1. Chet Rhoads The HDH Group November 19, 2014

2.  83% of firms with 25-49 employees offer health insurance  91% of firms with 50-199 employees offer health insurance  98% of firms with 200-999 employees offer health insurance  100% of firms with 1,000 employees or more offer health insurance

5.  Most important Asset comes with a price  Best talent in Labor Pool ◦ Innovation ◦ Competitive Advantage ◦ Compete with Global Markets ◦ Relationship Pipeline  Competitive Wages are Comprised by unsustainable healthcare costs ◦ Competitors that can control healthcare cost will have the advantage of attaining/retaining best talent

7.  Will not sustain healthcare costs over time  Typically transfers more of the burden on employee  Carriers and legislation can impose limits  Engagement of employee workforce limited

8.  Higher deductibles, versus higher employee contributions  Implement coinsurance for in-network services  Higher ER co-pays  Health Reimbursement Account (HRA)/Health Savings Account (HSA)  Spousal Mandate/Surcharge (Working Spouse Provision)  Prescription Drug Programs ◦ Mandatory Generic ◦ Mail Order ◦ Formulary

9.  Sustain healthcare costs over time  Encourage employees/dependents to make better healthcare decisions  Encourage employees/dependents to conduct better behavioral lifestyles  More latitude with carriers and legislation  Over time, a culture is created for invested and engaged workforce

10.  Alternative Funding Arrangements ◦ Self-Funding – Cost Plus, Administrative Services Only (ASO) ◦ Captive  Prescription Drug Carve-Outs  Defined Contribution/Private Exchange Model  Wellness  Data Integrity

11.  Remit monthly premium to insurance carrier  Carrier in turn will pay: ◦ Claims ◦ Administration ◦ Reinsurance

12. ◦ Pros  Predictable budget  Less volatile compared to self-funding  Carrier pays PPACA fees on client’s behalf  Client not responsible for run-out claims ◦ Cons  Carrier uses past claims experience to determine future rates  Premium payments do not reflect real-time claims changes  Carrier sets the pooling level ($125K)  Administration built into the rates is higher than a self- funded arrangement  2-3% annual fee on health insurance providers only applies to fully-insured plans (2014)  Premium taxes

13.  A trade off of short term stability for long term cost savings  Assume more risk/opportunity for more reward  Pay carrier a monthly or weekly administrative fee for claims adjudication, billing, eligibility, customer service, etc…  Purchase Stop Loss Insurance ◦ Specific: Protects client when claims incurred during policy year on any one member exceed specific liability ◦ Aggregate: Protects client when claims incurred during policy period exceed a certain corridor above expected claims  Pay actual claims less stop loss reimbursements monthly  Reserves – Held by Carrier or Client  Settlement – Annually if carrier hold reserves

14. ◦ Pros  Good years; ABC Company experiences immediate savings  ABC Company chooses the amount of risk to retain via the specific deductible  Carrier does not profit as a result of good claims  ABC Company holds onto excess reserves instead of paying them to a carrier  Avoid 2-3% fee on health insurance providers (2014) and premium taxes  Administration of the plan less expensive  Carrier renewal rates irrelevant (used for COBRA and budgeting) ◦ Cons  Bad years; possibility of spending more than fully-insured rates  More volatile compared to fully-insured (volatility a function of stop loss specific deductible)  Client responsible for run-out claims in the event of a carrier change/termination of plan/layoffs  Carriers do not remit PPACA fees on client’s behalf – Employer pays fees annually based on members

15.  Captive ◦ A member-owned insurance company ◦ Initial captive structures were created for the Fortune 500 (e.g. Exxon, IBM, Xerox)  Group Captive ◦ Provided the advantages of a captive to small and mid-market employers ◦ Over 50% of mid-sized employers are in an alternative risk program

18.  Plan sponsor chooses a Pharmacy Benefit Manager (PBM) to administer and manage prescription drug benefits separate from the PBM contracted with the health plan  Plan sponsor ends up paying less in administrative fee by contracting directly with a PBM on a carve- out basis  Plan sponsors are able to remove fees that bear no relationship to the performance of their plan or the cost of providing a pharmacy benefit ◦ Negotiating contract terms and conditions ◦ Audit rights ◦ Clinical management ◦ Risk management programs

19.  Allows for aggressive price negotiations ◦ Governs pricing, discounts and rebates  Allows for carve-out specialty Prescription Drugs  Customized Clinical Programs  Medical Program must be self-funded to have ability to carve Prescription Drug Program out  Caution! – It is important that data feeds between PBM and medical carrier/administrator take place for integration of pharmacy benefit claims and medical claims

20. Private Exchange Model Video

21.  Employer Defines their Contribution (flexible choices to fit your management philosophy and budget).  Offers employees multiple benefits choices.  Employees value choice and the ability to create a benefit plan that fits their needs. New Model: Employees get to select the benefits that make sense for their lives Chris & Family Previously $1,000 Now is $750

22. Defined Contribution Helps Create Engaged Employees by: Providing choice Providing decision making tools Creating a purchasing venue that is easy for the employee to evaluate the options and enroll in plans that make sense for them

24.  Delivering available, complete, accurate data on time  Transforming information into actionable knowledge that empowers the continuum of patient care ◦ Significantly enhances patient and population health ◦ Control cost  Creates venue to: ◦ Optimize care ◦ Improve outcomes ◦ Control Costs

25.  Trust & Secure – Cleansing, Archiving, Safeguarding, and Controlling Data  Visibility – Online financial and clinical dashboards, population health trends and analysis  Insight – Data driven underwriting analysis, benchmarking and modeling for plan design  Optimize – Financial Risk Pools driven by predictive analytics

28. Thank you for your attention. Questions…?