HEALTHCARE & ITS IMPACT ON EMPLOYEE BENEFITS Jiten Shah Executive Director GRADD Owensboro, Kentucky

GRADD has worked diligently over the years to continue to provide exceptional benefits for our employees.

Health Insurance: – 95% for Single – 80% for Dependent Dental Insurance: – 100% for Single – One half difference for Dependent Vision Insurance: – 100% for Single – One half difference for Dependent Retirement through Kentucky State Retirement System (CERS) Group Life Insurance ($50,000) Long Term Disability Insurance Current Benefits

Rising Cost of Benefits Over the past 10 years, the cost of providing benefits has risen at a staggering rate relative to salary.

Percent to Salary Analysis

Health Insurance GRADD has continued to strive to keep premiums reasonable for both GRADD and for employees. Over the years the ADD has offered many different benefit design plans without placing undue burden on employees.

Health Insurance Designs Prior to 2006, GRADD offered conventional fully insured 80/20 coverage. In 2006, GRADD begin offering a high deductible plan with a health reimbursement account (HRA) — $1,000 Single / $2,000 Dependent In 2012, GRADD began a self-insured health plan offering the same benefit design as in years past. GRADD was the first ADD in Kentucky to begin the HRA concept and is currently the only ADD with a self insured plan.

Cost Control Measures Over the years several changes have taken place, in an attempt to control insurance costs: Wellness program implemented (wellness screenings, health fairs, etc.) Health club reimbursement Removal of spouse coverage, when offered at their place of business Change in benefit design (ER penalty, change deductibles, etc.) $100/month incentive for employees not taking GRADD health insurance

Kentucky Area Development Districts are paying on average 46% of salary to provide fringe benefits for their employees and approximately 19% of salary for health insurance costs. Local Trends

Local Trends: KY Area Development Districts

National Trends

U.S. healthcare costs have risen consistently from $1,100 per capita (1980) to $13,700 (2015). In 1980, it was 10% of GDP; by 2015, it is expected to be 20%. Three main strategies used to reduce healthcare costs: 1) Reducing the number of employees 2) Eliminating expensive plan designs in favor of less costly options 3) Shifting cost to the employees Controlling Healthcare Costs

From 1999 to 2011 … Inflation has increased by 38%. Employee earnings have increased by 50%. Employee contributions to premiums increased by 60%. Health insurance premiums have increased 168%. One in five employers (20%) pays 100% of the healthcare premiums, and the rest is joint contributions. Cumulative Increases in Healthcare Costs

49% of employees feel benefit packages are an important reason to decide work, and 60% of employees feel benefit packages offered is a good reason to stay. Employers assume unwavering loyalty and appear to be unaware of downward trend in employee loyalty. We must be taking employee retention for granted. One third all HR/benefit decision makers feel shifting healthcare cost to employees had a negative impact on morale and job satisfaction. Impact on Employee Retention & Morale from Benefit Packages

Wellness program offerings appear to be a value to employers as they seek to address employee health, the rising cost of healthcare, employee morale and satisfaction, and to a lesser degree, productivity. Wellness Programs

Employee Assistance Programs64% Health Promotion Material59% Health Screenings and Biometric testing50% Stop Smoking Program43% Access to Nurse/Help Line42% Exercise Program41% Weight Loss Program38% Web Based Health Coaching34% Paper and Electronic Health Risk Appraisals31% Wellness Games/Competitions19% Condition/Disease Management Program17% Coaching via Telephone16% Work Life Program15% 77% of employers offer volunteer wellness programs, but only 15% have mandatory wellness programs. Components of Wellness Programs Offered by Employers

Improve Employee Health81% Control Healthcare Costs64% Increase Productivity54% Reduce Absenteeism51% Attract and Retain Talent39% Maintain or Increase Benefit Offering37% On average, 51% of employees participate in wellness programs. 44% of small employers and almost 80% of large corporations offer wellness programs. Why Employers Offer Wellness Programs

After 2014, 30% to 50% of the Employers will pursue some other form of alternatives for health insurance to traditional ESI. At least 30% of the employers would gain economically from dropping coverage, even if they completely compensated employees for the change with other benefits or higher salaries. Contrary to what many employers assume, more than 85% of employees would remain at their jobs even if their employer stopped offering ESI, although majority would expect increased salaries. We will see proliferation of new group insurance plans capturing employees from ESI to individual market (especially for lower paid employees). New mix of ESI covered employees: customized services rather than traditional mix. Broader range of supplemental benefits (vision, dental, life, disability etc.) in addition of basic insurance. Those who are not price conscious and high salary employees will want membership in Concierge or preferred access physician group. Consumer Centric Coverage: Employees will be more engaged, increase in part-time work force, defined contribution models, and private exchanges. We will see more income indexed premiums and out of pocket subsidies. Employers will be more engaged in ROI from their Health Insurance plans and benefit packages. Small employers may even benefit from paying penalties and compensate employees with other benefits and salaries. Healthcare Reform & Employee Benefits

Expect an increase in benefit cost and customized benefit packages. Focus more attention to ROI. Wellness and healthy outcomes as part of the “healthy cake” – not just the icing! Income indexed and defined contribution could be the norm, not the exception. “To be or not to be” in the state/group plan will be a critical decision to analyze. In Summary

Jiten Shah Executive Director GRADD Owensboro, Kentucky