1. Trends in Employer-Sponsored Health Insurance
Health Care Industry Committee
Trends in Employer-Sponsored Health Insurance
Ready-to-Use Presentation Slides

2. Shift to Private Exchange Convert to Self-Funding
Employers 2
Traditional Employer Coverage Eroding
Will Employers Maintain Coverage, and How?
Spectrum of Options for Controlling Health Benefits Expense
“Abdication”
“Activation”
Drop Coverage
Shift to Private Exchange
Convert to Self-Funding
Pros:
Escape from cycle of rising premium costs
Cons:
Employer mandate penalty
Labor market disadvantage
Pros:
Responsiveness to employee preference
Predictable, defined contributions
Cons:
Disruption to benefit design
Risk employees may underinsure
Pros:
Close control over network design
Exemption from minimum benefits requirements
Cons:
Greater financial risk
Network assembly challenging
Source: Health Care Advisory Board interviews and analysis.

3. Average In- and Out-of-Network Deductibles for Group Plans3
Employers Shifting Risk by Increasing Cost-Sharing
Particularly Severe for Out-of-Network Care
Percent of Covered Workers Enrolled in a Plan with a $1,000+ Deductible by Firm Size
Average In- and Out-of-Network Deductibles for Group Plans
Single Coverage
n = 1,100 employers
Source: Kaiser Family Foundation and Health Research & Educations Trust, “Employer Health Benefits 2013 Annual Survey,” August 2013; PwC, “Medical Cost Trends: Behind the Numbers 2014,” June 2013, available at: Health Care Advisory Board interviews and analysis.

4. Most Employers Running to High(er) Deductibles
Select Employers Moving to CDHP1
Percent of Firms Offering HDHP/SO2 by Number of Employees
2011
40 percent CDHP
Moving to 100 percent CDHP
100 percent CDHP
100 percent CDHP
Consumer Directed/Driven Health Plans.
High-deductible health plan with savings option, defined as a health plan with a deductible of at least $1,000 for single coverage and $2,000 for family coverage.
Source: Towers-Watson & National Business Group on Health, “Employer Survey on Purchasing Value in Health Care,” available at: Castlight Health, “Castlight Health and Life Technologies to Discuss Employee Engagement in Health Care at IHC FORUM East,” available at: “Mini-Microsoft”, available at: Claxton et al. “Employer Health Benefits: 2011 Annual Survey,” Kaiser Family foundation and Health Research & Educational Trust, Exhibit 4.3.; Advisory Board interviews and analysis.

5. $2,000 Employers’ Alternatives to Providing Coverage5
Employers’ Alternatives to Providing Coverage
Several Strategies to Avoid ACA Mandate Penalties…
Cut jobs to remain under 50 FTEs1
Convert full-time employees to part-time status
Hire all new employees at part-time status
Split into smaller companies with fewer than 50 FTEs
…Though Some May Consider Penalty a More Economical Option
Average Cost of 2014 Employer-Sponsored Insurance
$2,000
Penalty per employee for failing to provide qualifying health coverage
Full-time equivalents.
Source: Herring B and Lentz LK: “What Can We Expect from the ‘Cadillac Tax’ in 2018 and Beyond?” Inquiry, 48(4):322-37; Piotrowski J et al., “Health Policy Brief: Excise Tax on ‘Cadillac’ Plans,” Health Affairs, September 12, 2013, available at: Medical Group Strategy Council interviews and analysis.

6. Prominent Employers Using Private Exchanges6
Huge Growth Forecast for Private Exchanges
Low-Wage Employers Most Active Today, but Skilled Industries in the Wings
Potential Growth Path for Private Exchange Enrollment
172
Private exchange operators as of October 2014
Prominent Employers Using Private Exchanges
For Active Employees:
For Retirees: (Medicare Advantage, Medigap plans)
Source: Accenture, “Are You Ready? Private Health Insurance Exchanges are Looming;” privatehealthexchange.com; Health Care Advisory Board interviews and analysis.

7. Igniting a Race to the Bottom
Exchange Shoppers Trading Premiums for Deductibles
Results of Open Enrollment Process 1 2
42%
Employees on Aon Hewitt health insurance exchanges selecting plans less rich than the previous year
Case in Brief: Sears, Darden Restaurants
For 2013 open enrollment, self-insured large employers redesigned benefits to reduce health spend through defined contribution model
Employers offered employees lump sum credit to choose coverage in Aon Hewitt’s online marketplace
Preferred provider organization.
Health maintenance organization.
Source: Mathews AW, “To Save, Workers Take On Health-Cost Risk,” Wall Street Journal, March 17th, 2013, available at: Advisory Board interviews and analysis.

8. Self-Funding Strategies Steadily Gaining Ground8
Self-Funding Strategies Steadily Gaining Ground
Percentage of Covered Workers in Self-Funded Plans
ACA Benefits Standards Avoidable Through Self-Funding
Modified Community Rating
Essential Health Benefits
Guaranteed Issue and Renewability
Medical Loss Ratio Requirements
Source: Gabel JR et al., “Small Employer Perspectives On The Affordable Care Act’s Premiums, SHOP Exchanges, And Self-Insurance,” Health Affairs, 32(11): ; Health Care Advisory Board interviews and analysis.