State Health Plan Benefits COSTS AND STRATEGIES Public Sector HealthCare Roundtable November 8, 2018

Background 2017 Annual Study gathered data on all 50 states and the District of Columbia State employee plans in-force on January 1, 2017 Medical and Pharmacy Data collected Plan type (PPO, HMO, CDH, etc.) Plan Design (deductibles, copays, maximum out-of-pocket Limits, etc.) Cost (total costs/premiums, employee/state share, coverage tier structure 2018 study focuses on health management and wellness program features

Key Findings Most states provide their employees with a range of choices in medical plan types as well as multiple premium tiers Employees’ premium contributions remain fairly consistent as a percentage of total costs, yet on a dollar basis those contributions are increasing as the cost of coverage rises Employees’ out-of-pocket costs are also increasing as states increase deductibles, copayments and out-of-pocket limits. The annual out-of-pocket maximum for non-grandfathered plans under the Affordable Care Act has provided a new standard of comparison for many employers, including states States continue to use plan design to manage prescription drug costs by influencing utilization towards more efficient delivery channels and more cost-effective medications

Percentage of States Offering Plan Types Almost all states offer PPOs/POS plans; many also offer HDHPs/CDHPs and HMOs/EPOs # of States Large Employers (5,000 or More Workers) Percentage of States Offering PPOs/POS Plans 47 92% 82% PPO 12% POS HDHPs/CDHPs 30 59% 69% HMOs/EPOs 29 57% 31% Indemnity Plans 4 8% 1% Sources: Segal Consulting, 2017 State Employee Health Benefits Study and Kaiser Family Foundation/Health Research & Education Trust, 2017 Employer Health Benefits Survey

 Employee  Family  2016 – 2017 Change Total Costs PPO and CDH premiums increased by double digits from 2016 to 2017  Employee  Family  2016 – 2017 Change $1,833 $1,790 11% 6% $1,460 16% $780 $713 $563 Reasons for increases in CDH/HDHP premiums: Increased enrollment, resulting in higher risk members in these plans Members becoming more comfortable with utilizing HS/HRAs 8% 10% 14% PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs Source: Segal Consulting, 2017 State Employee Health Benefits Study

Employee Cost Share Overall, employee cost share increased for both single and family coverage  Employee  Family PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs 16% 10% 13% 1 6 14% 1 6 11% 1 6 12% 2 2 2 States continue to incrementally shift costs to employees States continue to provide incentives for Ees to choose CDH/HDHPs 25% 24% 22% 1 6 23% 22% 20% 1 6 1 6 2 2 2 Source: Segal Consulting, 2017 State Employee Health Benefits Study

Coverage Tier Structure The majority of states utilize a 3- or 4-tier coverage premium structure 4 6+ Tiers 1 5 Tiers 23 4 Tiers Increasingly, states continue to tailor tier structure to match family/contract size (“right-size”) 13 3 Tiers 10 2 Tiers Source: Segal Consulting, 2017 State Employee Health Benefits Study

 Employee  Family  2016 – 2017 Change Deductibles Average deductibles vary by plan design, with the highest levels found in the CDH plans (by design). However, PPO and HMO plans had large increases from 2016 to 2017  Employee  Family  2016 – 2017 Change $4,047 -1% $1,997 State maintain benefits in CDH/HDHPs, but continue to adjust benefit provisions in PPO/HMOs to manage trend/costs. HMOs are increasingly including deductibles (large increase is due to several states moving from $0 to $100-200 deductible) -1% $1,100 23% $483 $453 $194 23% 53% 40% PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs Source: Segal Consulting, 2017 State Employee Health Benefits Study

Deductible Levels Vary There is a wide range of deductibles for employee-only coverage PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs Low High $0 $1,250 $6,450 $2,000 $1,300 $250 $400 $2,300 $1,5001 $02 $263 $125 Source: Segal Consulting 2017 1 The 25th and 50th percentiles are the same: $1,500. The 25th percentile equals the 50th percentile (median) when all of the lowest 25% of the data is the same as the median. That is the case here because $1,500 is a very common deductible for employee-only coverage in an HDHP/CDHP. 2 The low and the 25th percentile are the same: $0. Because HMOs usually have no deductible, it is not surprising that the 25th percentile equals the low here.

