Table of Contents Page # Topic . 2 Agenda 3 Scope of Work

Making Healthcare Consumerism Work Ronald Bachman, FSA, MAAA
A Roadmap for Making Healthcare Consumerism Work A Pre-Conference Session on how to structure your next healthcare consumerism strategic planning session Pre-conference BONUS: A Priimer on Government & Private Exchanges, and ACOs. Ronald Bachman, FSA, MAAA President & CEO Healthcare Visions, Inc. Chairman, IHC Editorial Advisory Board and League of Leaders

Table of Contents Page # Topic . 2 Agenda 3 Scope of Work
4 Background Info 5 Task #1 – Setting Principles for Change 8 Task #2 – Vision Statement Development 11 Task #3 – Identification of Acceptable Stategies 14 Change Formula 18 Actuarial Issues 20 Consumerism 40 Task #4 – Personal Care Accounts 65 Task #5 – Wellness, Prevention, & Early Intervention 78 Task #6 – Disease Management 93 Task #7 – Decision Support Tools 102 Task #8 – Incentives & Rewards 111 Task #9 – Viewing Consumerism by Generations 145 Task #10 – Create Consumerism Plans 154 Task #11 – Setting Time Frame for Implementation 158 Integrated Health Management 161 Potential Savings from Healthcare Consumerism 164 Actual Industry Experience Results 170 Task #12 (summary) – Potential Savings 171 Consumer-driven Healthcare Surveys of Growth

A 1.5 Day Agenda to Develop a Healthcare Consumerism Strategy
Day# Goal 1 Morning Agenda, Scope of Work, Background, (T1-3), Change Formula, Actuarial Issues, Consumerism, Building Blocks (T4), Building Blocks (T5) 1 Afternoon Building Blocks T(6-8), Multi-generational Issues (T9), Create Plans(T10), Time Frame for Implementation(T11) Review Decisions from Tasks 1-11, Financials Task 12, Final Input to Roadmap Tasks To Be Completed During 1.5 Day “Extreme” Consumerism 1. Principles Decision Support Tools 2. Consumerism Vision Statement 8. Incentives & Rewards 3. Strategies Viewing by Generations 4. Personal Care Accounts 10. Create Consumerism Plans 5. Wellness Time Frames 6. Disease Management Financial Analysis

Scope of Work for Developing the Roadmap and Beyond
Diagnostic and Readiness Assessment Perform Financial & Actuarial Analysis (set metrics) Design Benefits and Contrib. Strategy (The Road Map) Evaluate, Select, Implement Vendors Develop and Implement Education, Comm., Training, etc. Monitor and Evaluate Evaluate current plans Interview stakeholders Identify Basic Principles for Change Create Consumer Vision Stmt Select Strategies Develop Obj. & scope, set timeframe Match HR/business plan Develop baseline costs Co.& Ee contrib. level Model options Evaluate cost impact and revise Develop measures of success Est. Rel. Value of Components HDHP & Accts Wellness & DM Transition strategy Optional Coverages Carve-out Programs Support services Health vs. Healthcare Debit/Credit Cards Incentive Programs Vendors Technology Services Performance Accountability Reliability Communication Strategy Web-based Training, education Print, video, other media uses Internal vs. External Services Periodic reevaluation of baseline metrics Consumer scorecards Survey, measure success, acceptance Vendor/supplier audits Reassess & modify as appropriate

Background & Issues Current Benefits, Design Issues, Service Issues,
General Concerns, Anti-selection Reasons for Change, Interests in Consumerism, Driving Forces for Change, Perceptions of Employee Satisfaction, Dissatisfaction Other Problems and Positives with Current Plans

Task #1 – Setting Principles for Change
Important…Not Important 1. Have the Right Vision & Vision Stmt 2. Have a 3-5 Year Roadmap/Strategic Plan 3. Consider Other Related Corporate Initiatives 4. Create plan as part of Employer of Choice 5. Consider other HR metrics impacted by Healthcare 6. Provide Information on Rx Costs & Alternatives 7. Provide Information on Dr. & Medical Service Costs 8. Provide Information on Hospital Costs 9. Provide Information on the Quality of Dr. Care 10. Provide Information on the Quality of Hospital Care 11. Focus on Discretionary Costs (Rx and OV) 12. Focus on High Cost Claims & Claimants 13. Focus on Wellness and Preventive Care 14. Focus on an Individual Behavior Changes 15. Focus on Group Behavior Changes

Task # 1 – Setting Principles for Change
Important…Not Important 16. Use Incentives and Compliance Rewards 17. Increase Costsharing to Change Behaviors 18. Increase Employee Contributions to Offset Costs 19. Focus on Overall Plan Cost Reduction 20. Set the Right Measurements for Monitoring Progress 21. Build Broad Employee Agreement for Change 22. Minimize Change from Current Plans 23. Make Choices and Plan Options available 24. Improve Access to Care 25. Maintain Existing Network of Providers 26. Provide $ for post-65 retirement healthcare 27. Provide $ for pre-65 retirement healthcare 28. Provide $ for non-plan medical 29. Provide $ for terminated ee’s healthcare 30. Provide $ for non-healthcare expenses 31. Alternative to cutting benefits or initiating contributions

