Healthcare Costs and Trends

1. 2009 Annual Meeting for Membership Council Representatives and Guests Healthcare Costs and Trends November 9, 2009

2. Topics For Discussion • Medical Trend – what is it? • Medical Trend – rate of increase • SchoolCare Trend • Trends in Plan Design • Wellness • Risk Assessments

3. HealthCare Trend Components • Price Inflation Inflation for services and supplies. This represents the biggest element of overall medical plan trend • Utilization The number of services utilized. • Technology Advancements Advancements in imaging and other technologies Developments in laboratory testing Increased availability and utilization of specialty pharmaceuticals • Cost Shifting – Private to Public Sector Cost for Medicare and Medicaid services continues to be shifted to the private insurance market due to government’s lower reimbursement levels

4. The Healthcare Cost Equation • For all of its complexities, determining the cost of healthcare is really quite simple: # of Units $ per Unit Total Cost = X • More services rendered • Imaging • Labs • Physician Visits • Clinical advancements resulting in new procedures and drugs • Quality of care • Declining health of the population • Plan design (OOP cost share) • Provider contracting • Inflation impacting COGS • New and more expensive drugs • Declining health of the general population • Cost shift from Medicare/Medicaid to the private insurance market • Administrative expenses • Plan design (OOP cost share) • Employer vs. Employee Cost-Share • Desire to Reward Quality

5. Average Annual Premiums and Contributions 1999 – 2009 (national survey) 131%Premium Increase 128%WorkerContributionIncrease The Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits, 2009 Summary of Findings” (2009): 1.

6. Trend estimates for 2010 • Projections reflect increases in the 7-10.5% range nationally • Variation exists by region and plan design

7. SchoolCare Trend • SchoolCare trend is estimated at 8% (from 7/1/09 plan year to 7/1/10 plan year) • This is below average trend and represents a meld of case specific trend and CIGNA trend • SchoolCare historical average rate increases are as follows: AON Spring 2009 Health Care Trend Survey: Trend Rate History Exhibit.

8. Plan Design Trends - Wellness More than 58% of employers offering health benefits offer at least one of the following wellness programs weight loss program gym membership discounts or on-site exercise facilities smoking cessation program personal health coaching classes in nutrition or healthy living The Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits, 2009 Summary of Findings” (2009): 6.

9. Plan Design Trends – Health Risk Assessments • Sixteen percent of firms offering health benefits give their employees the option of completing a health risk assessment to help employees identify potential health risks. The Kaiser Family Foundation and Health Research & Educational Trust, “Employer Health Benefits, 2009 Summary of Findings” (2009): 7.