1. Employer Risk Management with Financial Efficacy
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2. Current Healthcare Economics

3. National Health Expenditures
($ in billions; figures for 2003 and beyond are projections)
Source: CMS: cms.gov/statistics/nhe

4. National Health Expenditures per Capita
(Figures for 2003 and beyond are projections)
Source: CMS: cms.gov/statistics/nhe

5. Constellation of Financial vulnerabilities surrounding the typical employer.
Legend
75th percentile
Median
25th percentile
Participant
Total dollars per employee
Workers’
Compensation
Group Health
Unscheduled
Absence
$1,550
$237
Non-Occupational Disability
$955
$62
Workers’ Compensation
$1,805
$201
Unscheduled Absence
$6,752
$3,179
Group Health
$3,698
$951
Turnover
Non-Occupational
Disability
Turnover

6. Insurance Negotiation & Procurement
Navigating the Typical Employers Healthcare Delivery: Highlighting Potential Loss Interactions
Plan Design
Benefits Broker
Legal Compliance
PHARMCO
Physician’s Network
Network Hospital
Insurance Negotiation & Procurement
Case Management
Pre-Certification
Insurer
Health
Fully
Disability
Employer
TPA or ASO
Re-Insurance
Self
Claims Ajudication
Pay vs non-pay
Wellness Provider
Network Hospital
Physician Network
Employee
TPA
Re-Insurance
LTD/STD

7. Insurance Negotiation & Procurement
Navigating the Typical Employers Healthcare Delivery: Highlighting Potential Loss Interactions
Benefits Broker
Plan Design
Legal Compliance
Insurance Negotiation & Procurement
Physician Network
PHARMCO
Disability
TPA or ASO
Pre-Certification
Health
Re-Insurance
Case Management
Network Hospital
Physician’s Network
LTD/STD
TPA
Fully
Self
Insurer
Benefits Broker
PHARMCO
Physician’s Network
Network Hospital
Plan design acceptance
Employee/Employer morale
Case Management
Pre-Certification
What drug
Compliance?
Generic?
Where?
Communication?
Risk Defined
Participation vs non-participation
Intervention compliance
Perceived incentive
Participant satisfaction
Who to choose?
How to communicate?
When to go?
Employer
Communication?
Compliance?
What procedure?
In Network or out?
Claims Ajudication
Pay vs non-pay
Wellness Provider
Wellness Provider
Employee
Employee

8. Most Successful Methods for Controlling Benefits Costs by Number of Employees
1 to 99
100 to 500
500
2007 Overall
2006 Overall
Increased copays/deductibles/lifetime limits
47%
59%
55%
56%
56.3%
Increased premium cost sharing by employees 32 53 66 54 59
Started a wellness program 21 41 38 37 36
Added/Enhances employee health education programs 16 24 30 18
Changed to a 2-, 3-, 4-, or more-tier prescription drug program 26 19 23 27
Added/Enhanced employee health education programs 5 33
Adopted a mail order prescription drug program 11 29 20
20.3
Set up flexible spending accounts 17
Automated benefits functions (Intranet, Web-based benefits administration) 9
Self-insured one or more benefit programs (i.e. health, dental, workers’ comp)
Introduced a consumer driven health plan 14 12
Changed type of health plan offered
N/A
*IOMA – February 2008

9. Most Successful Methods for Controlling Benefits Costs by Industry
Fin. Services
Health Care
Manu-fact.
Non-Profit
Other
Services
Tech-nology
Transp./
Utilit/
Comm
Whole-sale/
Retail
Increased copays/deductibles/lifetime limits
31%
57%
80%
48%
50%
100%
86%
Increased premium cost sharing by employees 54 71 64 70 48 33 50 75 57
Started a wellness program 46 29 43 60 28 - 25
Added/Enhances employee health education programs 38 7 10 34 8 14
Changed to a 2-, 3-, 4-, or more-tier prescription drug program 15 21 30
Added/Enhanced employee health education programs 23 24
Adopted a mail order prescription drug program 20 17
Set up flexible spending accounts
Automated benefits functions (Intranet, Web-based benefits administration)
Self-insured one or more benefit programs (i.e. health, dental, workers’ comp)
Introduced a consumer driven health plan
Changed type of health plan offered
*IOMA – February 2008

10. Costs vs. Strategy XYZ Corporation

11. Employers Offering Wellness and Disease Management Programs
Who is Offering Wellness Programs?
Employers Offering Wellness and Disease Management Programs

12. Industry Players

13. What Defines a Successful Program? (in order of importance)
Program participation
Participant satisfaction
Improvement in clinical metrics
Return on investment
Reduced costs for absenteeism, disability, and workers compensation

14. Critical Success Factors
Communication of program goals and components 64% *
Incentives for participation 59%
Management support % *
Strong internal champion 52% *
Strong partnership with vendor, vendor satisfaction with services screenings % *
Leadership role of supervisors and co-workers 32% *
ROI data %
Other %
* Education & communications