Task #2 – Sample Vision Statement Positioning to Balance Cost, Quality, and Access
Sample Vision Statement: Create health and healthcare program options valued by employees that adapt effectively to environmental trends that increase the quality of services, improve access to care, and lower costs. Uncertain, Clinically Oriented Quality Consumer Valued Quality Demand Driven Controls Supply Driven Controls Access Third Party Reimbursement Consumer Involvement & Transparency Cost

Task #2 – Create a Consumerism Vision Statement
Sample Vision Statements: Providing high performing highly educated employees and their families with the security of comprehensive health and healthcare coverage that meets their diverse needs and rewards their personal involvement and responsibility as wise users of services to optimize their individual health status and functionality. 2. Affect employee behavior change towards healthier lifestyles and greater consumerism through the use of rewards and incentives. 3. Make employees better consumers of healthcare services by providing them with the necessary health education, decision support tools and useful information including provider cost and quality data. 4. Encourage greater employee awareness and involvement in healthcare and financial decision making, as a building block towards a defined contribution strategy for healthcare in the future.

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Task #2 - Key Words / Phrases for Consumerism Vision Statement for Addition to Guiding Principles __________________________________

Task #3 - Identification of Acceptable Strategies
High Priority...Low Priority 1.Create Transparency – support “employee’s right to know,” minimize distortions of third-party reimbursement system, create transparency in costs, provide education/ training on healthcare costs, use decision support programs 2.Create Personal Involvement – establish greater financial involvement through HDHPs, HRAs or HSAs, reward good behavior, offer valued options, provide long term incentives, provide immediate feedback 3. Be Bold and Creative - Shift from supply-side controls to demand-side control designs. Be an early adopter/fast follower, consider out-of-the box ideas 4. Focus on High Cost “Pareto” Population - Provide financial protection to families in need due to high unexpected medical costs and/or chronic conditions

Task #3 - Identification of Acceptable Strategies Continued
Important…Not Important 5. Focus on Saving Lives and Improving Health – Focus on improving the health of the entire population regardless of plan design selected. Implement prevention & wellness for long term savings and DM for immediate impact 6. Focus on Preventive Care – Create incentive programs that change behaviors towards acceptance and compliance with wellness and early intervention, including pre-natal, non-smoking, diet, exercise, and safety 7. Minimize Impact of Cost Shifting – Use consumerism as an alternative to increased cost shifting or higher contributions 8. Implement Optional Consumerism – Provide new programs and plan options on a voluntary basis

Task #3 - Identification of Acceptable Strategies Continued
High Priority…Low Priority 9. Implement Change on a Multi-Year Program – Establish a consumer-centric program with a pre- determined multi-year introduction of options and use of accumulated HRAs and/or options 10. Focus on Information Sharing Only– Provide ees with decision support systems and information sources w/o accounts or incentives to reward behavioural change 11. Use Packaged Programs – use full integration of plan design, information, disease management, and decision support systems from single vendor 12. Use Existing Vendors – develop consumerist programs through current vendor relationships only 13. Use “Best of Class” Programs – use selected vendors that May overlay core benefit designs as long as integration is Non-disruptive and transparent to members

The Formula for Making Change Happen
Set by Mgmt’s Direction IHC Workbook Implementation Results Desire for Change Vision / Roadmap Process for Change POSITIVE CHANGE + + = Desire for Change Vision / Roadmap Process for Change Put on Back Burner + + = Desire for Change Vision / Roadmap Process for Change Expensive False Starts + + = Desire for Change Vision / Roadmap Process for Change Frustration + + =

Requirements & Stages of Change
NO CHANGE Without Desire – “Back Burner” Without Vision – False Starts Without Process – Frustration Requirements & Stages of Change Alignment C H A N G E CHANGE No C H A N G E Threshold Gather Info Pros & Cons Awareness + + =

Preliminary Actuarial Work & Issues
1. Data Collection and Population Profiling 2. Distribution of claims (low-medium-high-catastrophic claims) 3. Types and Analysis of Chronic & Persistent Conditions 4. Review of Industry Data on Consumerism 5. Use of Actuarial Pricing Model 6. Behavioral Modification Recognition 7. Cost Impact of Strategies and Plan Designs Selected

Purpose of Actuarial Work
Perform the actuarial and financial analysis to determine the impact of options available under a Consumerism Plan. Determine Potential: Plan designs Saving Account Options / HRA, HSA, & Account Credits Combinations and interactions of “Building Blocks” Costsharing structure Contribution strategies Participation

Supply Controls or Demand Controls
Plan Sponsors and Members have two basic choices to control costs: 1. Traditional Managed Care & HMOs - The “supply of care” is limited by a third party who controls the access to medical services (e.g. utilization reviews, medical necessity, gatekeepers, formularies, scheduling, types of services allowed), or 2. Healthcare Consumerism - The member controls their “demand for care” because of a direct and significant financial involvement in the cost of care, rewards for compliance, and the information to make wise health and healthcare value driven decisions.

Supply Controls Are Failing
High Healthcare Costs Climbing Higher Patients have lost control of their own healthcare, and are not truly engaged in the process of managing their health Patients are frustrated with managed care “rules” and the impact on time and productivity Patients don’t understand healthcare costs – costs are not transparent “Every System is perfectly designed for the results achieved.”

