additional savings of $3,679.52 • This brings your actual total annual savings for your first year to over $24,679.00

38. SOME FUTURE ISSUES • Cost Shifting by the Government!!! • Reducing Rx Costs. • Tort Reform. • Flexibility on State Mandates.

39. How Do You Start This Educational Process Contact Livio Andreatta, ACBC, CSA L. L. Andreatta & Associates Illinois Office: (708) 647-9353 Michigan Office (269) 928-2901 Cell: (708) 932-5167 e-mail: livio3@sbcglobal.net