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Agenda Background Review the Contribution Strategy Consider a Consumer-Driven Health Plan (CDHP) Introduce an Employee Education Program Evaluate the Plan Design Introduce a Wellness Program Consider Self-Funding

Background Cost of health insurance is approaching the gross earnings of a full-time minimum wage worker Cost of employer health plan premiums rose by 11.2% in 2004* –This is an improvement compared to a 13.9% increase in 2003 –Still outpaced overall inflation by 8.9% There are valuable, practical initiatives companies can employ to recharge their plan –Deflect the most destructive dynamics in the marketplace –Provide maximum return on the company’s investment *Kaiser Family Foundation

Review the Contribution Strategy Companies should evaluate their contribution strategy routinely A vast majority of workers are paying more each year for health benefits In 2004, the average share of employees of large and medium-sized companies is expected to reach* –$2,800 for family coverage –$800 for individual coverage Employees paid an average of 18% of their medical premiums for single coverage and 31% for family coverage** in * New York Times ** U.S. Department of Labor

Review the Contribution Strategy Average Monthly Worker Contribution, * Note: Family coverage is defined as health care coverage for a family of four. *Kaiser Family Foundation

Review the Contribution Strategy Actions and Outcomes Review and adjust contribution strategies on an annual basis to avoid the catch-up predicament Make sure that strategies align with company’s human resource and business objectives Educate employees on rising health care costs

Consider a CDHP CDHP is defined as a high-deductible health plan with a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) 74% of companies offering CDHPs started them in 2004 and 2005* 11% of companies believe that CDHPs are very effective as a cost containment strategy** –42% believe they are somewhat effective 50% of employees will consider offering a CDHP in the next few years*** *Aon Corporation News Release **Employer Health Benefits Survey, Kaiser Family Foundation ***2004 Health Care Consumerism Survey, Towers Perrin

Consider a CDHP 21%6%All firms 28%22%Jumbo firms (5,000 or more workers) 25%11%Large firms (1,000 – 4,999 workers) 28%7%Mid-size firms ( workers) 20%6%Small firms (3-199 workers) Somewhat LikelyVery Likely Likelihood of Offering High-Deductible Health Plan with a Personal or Health Savings Account Option in the Next Two Years, 2004* *Kaiser Family Foundation

Consider a CDHP Actions and Outcomes Get the facts on CDHPs to determine if they match a company’s objectives and would be a good option for employees Determine whether an HRA or HSA is the best option for the workforce Implement a well-designed communication plan that describes and promotes the CDHP

Introduce an Employee Education Program 82% of employees believe they are effective health care consumers—only 36% of employers agree* 31% of employees think that employers communicate effectively—70% of employers believe they do* To build an effective health care communication system, employers should:** –Make communication an ongoing, rather than a once-a- year, event –Take a long-term approach –Align with plan design –Leverage the internet *2004 Health Care Consumerism Survey, Towers Perrin **WorldatWork

Introduce an Employee Education Program Actions and outcomes An education program should provide resources employees need to make wise health care decisions For a program to be effective it must be a long-term investment of company resources An employee education program is advantageous whether or not a company offers a CDHP

Evaluate the Plan Design Review co-insurance, co-payments and deductibles annually Between 2002 and 2004, the majority of employers increased deductibles at least once Diverse needs of the workforce may be better met by offering multiple plan options 52%42%Increase office visit co-pays or co-insurance 52%42%Increase annual deductibles Large EmployersSmall Employers Employers Very or Somewhat Likely to Change Annual Deductibles, Office Visit Co-Pays or Co-Insurance in Next 12 Months* *Kaiser Family Foundation

Evaluate the Plan Design Actions and outcomes Adjusting deductibles and co-pays can influence employees to use network providers –Reducing costs for both employers and employees Check the relative size of in-network and out-of-network deductibles and coinsurance Consider converting from a fixed dollar co-pay plan design to a co-insurance design Consider if the company’s employee population warrants the expansion of existing program to include multiple plan options

Introduce a Wellness Program Wellness programs have the potential to: –Decrease health care costs –Reduce absenteeism and medical claims –Increase productivity and employee retention The National Business Group on Health estimates that there is a $300 return for every $100 invested per employee* Approximately 70% of conditions requiring health care are avoidable* * Benefit News, March 2005

Introduce a Wellness Program Actions and outcomes Wellness programs have the potential to reduce costly workplace problems (absenteeism, medical claims and loss of productivity) A good wellness program might include: –100% coverage for preventive care services –Self-care workshops –Nurse lines –“Flextime” to allow employees to participate in exercise programs during working hours –Partial reimbursement for health club dues

Consider Self-Funding Self-funding can empower employers: –Improved access to information –Ability to exert greater control over health care spending –Reduce overall costs Financial and administrative control –Companies that self-fund have access to extensive reporting, providing detailed claims information Allows employer to make adjustments to its health plan design or administration to create savings

Consider Self-Funding Improved cash flow –Pay as you go –Plan savings –Premium taxes Plan flexibility –Customized health plans that best address the unique needs of their workforce –Self-funded plans are exempt from state health insurance mandates Mandated benefits increase the cost of basic health coverage from a little less than 20% to more than 50%, depending on the state* * Council for Affordable Health Insurance, January 2005

Consider Self-Funding Actions and outcomes Employers can leverage the cost advantages of a self- funded plan to extend their benefit dollars and improve case flow Flexibility of self-funding allows for multiple plan options at varying price points Factors to review when considering self-funding include: –Employer’s current and projected cost trends –Claims history –Makeup of company’s workforce –Projected cost of plan management and administration –Availability of stop loss coverage –Financial Risk tolerance

Start Recharging There are cost-saving strategies initiatives that you may not have considered or implemented entirely These initiatives can help reduce health care costs and improve the bottom line The appropriateness of implementing any benefits strategy depends on the employer’s unique human resource, financial and operational objectives –Consult with a broker and other health benefits industry specialists Design a strategy to explore these initiatives

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