Mega Trends Leading to Demand Control
Personal Responsibility Self-Help, Self-Care Individual Ownership Portability Transparency (the Right to Know) Consumerism (Empowerment)

Healthcare Consumerism - Defined
Healthcare Consumerism is about transforming an employer’s health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants. It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors. “The job of a leader is to create the possible” – Condi Rice 20

Consumerism – Saving Lives & Saving Money
The Moral Imperative for Consumerism: Increasing the Quality of Care, Better Health, and Improving Lives The Economic Imperative for Consumerism: Saving Money (Lower Product Prices and More Jobs)

Objectives Of Consumerism
Change participant health and healthcare purchasing behaviors Narrow market cost and quality variations using patient decisions Increase transparency of healthcare costs to plan participants Give plan participants more control over and “shared responsibility” for managing own healthcare and related costs Supply participants with the tools to act as better informed healthcare consumers Reduce costs for “discretionary care” through informed purchasing & incentives Reduce long term costs with added incentives for “good health” Reduce costs of Chronic Conditions through improved compliance with treatments and disease management programs Reduce Acute Care costs with incentive hospital tiering based upon cost and quality

Basic Requirements for Successful Healthcare Consumerism
Must work for the sickest members, as well as the healthy Must work for those not wanting to get involved in decision-making, as well as those that do

The Core of Consumerism
The Unifying Theme for a Health and Healthcare Strategy is: Behavioral Change “Implement only if it supports behavioral change consistent with the strategy”

Healthcare Consumerism Roles & Responsibilities / Implications
Employers Facilitators of change Provide increased information and decision making tools Improved employee morale with choice and access Link to productivity, absenteeism, disability, turnover, etc. Consumerism can improve costs/budgeting (current & future) Payers (Self-Insured Employers) Focus on high cost case mgmt/disease mgmt/population mgmt Will become responsible for more communications, training, education direct to consumers Value added services may change, including transactions and asset management Diminished role of managed care for routine care

Healthcare Consumerism Roles & Responsibilities / Implications
Employees Increased responsibility for own health & healthcare Involved in own treatment and medical necessity decisions Improved access to care Involved in financial costs of health & healthcare (P4C) Providers More direct involvement with patients and treatment Service and quality will be determined by consumers Pricing will become more flexible and visible (P4P) Overall implications Roles will change for all players The picture change quickly - your strategy must prepare you for rapid market changes

Consumerism Choices Involve Options for Behavioral Change
Wellness Preventive care Early Intervention Lifestyle Options (diet, exercise, smoking, safety) Self-help, self care (Health literacy) Discretionary Expenses (e.g. OV, ER, Rx) Value purchasing (e.g. DXL, o/p vs. in/p, online) Participation in Disease Management Programs Compliance with Evidence Based Medical Treatment Plans

Consumer Driven Healthcare Traditional PPO Alignments
Building Blocks Employer Plan Member (Consumer) TPAs/ Insurer Providers Personal Care Accts Account Options Create Savings Admin. Accounts N/A Health Management Worksite Wellness Healthy Lifestyle Benefit Designs Prevention, Primary Care Disease Management Access to Specialists Treatment Compliance EBM & Protocols Standards of Care Decision Support Communication Education Decision Tools Medical Counsel Incentives Financier Pay for Compliance Admin. Pymts. Negotiated Rates / P4P CDHC Focus Facilitator, Coordinator Empowered, Responsible Enabler Care Manager FOCUS on Behavior Change of Members

Healthcare Consumerism IDS / ACO Alignments
Building Blocks Employer Plan Member (Patient) Provider TPAs/ Insurer Personal Care Accounts Acct. Options Create Savings N/A Administer Accts. Health Management Worksite Support Healthy Lifestyle Prevention, Primary Care Benefit Designs Disease Management Access to Specialists Treatment Compliance Standards of Care EBM & Protocols Decision Support Communication Education Information Therapy Tools Incentives Pay for Risk Pay for Compliance Pay for Performance Pay for Administration Healthcare Consumerism Accountable Plans Acct’ble Health Acct’ble Care Acct’ble Administration FOCUS on Patient - Provider Relationship

Consumerism – Much Broader than HDHP & Consumer-Driven Healthcare
Consumerism is A Strategy ****************** It’s about moving from a “benefit” to an “accumulating asset. It’s about increasing one’s human capital”

Evolution of Healthcare Consumerism
Focus Impact Choices First Generation High Deductible Plans with HRAs or HSAs, Decision Support Tools Discretionary Expenses: Rx, ER, OV, D-X-L Initial Level and Type of Accounts with CDHC / HDHP Designs, Information and Decision Support Services Second Generation Behavior Change Through Rewards & Incentives Chronic and Persistent Conditions, Pre-natal, Preventive Care Covered Benefits, Type and Level of Matching Funds and P4C / P4P Incentives for Prevention, Wellness, and Disease Management Programs Third Generation Health and Performance, workplace health & safety Organizational Health, Turnover, Absenteeism, Productivity, Disability, and Presenteeism Group rewards, Importance and Impact on non-health Corporate metrics Fourth Generation Personalized Health and Lifestyle Needs Personalized Health and Performance Outcomes, Genetic Predispositions Lifecycle Needs, Culturally Sensitive DM, Holistic Care, Information Therapy

