1. Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. Consumer Driven Healthcare: Myth vs. Reality 2008 Health Care Forecast Conference University of California, Irvine February 22, 2008 C. William Sharon, CEBS National Consumer Driven Healthcare Practice Leader

2. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 1 Myth #1: CDH is an HDHP with an account Reality: The “heart” of CDH is consumer engagement  Consumerism –a set of techniques designed to transform members to be more effective health care consumers  Consumer driven healthcare (CDH) –consumerism using an account- based (HRA or HSA) plan design Consumer Financial Role Consumerism Tools Health Promotion Chronic Condition Management Four key building blocks for an effective program:

3. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 2 Myth #2: CDH savings are due to cost-shifting Reality: Savings come from changing consumer behavior  Well-designed CDH plans do not require cost shifting to save money –CDH plan = similar cost share + lower utilization through improved consumer engagement  80% of employers fund account –All HRA and 60% of HSA  The higher the CDH enrollment the higher the savings –Full replacement CDH saves the most Source: United Healthcare CDH Study, 5/07 and 2/08

4. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 3 EmployeeEmployee + 1Family Employer Account$1,000$1,750$2,500 Member Responsibility $1,000$1,750$2,500 Deductible$2,000$3,500$5,000 Employee Coinsurance 0% in-network 30% out-of-network Out-of-Pocket Maximum $1,000 in $2,000 out $1,750 in $3,500 out $2,500 in $5,000 out $ Incentives Health risk questionnaire (HRQ) & chronic condition management program completion Preventive Care covered at 100% CDH Plan Design – With Employer Account

5. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 4 Myth #3: CDH is a passing phase Reality: CDH market growth is strong  11 to 12 million CDH members (Aon est.) –500,000 CDH members in 2003  Growing 20-30% per year  46% of large employers*  10% of all employers  All industries and sizes  More in Central and Southeast  Many more in plans with “consumerism” * eg. American Express, General Motors, John Deere, Owens Corning, Union Pacific, Wendy’s Sources: Aon Consulting, 2007 UBA Health Plan Survey, 8/07, Tower Perrin “Account-Based Health Plans: What Works - and Why”, 1/08

6. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 5  Good studies: Aetna, Cigna, McKinsey & UHC  CDH plan findings –Increase in consumer engagement –Reductions in utilization –More value-conscious purchasing decisions –More engagement in wellness  McKinsey findings (2005) –50% more likely to ask about cost –33% more likely to ask about treatment options –25% more likely to engage in healthy behaviors –20% more likely to participate in wellness –30% more likely to get an annual checkup –20% more likely to treat a chronic condition Myth #4: There’s not enough data to make decisions Reality: There’s plenty of data; it will never be perfect

7. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 6 How Does CDH Change Utilization? Sources: Aetna CDH Study (9/06 and 2/08), CIGNA CDH Study (10/07), United Healthcare CDH Study (5/07 and 2/08) Reductions in:Increases in: Overall utilization: 5-12%Preventive benefits: 5-20% Inpatient hospital visits: 10-15%Immunizations: 8-12% Outpatient hospital visits: 10-15%Physical exams: 5-15% ER visits: 10-15%Online tools usage: 10-30% PCP office visits: 5-10%Generic Rx usage: 10-15%

8. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 7  77% enrollment in HRA plan (60% in 2004)  60% HRQ participation  70% web activation  No increase in healthcare costs from 2004 to 2007  Employee cost share (13%) lower than before Results  Formed Insurance Committee of labor and management  Added HRA to HMO and PPO in 2004  Added HRQ in 2004  Aggressive employee communications  Onsite wellness coaches in 2007  Focus on nutrition  Fitness competitions Actions  2,200 participants  Unions  $21 m health care cost in 2004  15% annual cost increases Employer Situation Case Study: Municipality Introduces CDH in 2004

9. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 8 Myth #5: All we need is health promotion Reality: Health promotion alone is not enough  Use preventive benefits  Understand treatment options  Evaluate price and quality  Make informed, shared decisions  Use generic drugs, pill-splitting or mail order  Comply with evidence-based medicine  Follow proper chronic condition management  Maintain personal health record  Complete health risk questionnaire (HRQ)  Participate in wellness programs  And, more To be really engaged, consumers must:

10. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 9 Sources: Aon Consulting client data; National Business Group on Health, Employees and Healthcare Decision Making, 1/08; United Healthcare Quality of Care Study, 4/07  Many employees like CDH plans –More employers with >50% CDH enrollment –95% CDH re-enrollment rates  CDH plan cost share may be lower than traditional plan  CDH members receive preventive care and evidence-based care equal to or better than traditional plan members  90% prefer to consult sources other than their doctor when making a treatment decision Myth #6: My employees would not like it Reality: Employees are more ready than you think

11. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 10  CDH experience  Administration integration  Consumer engagement techniques  Online decision support tools  User-friendliness of website  Price and quality transparency data  Chronic condition management  Health promotion programs  Incentives administration Myth #7: Every vendor is the same Reality: There is a vast difference in experience New Evaluation Criteria

12. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 11  Retail Clinics (CVS, Walgreens, Wal-Mart)  Medical tourism  Electronic medical records  Computerized Rx scripts  Online consultations (eg. Relay Health)  Evidence based medicine  Pay for performance  Concierge medicine  Hospital published pricing Myth #8: The health care system does not support CDH Reality: The health care system is changing

13. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 12  Initially, most employers add CDH as an option  Hard work to get high CDH enrollment –Cost savings depend on enrollment  Consumer behavior change takes time –Still learning how to engage consumers –Overcoming 25+ years of managed care Myth #9 CDH will cut medical costs once and for all Reality: CDH is a long term strategy

14. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 13  Members are skeptical of change –Members don’t know CDH can be a “win”  Members need to be taught to be an effective healthcare consumer –Face-to-face works best  Communication must be ongoing and targeted –Must come from a trusted source  Budget for the expense in advance – it’s a big, important piece Myth #10: We don’t need costly communications Reality: Member communication is critical to success

15. . Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. 14  The reality is that your health care costs will increase no matter what action you take – curbing the increases is the objective  There are more unhealthy and aging workers in the workforce every day – the trend is not reversing  You can’t ignore rising costs and you can’t just cost-shift  With careful planning, CDH can cost less with no cost shifting Myth #11: We don’t have the money (time) to do CDH Reality: You don’t have the money not to

16. Confidential property of Aon Consulting. Do not reproduce or re-distribute without the express written consent of Aon Consulting. For more about Aon’s CDH consulting services go to www.aon.com/cdh C. William Sharon National Consumer Driven Healthcare Practice Leader bill_sharon@aon.com 813-636-3022