Deductible Levels Vary The range of deductibles for family coverage is wider. Low High PPOs/POS Plans $0 $4,000 $500 $950 $1,400 HDHPs/CDHPs $2,500 $12,900 $3,0001 $5,000 HMOs/EPOs $0 $2,600 $02 $250 $638 Source: Segal Consulting 2017 1 The 25th and 50th percentiles are the same: $3,000, a very common deductible for family coverage in an HDHP/CDHP. 2 The low and the 25th percentile are the same: $0.

Maximum Out-of-Pocket Levels Maximum out-of-pocket levels are increasing, but remain below the ACA limits  Employee  Family  2016 – 2017 Change $8,409 $8,122 $7,599 11% <1% 3% $4,092 $3,977 $3,586 9% 1% 4% States have increased MOOPs in PPO/HMO, which has increased exposure for Ees. Note that deductible increases are higher than MOOP increases….States are more reluctant to shift costs to the higher users, who have the most $$$ in OOP costs PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs Note that the Affordable Care Act’s maximum for individual coverage offered by non-grandfathered plans was $6,850 for 2016 and is $7,150 for 2017. The maximum for family coverage was $13,700 for 2016 and is $14,400 for 2017. Source: Segal Consulting, 2017 State Employee Health Benefits Study

 Commissioning State’s Plans  Plans Offered by Peer States Benchmarking Benchmarking actuarial value provides true measurement of overall plan value This example indicates this state’s plans may not be as efficiently managed as the comparator states’ plans Opportunities may exist to improve health management program performance and introduce measures to increase utilization of more efficient delivery and purchasing options Data analytics and predictive modeling can be used to help understand true drivers of costs and uncover substantial savings The subject’s premiums are much higher, relatively speaking, than their comparators’ are for similarly valued plans A disconnect between costs and plan value leads to a plan/employer seeking ways to manage the employee health risk, introduce and promote efficiencies in the plan and increase member engagement in managing their own health risk and making decisions that result in more efficient utilization (value based benefits strategies) Costs do not always track with plan value  Commissioning State’s Plans  Plans Offered by Peer States

2018 Study Focuses on Health Management and Wellness Strategies Healthy Activities and Requirements Risk assessments, biometric screenings, disease management participation Tobacco Cessation Incentives and Rewards Premium reductions, enhanced benefits, HS/HRA deposits/credits Telemedicine Health Management and Wellness Clinics Staffing, hours of operation, scope of services, pharmacy Centers of Excellence Tiered Networks Medical and pharmacy Transparency Tools Medical/Rx and rewards/incentives

Branded Wellness Programs Most states have branded their wellness programs. 61% Examples: Branding is an indication of a long-term commitment to wellness. BeWell Commit to Health HealthMatters Life Points Live Life Well Smart Health Source: Segal Consulting, 2018 State Employee Health Benefits Study

Comparative Private Sector Data Percentage of Large Employers What Are States Doing? Comparative Private Sector Data Percentage of Large Employers 62% 52% 72% 68% Health risk assessments and biometric screening: Educate members about their health Yield data useful to the plan’s disease management programs * For members who have an eligible chronic condition. ** Examples include blood pressure, cholesterol and/or BMI within targeted norms for age/gender. Sources: Segal Consulting, 2018 State Employee Health Benefits Study and Kaiser Family Foundation/Health Research & Education Trust, 2017 Employer Health Benefits Survey

How Are State Promoting Wellness? Comparative Private Sector Data Percentage of Large Employers 68% 19% 37% Source: Segal Consulting, 2018 State Employee Health Benefits Study and Kaiser Family Foundation/Health Research & Education Trust, 2017 Employer Health Benefits Survey

Who Can Participate? Source: Segal Consulting, 2018 State Employee Health Benefits Study

How Do States Promote Efficient Utilization? Comparative Private Sector Data Percentage of Large Employers 63% 15% * This includes any type of preferred network providers even a hospital network. Source: Segal Consulting, 2018 State Employee Health Benefits Study and Kaiser Family Foundation/Health Research & Education Trust, 2017 Employer Health Benefits Survey

Do States Sponsor Wellness Clinics? Source: Segal Consulting, 2018 State Employee Health Benefits Study

Thank you! Richard Ward, FSA, FCA, MAAA Senior Vice President, National Public Sector Health Practice Leader RWard@segalco.com 818-956-6714 Kirsten Schatten, ASA, FCA, MAAA Vice President, Consulting Actuary KSchatten@segalco.com 678-306-3129