Behavioral Change and Cost Management Potential
The Evolution of Healthcare Consumerism Future Generations of Healthcare Consumerism 2nd Generation Consumerism Focus on Behavior Changes Traditional Plans with Consumer Information 1st Generation Consumerism /CDHC Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare 3rd Generation Consumerism Integrated Health & Performance Traditional Plans Behavioral Change and Cost Management Potential Low Impact High Impact

The Promises of Consumerism
Major Building Blocks of Consumerism Personal Care Accounts The Promise of Demand Control & Savings It is the creative development, efficient delivery, efficacy, and successful integration of these elements that will prove the success or failure of consumerism. Wellness/Prevention Early Intervention The Promise of Wellness Disease and Case Management The Promise of Health Information Decision Support The Promise of Transparency Incentives & Rewards The Promise of Shared Savings

The Consumerism Grid Incentives & Rewards Personal Accounts
2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling, push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy, social networking Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Personal Accounts Condition Management Incentives & Rewards
Longevity Personal Accounts Health Mgmt Wellness/Prevention Condition Management Information Decision Support Incentives & Rewards

Creating Healthcare Consumerism Plans
Understand Basic Consumerism Plan Designs Including Consumerism in All Plan Options Building Blocks 1. Understanding HRAs/HSAs to Create Personal Care Accts as a Basis for Health “Asset Accumulation” 2. Include Wellness Programs that Encourage Healthy Habits 3. Include Disease Management Programs that Encourage Compliance 4. Include Decision Support Tools for All Plans 5. Include Incentives/Disincentives to Change Behavior

Basic Plan Design Options & Healthcare Consumerism
Traditional Health Plans Most Healthcare Consumerism Plan Designs Personal Accounts HMO & FSAs HRAs? PPO & FSAs HRAs? PPO & FSAs with HRAs HDHP PPO & Ltd FSAs HSAs HDHP PPO & Ltd FSAs HSAs Ltd HRAs Typical CDHP Must Meet HSA / HDHP Legal Definition Wellness/Prevention Early Intervention Disease Management Case Management Information Decision Support Incentives & Rewards

Potential Use of PCAs to Support Consumerism Plan Designs
Traditional Health Plans Most Healthcare Consumerism Plan Designs Personal Accounts HMO PPO PPO HDHP PPO HDHP PPO Typical CDHP Must Meet HSA / HDHP Legal Definition Wellness/Prevention Early Intervention Minimum Co-Payment Designs Disease and Case Management High Ded & Co-Insurance Designs Health Incentive Accounts? Information Decision Support Initial $500-$1000 HRA with Incentive HRAs Initial Er HSA Contribution Initial Er HSA Contribution With HRA Match & Incentive HRAs & HSAs Incentives & Rewards

PPO/HRA and PPO/HSA High Deductible Health Plans
Four components that work together to improve quality, outcomes, and lower cost. Personalized Health Care Web- and Phone- Based Tools Health Tools and Resources Wellness, Condition care Programs, Information and Decision Support Tools and Resources. 3. HRA – ER provided $s HSA - ER and/or EE Provided $s HRA/HSA – Individual & Group Reward $s Incentives and Rewards Health Accounts (HRAs or HSAs) “Benefit dollars” to pay for healthcare expenses. Preventive 100% Coverage Health Account (HRA/HSA) The Definity Health benefit features three key components. The Personal Care Account is an allotment of benefit dollars provided by employers that members use to pay for their medical needs. Doctor visits and prescription drugs, among other medical services, are paid directly from the PCA without the hassle of co-payments. Health Coverage is a repackaging of typical health insurance plans. It features a Preventive Care component that encourages members to be actively involved in managing their health. The third component of the Definity Health benefit is Health Tools and Resources. It provides members with care management services and advanced Web- and phone-based information, tools and resources that encourage them to become true consumers of healthcare. Lets look at these three components in more detail. Deductible Gap PPO Additional Health Coverage beyond the HRA/ HSA. 1. 2. 4.

Task #4 - Personal Care Accounts
The Promise of Demand Control & Savings HSAs, HRAs, FSAs “Of the 5 building blocks, the greatest among them is the Personal Care Account”

HSAs and HRAs - Two Very Different Accounts to Support Consumerism
HSA (2003 MMA) - A law, with specific requirements and benefit design requirements. - Most TAX ADVANTAGED vehicle ever created HRAs (6/26/2002) - A regulatory creation based upon an IRS ruling - Most FLEXIBLE vehicle ever created

Health Savings Accounts – Advantage Employees
Tax-free savings vehicles for medical expenses, no use-it-or-lose-it rule Effective January 1, 2004 Eligibility: must be covered under high deductible health plan (HDHP) Portable

Health Savings Accounts
Individual accounts To permit saving for qualified medical and retiree health expenses on a tax-free basis Must be offered in conjunction with a legally defined HDHP - “High Deductible Health Plan” Portable An HSA is owned by the individual, similar to IRAs, and transfers if the employee changes jobs Held in a trust or custodial account; trustees – banks, insurance companies, approved non-bank trustees

