The University of Alaska Proposed Wellness Review Services

1. The University of AlaskaProposed Wellness Review Services Kristen A. Russell, FSA, MAAA President & Founder Fall River Consulting Group LLC

2. Agenda • Background • Fall River Six Step Trend BusterTM Strategy • High Level Plan Review • Wellness Review Services

3. Fall River Background

4. Fall River Background • We are a boutique actuarial consulting firm in Denver, CO • 5 W-2 Employees and 4 Independent Contractors • Ms. Russell is a member of the American Academy of Actuaries and a Fellow of the Society of Actuaries • Over 16 years of experience in the employee benefits and health actuarial fields • 76% of the time we review a health plan we find ways employers can save money without giving up anything in terms of benefit value • Employer clients include hospitals, schools, non-profits, technology, and professional services firms

5. The Fall RiverTrend BusterTM Strategy

6. Craft a Long Term Strategy • Quick fixes often backfire, and employees grow tired of “flavor of the month” initiatives • A recent Watson Wyatt study revealed: • The average large employer experienced a 6% healthcare cost trend; • Those who took focused, proactive steps to manage their healthcare costs averaged only 0.5% increases; and • Those who did little to nothing to tackle their costs instead paid 10.5% increases on average.

7. Engage Employees through PlanDesign • Employees are typically no more concerned about spending your healthcare dollars wisely than a teen-aged girl shopping with Dad’s money. • We help firms evaluate how their plan designs can be enhanced to engage employees in the actual cost of health care so they are incented to spend your money wisely.

8. Get ‘Em Moving • Two-thirds of our healthcare dollars spent on conditions preventable or treatable by lifestyle (Centers for Disease Control and Prevention). • Wellness programs can achieve 300-600% ROI over 3 years, but most are haphazardly designed or only attract participation of already healthy members. • We have experience designing outcome based incentive structures that incent the least healthy members to participate the most

9. Create Savvy Healthcare Consumers • Consumers can estimate the price of a Honda Accord within 3%, but are 56% off on a four day hospital stay (Harris Interactive survey). • Employees cannot make wise decisions with your healthcare dollars unless they have the knowledge and tools to be informed consumers. • Fall River helps employers create an education strategy to teach members how to: • Seek care in the most appropriate setting • Become an active partner in their treatment plans • Find out which of their drugs have generic alternatives and how to find the lowest cost source for those prescriptions

10. Mine Your Data • When you don’t know what’s driving up your healthcare costs, it’s hard to reverse it. • The claims experience data provided by a TPA and PBM is a treasure map showing how to better manage your claims, but it doesn’t do any good sitting on a shelf… • Fall River takes charge of the claim management process for large employers, using our actuarial expertise to identify problematic cost drivers and benefit designs that are being abused, and reporting back regularly.

11. Communicate Constantly • Adults need to see or hear new info 7 times to absorb it. • Employees need to hear things in different ways too: • Face-to-face education (WIN conducting today with Wellness Breaks, but consumer education could be added) • Online information and email reminders and encouragement • Print information sent home to reach spouses – e.g. Fall River offers an optional wellness print newsletter to send home • We also keep you updated on the latest benefit strategies, wellness ideas, and compliance updates via our Fall River Journal employer newsletter.

12. A recent Watson Wyatt study revealed: • The average large employer experienced a 6% healthcare cost trend; • Those who took focused, proactive steps to manage their healthcare costs averaged only 0.5% increases; and • Those who did little to nothing to tackle their costs instead paid 10.5% increases on average. Which group would you rather be in?

13. High Level Plan Review

14. Medical PEPM – 36 Months

15. Trend Analysis Results

16. Regression Analysis Results

17. Medical Utilization • Ignore Claim report columns titled “Claims Per Employee” as they are erroneous on most all GER reports reviewed • U of A population is older, more female, and with fewer kids than the norm, but the male/female split did balance a little back toward norms in the last year • 2008 Utilization report from Premera indicates that trend (actually change in PEPM) was reduced from 13.5% to 4.3% • This is due in part to a dramatic reduction in inpatient utilization – bed days are down 21% overall • Large claims down in 2008 but still at or above norms – top 5 causes are all able to be impacted by lifestyle and wellness • Musculoskeletal, Cancer, Digestive, Circulatory, Genitourinary

18. Union vs. Non-Union Stats (from 2007)

19. Disease Management - Activity • Premera’s prospective UR/CM reviews dropped dramatically in most recent, but still at norms for book • PMPM savings attributable to UR/CM dropped 18% - diminishing returns? • On DM, Premera is managing more patients on a cumulative basis, but far fewer contacts in terms of: • Welcome kits • Quarterly standard of care reminders • Employee Newsletters • Number of outbound calls did increase, which is positive • % of Opt Outs increased in most programs • Is U of A still getting its money’s worth with Premera’s DM?

20. Disease Management – Clinical Outcomes • Only detail reporting was for Diabetes, CHF, and CAD, and is greatly delayed (reviewing CY 07 stats in Nov 08) • Hospital admissions and ER visits were down for diabetes and CHF but both were up for CAD • Categorization of members by how well they are managing disease indicated several concerns: • All CHF patients had an ER or hospital visit in the past year, meaning that’s the only way Premera found them • 0% of diabetics are classified as “Managing Condition Effectively” without an elevated risk of exacerbation • % of Opt Outs increased in most programs • Savings calculation seems to indicate that claims dropped dramatically in 2006 after the 2005 baseline year, and then increased quite a bit again in 2007. Appears to be taking credit for reversion to the mean.

21. Pharmacy Reporting • Total PEPY cost is up 6.6%, utilization (measured by days’ supply) is up 2.1% • Generic dispensing rate of 54.7% is well below norms and Best in Class (Addition of 3 Tier benefit 7/1/08 should help) • Employee cost share is very low at 9.7%; norm is 19.2% • 41.4% of scripts are maintenance drugs that are filled at retail – work to convert these to mail order • Medication adherence (Med Possession Ratio) is well below Best in Class • Consider these improvements: • Step Therapy • Mandatory OTC • Value Based Purchasing / Evidence Based Design

22. Proposed Wellness Review Services

23. How Fall River Can Help U of Alaska • Perform an on-site review of all wellness services and offerings with an objective eye • Evaluate offerings in context of other major university programs • Review ROI calculation methodology for actuarial soundness and provide recommendations for drilling down further • In depth investigation of the return on various investments – what’s working best and not as well, and what are you REALLY getting for what you pay • Provide recommendations for strategies to increase wellness plan participation, including full legal and other details regarding outcome based incentives, as well as a review of current HRA incentive • Provide overall recommendations in context with a full actuarial cost containment strategy

24. Advantages of Fall River • Many years experience with healthcare cost containment • An actuary can put wellness into context with larger strategy • Extensive familiarity with outcome based wellness rewards and rules governing them • Can conduct a lower cost ($35,000 - $50,000) overall strategy review and identify areas to dive deeper on • Ensure you’re digging in the right places before spending $100K+ to dig • Engagement could include (if desired) quarterly review of all medical, pharmacy, and DM utilization reporting review – enables faster action than annual reviews

25. Questions?