Managing Employee Benefit Costs in the Health Care Reform Era Thom Mangan

1. Managing Employee Benefit Costs in the Health Care Reform Era Thom Mangan CEO United Benefit Advisors

2. About the UBA Health Plan Survey

3. Why We’re Here

4. Top Decision-makers’ Concern About the Cost of Health Care Benefits with Respect To: 4

5. Increases in Health Insurance Premiums Compared with Other Indicators 1988 - 2012 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 1999-2007; KPMG Survey of Employer-Sponsored Health Benefits: 1993, 1996; The Health Insurance Association of America (HIAA): 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2011.

6. Health Care Costs Per Employee Per Year 6

7. 2014 and Beyond 7

8. Health Care Costs Per Employee Per Year 1969 $242 1979 $623 1995 $3,821 2011 $8,960 8

9. 2012 Health Care Trend – Med + RX 9

10. Why Should You Care • Cadillac Tax– 2018 – 40% excise • Employee - $10,200 • Dependent - $27,500 • 1% CPI • Avg. Public Employers Penalty in 2018 (Family) IL $2,4422018 $9,8022020 MA $5,7322018 $19,699 2020 10

11. The Effects of Inflation on Medical Premiums @ 5% / 10% 11

12. Type of Plan Offered 12

13. Average Annual Medical Plan Cost per Employee by Plan Type 13

14. Annual Cost Per Employee – Total Cost 14

15. More Granular is More Accurate National $456 PPO $475 HMO $451 CDHP $409 Central $373 Southeast $380 Northeast $430 North Carolina $405 South Carolina $372 Georgia $429 15

16. Health Plan Costs

17. What do you predict will happen to health plans in the next 5 years? 17

18. Health Plan Costs • The average monthly premium was $456 single, $1,110 Family • The 2012 average annual plan cost per employee was $8,960 vs. $ 8,688 in 2011 18

19. Health Plan Costs • The 2012 employee share for plans with employee contributions was up from $3,612 in 2011 to $3,776 in 2012 or 28.2% of the total employee premium. • The employer share for plans with employee contributions decreased from 72.6% in 2011 to 71.8% in 2012. 19

20. Renewal Analysis 20

21. Average Percent Increase Last Plan Anniversary by Plan Type – PPO 21

22. Average Percent Increase Last Plan Anniversary by Plan Type – HMO 22

23. Average Percent Increase Last Plan Anniversary by Plan Type – POS 23

24. Average Percent Increase Last Plan Anniversary by Plan Type – CDHP 24

25. Average Annual Cost per Employee – PPO 25

26. Average Annual Cost per Employee – HMO 26

27. Average Annual Cost per Employee – POS 27

28. Average Annual Cost per Employee – CDHP 28

29. Plan Design Components

30. PPO Plan Designs • Median PPO Deductible = $1,000 / $2,250 • Median PPO Coinsurance = 80% / 60% • Median PPO OOP Max. = $3,000 / $7,000 • Median PPO Office Visit Co-Pay = $25 30

31. Median Copay - HMO 31

32. Average Single In-Network Out-Of-Pocket Maximums – HMO

33. Median Coinsurance Percentage – HMO

34. Top 5 Pharmacy Benefit Management (PBM) • Multi-tiered drug formularies that promote generic utilization • 30 brand names came off patent last year • Generics are highly effective to treat 9 out of 10 patients • Narrowing pharmacy networks to leverage deeper discounts • Carving out pharmacy management to a PBM • Specialty drug utilization management • $11 billion- 2012 • $19 billion - 2014 • Value-based insurance plan – multi-tiers • Four-tier plans • 2004 – 4% • 2012 – 14% 34

35. Median Rx Retail Copays – 2-tier 35

36. Median Rx Retail Copays – 3-tier 36

37. Median Rx Retail Copays – 4-tier 37

38. Spotlight on CDHP Findings: Debunking the Savings Myths

39. % of Employees Enrolled by Plan Type by Region (CDHP) 39

40. Real Average Annual Cost per EE with ER HRA/HSA Contribution – All Plans 40

41. Annual HRA Funding Levels 41

42. Spotlight on CDHP Findings: Debunking the Savings Myths • 2012 UBA Health Plan Survey shows that CDHPs do not prove to generate higher savings for employers than other plan types with the same deductible. • Unless… 42

43. Average Annual Cost per EE by Deductible Level 43

44. Spotlight on CDHP Findings: Debunking the Savings Myths • Regardless of health plan design, health care costs are rising because employees are making uninformed health care consumer choices Lower health costs = informed consumer activity Plan type doesn’t matter – what’s needed is employee communication on how to make better health care consumer choices • Plan Design Matters – HSAs provide much better outcomes than HRAs. Reason – Patient Responsible for the Deductible 44

45. Other Findings: Wellness Programs

46. Percent Offering Wellness by Employee Size 46

47. Wellness Programs and Components 47

48. Next Steps…

49. Future National and Regional • High Performance/Tiered Provider Networks • Patient-Centered Medical Homes • Transparency in Pricing • Transparency in Outcomes • Accountable Health Care Organizations – ACO • ASO Plans • Increase in Premiums – Cost Shifting 49

50. What Should I Do Today? • Benchmark your plan – “You can’t manage what you can’t measure” • Determine your Goals and Objectives • High Level of Benefits – Attract and Retain • Mid-Level of Benefits – Competitive • Low Level of Benefits – Just the Minimum to Meet PPACA • Manage Your Plan! • Claims – 10% of your people are driving 80% of your costs • Plan Design Drives Performance • Treat Wellness Like Workers’ Compensation 50