Health Savings Accounts: Contributions
Contribution limits determined monthly based on status, eligibility, HDHP coverage as of first day of month (offset by other HSA contributions) 2013 Monthly limit – 1/12th of lesser of deductible or $3,250 (self-only), $6,450 (family), indexed Catch-up contributions, to $1,000 annually in 2013

HSAs – Real Dollars, Portable, Vested
Can be used or taken in cash at anytime, even when no longer eligible to make contributions Tax-free if used to pay for qualified medical expenses (IRC Section 213(d)) For other purposes, subject to income tax and 20% penalty - 20% penalty waived in case of death or disability - 20% penalty waived for distributions after age 65 or older HSA can be transferred tax-free to spouse on death; otherwise taxable to estate or beneficiary Transfers upon divorce, nontaxable, becomes spouse’s HSA

2014 HSA Eligible HDHP High Deductible Health Plan – By Law
Self-only: a deductible of at least $1,250; maximum HSA is $3,300; no more than $6,350 maximum out-of pocket expenses (incl. Ded.) Family coverage: a deductible of at least $2,500; maximum HSA is $6,550; no more than $12,700 on out-of pocket expenses (incl. Ded.) 2014 Age 55 and over catch up amount of $1,000 Preventive services are not subject to the deductible OK for out of network costs to exceed maximum out-of pocket limits THE ABOVE 2014 AMOUNTS ARE SUBJECT TO ANNUAL INDEXING

HRAs- Advantage Employers National Accounts, Er Controlled Rules
Employer does not fund and has cash flow value Employer can determine rules for HRA usage; they are subject to forfeiture; they are not portable, but can be subject to vesting HRAs are more flexible in plan design, can tailor scope of reimbursements, are less costly for employer Employer decides if HRA can used for (1) medical plan expenses not otherwise reimbursed, (2) non-plan QME 213(d), and/or (3) insurance premiums

Important Differences between Use of HRAs and HSAs for Supporting Behavioral Change
Personal Care Accounts Generation 1 Initial Account Only Generation 2 Activity & Compliance Rewards Generation 3 Indiv. & Group Corporate Metric Rewards Generation 4 Specialized Accts, Matching HRAs, Expanded QME Health Reimbursement Arrangements 1. Any Amount 2. Notional Acct 3. Employer Determined 4. Employer Only Contributions 1. Flexible Activity & Compliance Rewards 2. Employer Determined 3. Can not be cashed out 4. Must be used for healthcare 1. Flexible Indiv & Group Rewards 4. Must be used for healthcare 1. Specialized Notional Accts, 2. Can terminate by employer rules 3. Potential IRS Expanded QME Health Savings Accounts 1. Amounts Set by law 2. Real Dollars in Acct 3. Er or Ee Contrib 4. Contributions up to plan deductible of $ Single $ Family 5. Non-substantiation 1 Must give Cash Option 2. Awards must be same $ amt or same % of deductible 3. HSA can be used (with 20% penalty) for non- healthcare expenses 1. All participants must receive same amount or same % of deductible 2. Difficult to use for Group Incentives 1. 100% Vested & Portable 2. Can use matching HRAs, 3. Potential IRS Expanded QME

HRAs – Best for Larger Groups
HRAs – Best for Larger Groups? HSAs – Best for Individuals and Small Groups? Current State Combination Accounts HRAs HSAs FSAs Employer-based Healthcare with Individual Accountability Employer-based Healthcare Traditional (Ltd Carry-over) Special Purpose Non-Plan Employer-based healthcare Special Purpose Accounts Incentive Matching Individual-based Healthcare Er-Based with HSA Contributions Employer-based Defined Contribution Developments

Are HSAs the right vehicle for large employer groups?
Yes, If……….. Or No, Because……. Need to Understand the Consumer Movement, Federal Health Policies, & the Market Transformation that is Underway

Are HSAs the Wave of the Future? Which Direction will Legislation Take?
Yes, if…. … we recognize the HSA legislation and regulations as a good start and another building block for consumerism and behavioral change. …Er’s and Ee’s recognize current limitation and optimize available uses …there is additional legislation/regulation to support large Er interests in providing HSAs (use for healthcare only, Rx coverage problem, combination accounts). …there is legislative support for the common use of FSAs for targeted needs, HSAs as true “Health Savings Accounts” and HRAs as true “Health Reimbursement Arrangements. No, because…. … they were not legislated/regulated with large employers in mind. … of a desire to promote individual insurance over individual ownership (under employer and individual policies) … they are just a tool to cost shift to employees, they can not reward behavior change … they are only desirable to the young, healthy, and wealthy

Summary - PCA Comparisons

Summary - PCA Comparisons (cont)

The Fundamental Federal Policy Question
Will Legislation/Regulation Use HSAs to … mainly promote portable Individual & Small Group Insurance, OR … expand Personal Care Account ownership through in both an employer-based and individual-based healthcare system thru HSAs, HRAs, and FSAs.

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy. Social networking Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Task #4 - Discussion on Type(s) and Use of Personal Care Accounts
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Task #5 - Wellness, Prevention, and Early Intervention
The Promise of Wellness

Wellness - Defined Wellness is a proactive organized program providing lifestyle and medical/clinical assistance to employees and their family members in maintaining good health. Wellness programs encourage voluntary behavior changes and support compliance with proven approaches to maintain health, reduce health risks and enhance their individual productivity.

