CCLA Annual Conference November 2, 2011 Mike Snyder Health Plan Trends CCLA Annual Conference November 2, 2011 Mike Snyder

Healthcare in the US Current environmental conditions are reshaping the behavior of the major stakeholders: Employer Groups Consumers Health Plans Confidential

Employer Groups The economy and Wall Street are affecting employer sponsored benefits: Willing to reduce (or curtail!) healthcare benefits Willing to further cost shift to the employee Focus is on Wellness vs. Disease Management Confidential

Among Firms Offering Health Benefits, Percentage of Firms That Report They Made the Following Changes as a Result of the Economic Downturn, by Firm Size, 2010 *Estimate is statistically different between All Small Firms and All Large Firms within category (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2010.

Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage, 1999-2010 $5,791 $6,438* $7,061* $8,003* $9,068* $9,950* $10,880* $11,480* $12,106* $12,680* $13,375* $13,770* * Estimate is statistically different from estimate for the previous year shown (p<.05). Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010.

Slammed by the economic conditions Consumers Slammed by the economic conditions Ave increase in salary: ~3% Consumer Index (All): 3.6% (BLS) Healthcare Benefits: 131% (10 yr inc) Healthcare Reform Spotlight on the cost of healthcare in the US Reminds consumer of their responsibility to manage their personal healthcare costs Confidential

Percentage of Covered Workers Enrolled in a Plan with a General Annual Deductible of $1,000 or More for Single Coverage, By Firm Size, 2006-2010 *Estimate is statistically different from estimate for the previous year shown (p<.05). Note: These estimates include workers enrolled in HDHP/SO and other plan types. Because we do not collect information on the attributes of conventional plans, to be conservative, we assumed that workers in conventional plans do not have a deductible of $1,000 or more. Because of the low enrollment in conventional plans, the impact of this assumption is minimal. Average general annual health plan deductibles for PPOs, POS plans, and HDHP/SOs are for in-network services. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2010.

Changes in Average PPO Costs for Family Coverage, 2006-2010 Note: Each 2010 estimate is statistically different from the 2006 estimate within category (p<.05). The survey has asked comparable questions on family deductibles only since 2006. An aggregate deductible is one in which all family members’ out-of-pocket covered expenses count toward meeting the deductible amount. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006-2010.

Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2010* *Tests found no statistical difference from estimate for the previous year shown (p<.05). No statistical tests are conducted for years prior to 1999. Note: Data have been edited to include the less than 1% of large firms who report “yes, but no retiree” responses in 2010. Historical numbers have been recalculated so that the results are comparable. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

Problems Related to Recent Economic Conditions As a result of recent changes in the economy, have you and your family experienced any of the following problems, or not? Was this a serious problem, or not? Percent saying each was a “serious problem” Problems paying for gas Problems getting a good-paying job or a raise in pay Problems paying for health care and health insurance Problems paying for food Problems with credit card debt or other personal debt Nearly six in ten (58%) Americans face "serious problems" resulting from recent changes in the economy, with one in four (24%) struggling to pay for health care and health insurance. Losing money in the stock market Problems paying your rent or mortgage Report ANY of the above was a “serious problem” SOURCE: Kaiser Family Foundation Health Tracking Poll: Election 2008 (conducted July 29-August 6, 2008)

Confidential

60% … of consumers surveyed by the Employee Benefit Research Institute are either “extremely satisfied (23%) or “very satisfied” (37%) with their health plan, with a total of just 11% either “not too satisfied” or “not at all satisfied.” Confidential

Challenges for the Plans Higher cost for provision of care Greater competition for employer business: Need for lower cost Greater services (examples): Specialized benefit design for the chronically ill Member education and incentives Reduce internal admin cost (example): Cost to market lab access

Major Trends for Health Plans Plans are downsizing their provider networks Employer groups are demanding lower cost of benefits National labs are leveraging their contracts to gain new volume States are pushing Medicaid participants to managed care plans (increased capitation) Medicare Advantage plans continue to grow Privatization of Medicare

Major Trends for Health Plans Increase in ‘Self Funded’ benefit plans Greater need to control admin costs Change in the BCBS ‘Blue Card’ administration Greater denials ACO Model formation (non-Medicare) New requirements? Participation? Reimbursement?? Blue card issue will result in a loss of employer biz for the blues; must keep the pressure going ACO: issue is not how plans will behave once model is established; however, concern is that plans will further leverage services from labs w/o an increase in pricing

