1. Mid-Market Employer Perspective
Elaine Coffman
McGraw Wentworth

2. Health Care Perspective: Mid-Market Employers
What Mid-Market Employers have in Common:
Health care costs driven primarily by claim experience
Available health care solutions driven by carrier products /networks
Complex compliance environment, communication challenges
Annual evaluation of appropriate solutions to manage costs
Where Mid-Market Employers are Unique:
Culture (paternalistic, union presence)
Financial situation
Fit of available market products/solutions (geographic, technology, wellness)
Annual health care budget challenges

3. Labor Cost of Health Care
Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage,
$13,375
131% Premium Increases
$5,791
128% Worker Contribution Increase
Note: The average worker contribution and the average employer contribution may not add to the average total premium due to rounding.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

4. Labor Cost Advantage: Difficult in Global Environment
Trendline of countries’ expected spending according to wealth, 2006
United States
United States is far above the expected level, even after adjusting for relative wealth
Switzerland
Austria
Canada
Health care spending per capita, USD
France
Iceland
Germany
Denmark
Portugal
Spain
Finland
South Korea
Poland
Czech Republic
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
GDP per capita, USD
Source: McKinsey & Co.

5. Short-Term Opportunities to Improve Quality and Lower Costs
Leverage new product innovations offered by carriers
Consumerism & Wellness products, pharmacy initiatives
Need replacement for “PPO”
Focus on Employer-Based Wellness Increasing
“High level vitality” workforce improves productivity & lowers costs
Employer is only stakeholder with both incentive AND access to employee to fundamentally change lifestyle
Hiring practice changes
“Stick” approach to health habits emerging
“Culture of Health”

6. Long-Term Opportunities to Improve Quality and Lower Costs
Will I maintain my group coverage?
Employers will consider both cost & quality in decision making
Impact of Mandate Testing and other Penalties
Shift into Exchange environment
Will allow certain employers to lower costs and improve quality by taking advantage of government subsidies in the individual market
Lower cost to employer and employee
Higher benefit level than employer coverage
Dynamics of Exchange should drive more people into higher quality/lower cost delivery systems

7. Exchange Subsidies (2014): What are they?
Premium assistance based on Federal Poverty Level (FPL)
Those earning under 133% of FPL generally eligible for Medicaid
Premium assistance to those from 133% to 400% of FPL
Cap on individual premium cost for 2nd-Lowest Cost Silver Plan
70% Plan - MW benchmark plan is 74% value, so similar to current medians
Likely to drive enrollment into different plans than group market
Combined with price sensitive buyers and subsidies based on 2nd lowest cost plans, likely to drive market share to new types of plans than today
Potential for new products to be much less than employer market (Innovation in provider reimbursement methodology/Regional focus)
In addition, those with lower incomes get better benefits (Cost Sharing)
% of FPL 70% value raised to 94%
% of FPL 70% value raised to 87%
% of FPL 70% value raised to 73% 7

8. Exchange Subsidies (2014): Premium Subsidies CAP Monthly Cost of Health Care for Most Americans
People in Household: 1 2 3 4
% of FPL
Income Threshold for Premium Subsidy
133%
$14,404
$19,378
$24,352
$29,327
150%
$16,245
$21,855
$27,465
$33,075
200%
$21,660
$29,140
$36,620
$44,100
250%
$27,075
$36,425
$45,775
$55,125
300%
$32,490
$43,710
$54,930
$66,150
350%
$37,905
$50,995
$64,085
$77,175
400%
$43,320
$58,280
$73,240
$88,200
Maximum Monthly Premium in Exchange
for 2nd Lowest Cost Silver Plan
133%
$36
$48
$61
$73
150%
$54
$92
$110
200%
$114
$153
$192
$232
250%
$182
$244
$307
$370
300%
$257
$346
$435
$524
350%
$300
$404
$507
$611
400%
$343
$461
$580
$698
Premium Cap as % of Income 3% 4%
6.30%
8.05%
9.50%
Cost Sharing/
Better Benefits
Value Plan
70%
Cost in range of employer contributions and much less than actual premiums

9. Exchange Subsidies (2014): Number of Michigan Households Eligible for Assistance
63% of Michigan households would qualify for assistance based on income data (more today?)
Many employers have high concentrations of lower income workers who would receive better
benefits at subsidized cost
Dropping coverage may
lower overall labor costs
for SE MI Employers by
moving indivduals into
Exchange market
22%
41%
37%
Source: Center for Healthcare Research & Transformation (CHRT)
Eligible for Medicaid
Eligible for Premium Subsidies

10. Dynamic New Environment: Potential Threats and Opportunities
Public Pay
Private Pay
Medicare
½ of reform funded by reductions in Medicare (efficiency, reimbursement changes)
Patients
Carriers
Launch of Exchanges
Premium Subsidies (Public $)
Mandates
Guarantee Issue
Individual Market
Patients
Carriers
Providers
Hospitals/Physicians
Enrollment
Medicaid
46% increase to enrollment (CBO)
Benefit coverage close to 100%
Shift in use of services/provider mix, and level of demand
Patients
Carriers
Employer Market
Launch of Exchanges
Mandates
Cadillac Tax
IMPACT OF PATIENT SHIFT??
Carriers
Patients

11. Collective Bargaining
Employers will “Grind it Out” to find ways of Improving Quality and Lowering Costs
= ? HR
Issues
Other Intangibles
Collective Bargaining
Exchange Coverage
Intangibles
Data
Assumptions
Exchange Vendors
Exchange Subsidies
Exchange Price
Exchange
Plans
Exchange Networks
“Second Low” Silver
Employee Age
Household Income
Enrollment Choices
Current Benefits
Current ER Premiums
Current EE Premium
Enrollment Shift
Risk Shift
Other Assumption 11