Wellness – The Need For every 100 members:
23-30% smoke (70% want to quit, 35% try each year) 29% have high blood pressure 30% have cardiovascular disease 80% do not exercise regularly 55% or more are overweight or obese 30% are prone to low back pain (many linked to obesity) 6-9% have diabetes 10% are depressed 35% are under significant stress 50% do not wear their seat belts

Wellness – The Desire for Change
For every 100 members: 47% are trying to improve their diet 37% plan to undergo some health screening 30% state they exercise regularly Only 23% are aware of the health promotion and wellness programs offered by their employer sponsored health plans 76% of employers with over 11,000 employees offer health management programs

Wellness - How Does It Impact Employees and Family Members?
e.g., Low Risk, Good Nutrition, Active Lifestyle At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Catastrophic e.g., Cancer, Rare Diseases, Head Trauma No Claims Generally Healthy O/P (Low) In/P (High) Maternity In/P (High) % Ee 15% 48% 14% 3% 12% 4% 1% % $ 0% 5% 21% 20% 63% 17% % $ 32% 56% Prevention Wellness – Lifestyle Wellness - Lifestyle Minimize Acute Episodes Minimize Complications Maximize Recoveries Maximize Stabilization Early Intervention Wellness - Clinical Wellness - Clinical Traditional Wellness Programs

Wellness – Examples for Employer Sponsored Programs
Common Programs Health Risk Appraisals Weight Management Fitness/exercise/health clubs Smoking cessation Employer Support Communication and awareness (newsletters, health fair, posters) Screening (health awareness profiles, blood pressure check, blood tests, body fat analysis) Education (seminars/classes, self help kits, group discussions, lunch and learn) Behavioral Change (on-site fitness center, flu shots, lunchtime walks, yoga classes)

Wellness – Working within Consumerism
Traditional Plans Cover selected wellness in benefit plan at 100% Supplement with non-plan wellness and work-site programs Other: same * as below PPO/HRA incentives PPO/HRA Include Employer defined wellness/prevention benefits at 100% Include HRA Incentive for Health Risk Appraisal (Wellness Assessment) Include HRA Incentives for personal wellness activities Include HRA Incentives for work-site wellness participation PPO/HSA Include IRS defined Preventive Care benefits at 100% Benefits contingent upon HSA contribution? Wellness Appraisal Other: same * as above with PPO/HRA incentives

Consumerism - Programs and Services
Prescription Drugs Information Evidence Based Medicine Medical Care Guidelines Health Library Disease Management Condition Specific Assessment Tools Chronic & Persistent Wellness Voluntary Participation Voluntary & Incentive Based Mandatory Participation Mandatory & Incentive Based Self Care Management Information On-Line Health Risk Assessment Personal and Family Tracking Health & Performance Population Management Case Management Cost & Quality Management Stress Management Assessment Tools Self Help Tools Depression Screening Preventive Care – Lifestyle Lifestyle Nutrition Fitness Personal Health Management Preventive Care – Clinical Immunizations Hypertension Screening Cholesterol Testing Mammograms Pap Smears Blood Pressure Checks Colorectal Cancer Testing Diabetes Testing Osteoporosis Testing Chlamydia Tests Early Prevention Wellness Online News Safety Pre-Natal Well Baby Care New Mom Programs Medical Services Support FAQ, Preparation for In/P End of Life Care Provider Cost/Quality Incentives Regional Centers of Excellence

Wellness & Preventive Care for HSAs
Preventive care includes, but is not limited to, the following: Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Routine prenatal and well-child care. Child and adult immunizations. Tobacco cessation programs. Obesity weight- loss programs. Screening services However, preventive care does not generally include any service or benefit intended to treat an existing illness, injury, or condition.

HSA Safe Harbor Preventive Care Screening Services
Infectious Disease Screening Bacteriuria Chlamydial Infection Gonorrhea Hepatitis B Virus Infection Hepatitis C Human Immunodeficiency Virus (HIV) Syphilis Tuberculosis Infection Mental Health/Subst. Abuse Screening Dementia Depression Drug Abuse Problem Drinking Suicide Risk Family Violence Cancer Screening Breast Cancer (e.g., Mammogram) Cervical Cancer (e.g., Pap Smear) Colorectal Cancer Prostate Cancer (e.g., PSA Test) Skin Cancer Oral Cancer Ovarian Cancer Testicular Cancer Thyroid Cancer Heart and Vascular Diseases Screening Abdominal Aortic Aneurysm Carotid Artery Stenosis Coronary Heart Disease Hemoglobinopathies Hypertension Lipid Disorders

Quest Diagnostic Report
A Quest Diagnostic report showed 60% of employees who participate in wellness programs report that the incentive is a deciding factor in their choice to participate. Incentives have been so successful in increasing participation that approximately two-thirds of the employers who invest in employee wellness use an incentive to drive employee participation. Bio-metrics (e.g. blood pressure, cholesterol, body mass index, waist size, and A1(c)) are popular as measuring standards for improved outcomes.