15. How do we find the risk?

16. What do we understand about risk factor accounting?

17. There is a direct relationship between the number of risk factors an individual has and their propensity to be a low, medium or high spender of the health care system.
0 – 1 risk factors = low risk
2 – 4 risk factors = medium risk
5 or more risk factors = high-risk
Source: University of Michigan Health Management Research Center

18. Master List of Risk Factors
Current tobacco use
Reported use of medications
Sedentary lifestyle
Rate Health as poor or fair
Absent 5 days or greater in the past year
Blood pressure 130/85 or greater
Cholesterol 220 or greater
Greater than 20% over ideal body weight
Report high stress on the health risk appraisal
Glucose 110 or greater
HDL less than 40 mg/dl
LDL greater than 100
Triglycerides 150 or greater
Family history of heart disease
Family history of diabetes
High fat intake
Current Diabetes
Alcohol use

19. Learning’s With Regards to Risk Factor Accounting
Wellness program
opportunities are
in preventive
services, low-
and high-risk
interventions, and
disease
management
High-risk
persons are
high cost
Low-risk maintenance
Is an important program
strategy
Absenteeism shows the
same relationship as
medical costs
Changes in costs follow
changes in risks
1990
1991
1992
1993
1994
1995
1996
1997
1998
Excess costs are
related to excess risk.
Risk combinations are
the most dangerous
Wellness scores are
highly correlated
with medical costs
Source: D. Edington, Worksite Wellness: 20 Year Cost Benefit Analysis Report: to 1998

20. Additional validation of risk factor accounting and predictive power with regards to absenteeism, medical costs, productivity, short-term and long-term disability.
(Remember excess risks equate to excess costs)

21. Excess Medical Cost Due to Excess Risks
$5,520
$3,460
$3.039
$2,199
Source: University of Michigan Health Management Research Center

22. Excess Disability Cost Due to Excess Risks
$1,248
$783
$666
$491
Source: University of Michigan Health Management Research Center

23. Excess On-The-Job Loss Due to Excess Risks
Source: University of Michigan Health Management Research Center

24. Change in Costs Follow Change in Risk
Cost Increased
Cost Reduced 3 2 1 1 2 3
Risk Reduced
Risk Increased
Cost per risk reduced
Cost per risk avoided
Overall
$215
$304
Actives
$231
$320
Retirees < 65
$192
$621
Retirees > 65
$214
$264
Source: University of Michigan Health Management Research Center

25. Case Studies with Regards to Wellness Financial Efficacy

26. Mean Amount Paid by Participant
Company I
Mean Amount Paid by Participant
In Wellness versus Employee Non-Participant in Wellness Versus Dependent
n= 13,139
n= 9,580
n= 5,115
Total savings across years = $4,595,907

27. Mean Amount Paid by Participant
Company II
Mean Amount Paid by Participant
In Wellness versus Employee Non-Participant in Wellness Versus Dependent
n= 315
n= 1,344
n= 796
Total savings across years = $1,080,858

28. Mean Amount Paid by Participant
Company III
Mean Amount Paid by Participant
In Wellness versus Employee Non-Participant in Wellness Versus Dependent
n= 1,517
n= 309
Total savings across years = $474,735

29. Validity of Savings Accounting for Variance
Mean Amount Paid by Class Status and Gender For Years
Participation in Wellness/Non Participation in Wellness
Relative Proportion of Individuals for Each Class Status within Risk Level For Years

30. Shift in Level of Risk
Low
Medium
High

31. Data Mining Determines Wellness Template

32. Total and Mean Amount Paid by Year
Sum
Mean
2006
2,708
13,451,831
$4,967

33. Chronic Illness (without complications)
Spending Distribution and Risk Management Opportunity
Greater than 50% $9,375,387
30% - $2,242,044 5%
53% Employee
47% Spouse/Dep
21%
0 – 4 Risk Factors
45%
Chronic Illness (without complications)
29%
Clinical Behaviors
Smoking
Blood Pressure
Elevated Cholesterol
Sedentary Lifestyle
Obesity
20% - $1,834,400
Risk Management
Opportunity
Sectors

34. Relational Database Biometrics HRA Data Employee KAM Counseling
Height
Weight BP
Chol
Trig
Employee
Employee
Name
DOB
Address
ID #
Work Loc …
HRA Data
Exercise
Nutrition
Smoke
Family History
KAM
Counseling
KAM Activity
Date
KAM Points
Counseling
Date
Goals
Goal Met
Notes
KAM
Model SN
KAM Activity

35. Kersh Relational Database

36. Interventions Absence Manager Counselors KAM HRA and Biometrics
Health Station

37. Analyze Data and Risk Stratify Population
The Process
Capture
HRA Data
Biometric Data
Utilization Data
Analyze Data and Risk Stratify Population
Outcomes are reported to the employer by reporting an ROI associated with TLC interventions and the financial saves that were associated with early preventative screening.
Drive population to appropriate TLC (therapeutic lifestyle change) interventions and drive the population to gender/age specific preventative screenings (compliance enhanced by employer incentive plan)