What is the Effect on Labs? “When you talk to payers, they want not just benefit to patients but also benefit to payers such as saving costs and needless procedures. They want diagnostics to have clinical utility…but also to be cost effective.” Bryan Dechairo, Ph.D., senior director research and development, Medco Research Institute. Confidential

What Do the Plans Want from Labs Today? Broad menu that incorporates AP and other esoteric testing (one stop care) Generous access to services (locations) Electronic interface (orders and reporting) to physicians Submission of member lab results to the plan Participation in managed networks Electronic claims submission (clearinghouse) Strong marketing program (that emphasizes use of in-network services: Competition!!) Consultation by in-network labs (SME)

What are the Expectations for Tomorrow? Participation in Utilization Management Synchronization of Test Menu to Medical Policy Notification of Test Identity (no code or generic stack codes) Expanded Credentialing: demonstrate proficiency of testing against standards Participation in Preauthorization Ability to meet employer demands for member transparency to healthcare costs

Increased Pressure to Reduce Costs Pricing Greater discounting? Capitation: more to come? Steerage (Control OON Leakage) Push to low cost provider Restriction in OON payment (MNRP) Limit access to contracted providers Panel size is decreasing Cost Shifting Higher deductibles and co-insurance Reduced OON cost share Enforcement of Medical Policies Non-covered services Increasing utilization of PreAuthorization and/or PreCertification Plan tactics to further reduce lab costs

Laboratory Benefit Management New Development Laboratory Benefit Management DNADirect (Medco) Generation Health (CVS-Caremark) National Lab forays: Beacon Laboratory Benefit Solutions, Inc QuestNet Confidential

Create an overall Health Plan contracting strategy Survival Solutions Create an overall Health Plan contracting strategy Value beyond testing Determine a “consultative” approach to the plans Form regional lab networks: Join an existing network Create 3rd-party managed collaborations Deploy tools that create efficiencies and increase your value proposition Confidential

Solutions for Success Educate!! Physicians Community Health Plans Employer Groups Patients Health Plans

Educate Your Physicians Relate the value of your lab to the issue of “local” healthcare Your lab’s participation in health plans: Which plans? What is the cost to the patients? Value of your lab’s service to patients UM, HIE, ability to consult

Educate Your Community Role of the lab in community health Wellness and chronic disease management vs. critical care Integration of care and the medical record Who has your complete medical record? Accountable Care: Community or Commercial enterprise?? Partner with the local employer groups

Educate the Plans Target the Medical Directors Demo your lab’s value proposition: Effective care management Utilization management Relationship to Disease Management: Monitoring chronic care Early ID of medical conditions Diagnosis of cancer Early detection of pregnancy

Solutions for Success Present ‘Value’ that is meaningful to the Plans Collaborative lab networks under single contracts Reduce lab leakage in your area through a strong marketing program; engage the plan Present Utilization Management solutions: Sync to the plan’s medical policy Offer Decision Support to assure appropriate testing Offer meaningful Utilization Reports Manage your Lab’s patient results

Solutions for Success Assure the efficiency of your lab operation Billing processes (missing info, denial management, etc) Manage cost Use workflow solutions to assure the efficiency of people and processes

Time to “Re-Tool”? Network Administration MDx Testing Preauthorization Notification for non-specified testing New coding solution (for ‘technology codes’) Preauthorization Decision Support Assure clinical utility and effectiveness Test Registry Document science and proficiency Cost estimator for OOP costs Confidential

Finding the Solutions Health Plans? National Labs?? Trusted Vendors Healthcare Reform: shift to provider National Labs?? Plan participation Funding for tools Trusted Vendors Software Consulting Confidential

Winners and Losers Plans have the leverage: Technology Employers and consumers demand lower costs Enrollment is increasing (‘Caid, ‘Care, and Self Funded) Competition between labs Technology Demand for integration (EMR, eligibility, transparency, etc) New applications (evidenced-based, coding, etc) Collaboration: Diagnostics and Therapeutics Confidential

Mike Snyder MedSpend msnyder@medspend.com