Wellness – Planning Will the wellness program be for employees only, or employees and dependents? Will you purchase from vendor, internally developed, or a combination Consider in conjunction with plan covered wellness benefits (immunizations, mammograms, screening, EAP, physical exams, prenatal care, well child care, etc.) Consider in conjunction with worksite programs (safety, ergonomics, work-life programs, etc.) Incentives/rewards provided for compliance

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info and services, information therapy Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Task #5 - Discussion on Type(s) and Use of Wellness and Prevention
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Task #6 - Disease Management Programs
The Promise of Health The “Holy Grail” of Cost and Quality Improvements

Disease or Condition Management – the Holy Grail of Potential Savings
Primary cost drivers are chronic disease and serious acute conditions. 80% of costs Driven by 20% of claimants For a typical employer, 15-30% of costs are driven by controllable health risks 50% of costs Have a behavioral root cause (CDC 1999)

Disease Management Potential Focus on Hi-Volume / Hi-Cost Users
Cost Curve % Members % Costs 1% > 20% 15% -> 68% 50% -> 95% EBRI -Stakeholders in Consumer-Driven Health Care

Disease Management - Defined
Disease Management is an proactive organized program providing lifestyle and medical/clinical assistance to employees and their family members with chronic and persistent conditions. Disease Management programs encourage voluntary behavior changes and support compliance with proven medical practices which stabilize conditions, reduce health risks and enhance their individual productivity.

Disease Management – The Need
60+% of an employer’s total medical costs come from chronic and persistent diseases such as, diabetes, asthma, congestive heart failure, back pain, and depression. 45% of Americans live with at least one chronic disease. 14% live with two or more chronic diseases. 76% of hospitalizations, 72% of physician visits, and 88% of Rx is due to chronic conditions The average cost of health care for a diabetic is $13,200/yr compared to $2,600/yr for a non-diabetic. 61 million Americans live with cardiovascular disease 50% of chronic disease deaths are traced to cardiovascular disease. Coronary artery disease is a leading cause of premature permanent disability. Obesity is becoming the #1 preventable cause of death

Disease Management – The Desire for Change
Very Little under Traditional System: 50% do not follow recommended standards of care 33% will high blood pressure do not know 33% of diabetics do not know it Patient’s lack of knowledge and information Patients without financial incentives to change health and healthcare behaviors Distortions of current 3rd party reimbursement medical financing system. Plans pay for treatments not prevention or compliance Physicians without incentives to take time and effort to deal effectively with chronic conditions

Disease Management – Elements for a Successful Program
There are four elements of a successful disease management: 1. A delivery system of health care professionals and organizations closely coordinating to provide medical care and support the patient’s compliance throughout the course of a disease. 2. A process that monitors the compliance and describes outcome-based care guidelines for targeted patients. 3. A process for continuous improvement that measures clinical behavior, refines treatment standards, and improves the quality of care provided. 4. Incentive awards that support the disease management medical and clinical care services

20 Priority Areas per the Institute of Medicine
1. Asthma, supporting and treating those with chronic conditions. 2. Care coordination for patients with multiple chronic conditions. 3. Children with special health and care needs, particularly those with chronic conditions. 4. Diabetes, which can lead to high blood pressure, heart disease, blindness and other complications. 5. End-of-life care for people with advanced organ failures, concentrating on reducing symptoms. 6. Frailty - preventing accidents, treating bedsores and improving advanced care. 7. High blood pressure - left untreated it can lead to heart attack, stroke and kidney failure. 8. Immunization. 9. Evidence-based cancer screening, which can reduce death rates for many cancers, including colorectal and cervical. 10. Ischemic heart disease, also known as coronary heart disease. Efforts should focus on prevention.

20 Priority Areas per the Institute of Medicine
11. Major depression, which currently has a much lower treatment rate that other major diseases. 12. Medication management to prevent errors. 13. Noscomal infections. These are infections acquired in the hospital and kill an estimated 90,000 Americans annually. 14. Obesity, which is blamed for as many as 300,000 deaths annually in the United States. 15. Pain control in advanced cancer. 16. Pregnancy and childbirth, especially improving the quality of prenatal care. 17. Self-management and health literacy, using public and private organizations to increase the level of health education. 18. Severe and persistent mental illness; improving mental health care in the public sector, including state hospitals and community centers. 19. Stroke, the third highest cause of death in America. 20. Tobacco-dependence treatment for adults.

Disease Mgmt - How Does It Impact Employees and Family Members?
Well e.g., Low Risk, Good Nutrition, Active Lifestyle At-Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease, Asthma, MH/SA Catastrophic e.g., Cancer, Rare Diseases, Head Trauma No Claims Generally Healthy O/P (Low) In/P (High) Maternity In/P (High) % Ee 15% 48% 14% 3% 12% 4% 1% % $ 0% 5% 21% 20% 63% 17% % $ 32% 56% Prevention Wellness - Lifestyle Wellness – Lifestyle Minimize Acute Episodes Minimize Complications Maximize Recoveries Maximize Stabilization Early Intervention Wellness - Clinical Wellness - Clinical Disease Management Program

Disease Management Programs
Designed and Financially Aligned for Success

Disease Management Program Planning
Identify key populations Focus on Compliance Manage expectations Respect privacy Follow Best practices (EBM, Outcomes Based Medicine) Integrate demand management, disease management and utilization management Give patients their own data Align Incentives for patients, providers, and Employer Disease management buzz grows despite uneven record Despite their questionable return on investment potential, disease management programs are still hot among employers, according to a new study. An article from the Employee Benefit Research Institute (EBRI) reports employers are increasing their offering of disease management programs designed to control chronic illnesses, which account for three-fourths of the nation’s health care costs. Employers are motivated by the potential of the programs to help shield them from the onslaught of double-digit health care cost increases. Research and case studies for the most part, however, have offered evidence of success only in individual programs. There is no conclusive evidence that disease management in general can improve employees’ health or reduce costs in the long term. A 2001 Hewitt Associates survey found 76% of employers provide disease management programs. This month’s issue of EBRI Notes details disease management trends, including prevalence, effectiveness and the outlook for the future. For full-text copies, call BCBSNC Launches Predictive Modeling Initiative By Diana Garber In order to rapidly identify patients with treatable illnesses—and reduce the administrative costs related to providing services to these customers—Blue Cross and Blue Shield of North Carolina (BCBSNC, Durham, NC) and BioSignia Inc. (Durham) are co-developing a software program that will review insurance claims using predictive modeling technology. The program, designed by BioSignia, is being created to identify candidates for BCBSNC's free healthcare management programs. BCBSNC, which is implementing this program in order control expenses, takes patient lists complied by the program and alerts the people on the lists of the availability of existing health management programs. The basis for the predictive modeling program is an algorithm. The program scans claims filed with BCBSNC and records the dollar amounts, diagnosis and procedure codes. The program has 159 distinguishable diseases in its memory. The program then ranks how far the disease has progressed and how treatable and/or preventable it is in its current stage. The system is looking to pinpoint complicated but treatable conditions. If a patient has a medical condition listed as treatable and resource consuming, the patient is considered a prime target for BCBSNC's healthcare management programs. Once these patients are identified, a nurse from the insurance company contacts the patient and discusses the medical treatment the patient is receiving and if any changes should be made. According to Stephen Blackwelder, Ph.D., manager of quality improvement research and biostatistical support of BCBSNC, "the goal [of this program] is to identify and act more quickly on behalf of members who are in the midst of complicated medical situations. By running the claims through this algorithm, we are hoping to identify people in these situations rapidly, and then implement the solutions we already have in place more quickly." BCBSNC will look at the diagnosis on the claim and how much the procedure cost, not the customer's name on the claim. Patient participation in any of the programs is purely optional and will have no impact on premium rates, according to the insurer. Currently the only way for BCBSNC to get patients to use any of its health management programs is by a doctor's referral, or if a patient decides to call the insurance company's number. BCBSNC is hoping to reach a broader audience through the new program. "Potentially, we want to improve quality of the situation customers are experiencing and keep the cost down for the employer and for us," Blackwelder adds. BioSignia, which had developed the software before signing the agreement with BCBSNC, is still refining the system. Although so far it has only licensed the software to BCBSNC, the vendor thinks the program could be beneficial to many companies. According to Guizhou Hu, Ph.D., vice president of research and development at BioSignia, "They can use this system to identify the people [to whom] they can provide a health promotion to help review medical costs. We want to make this a product that can be available to many other managed care companies."

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy, social networking Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Task #6 - Discussion on Type(s) and Use of Disease Management Programs
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Task #7 - Decision Support Tools
The Promise of Transparency & The “Right to Know”

Healthcare Consumerism – Already Active Consumers
Consumers Search Internet for Medical Content Consumers Ask Physicians for Genetic Testing Consumers Work with Providers on Personalized Health Plans Consumers Monitor and Track Their Own Medical Status Regularly Consumers and Providers Coordinate Care and Understanding through Integrated Clinical and Information Therapies

Decision Support Tools Survey of Attitudes
Patient decision making preferences “INFORMED” PARENTAL INTERMEDIATE SHARED DECISION MAKING PATIENT AS DECISION-MAKER 17.1% 45% 11% 22.5% 4.8% Employer Role: Recognize the “consumer-preference spectrum” Provide consumer-focused decision support tools for: Choice of Health Plan Choice of Provider Choice of Treatment Current and Future Financial Considerations The four areas of consumer choice highlight the need for a strategic plan and the proper selection of vendor partners.

Decision Support Tools for Consumerism
Basic Design Information Provider Selection Support HRA Fund Accounting Physician Quality Comparison Underlying PPO Plan Design Physician Cost Comparison Disease and/or Medical Management Hospital Quality Comparison HSA Fund Accounting Hospital Cost Comparison Debit/Credit Card Personal Benefit Support Care Support Plan Comparison Cost Estimator On-line Provider Directory Account Balance Provider Scheduling On-line Claim Inquiry On-line Rx Comparisons SPD On-line Patient Decision Support 24/7 Nurse Line Personal Health Management Health Risk Appraisal Health & Wellness Information Targeted Health Content Medical Record, History Health Coach

Decision Support Tools Employer Considerations
Employee Readiness Sophistication and orientation Internet competency and access Due Diligence Accuracy Usability Independence Stability Integration issues Targeted Clinical Support: Value-based Evidence Based Medicine Personalized Chronic Care Management Tools Consumer-Focused Stress Management

PwC Study A PricewaterhouseCoopers study found that nearly a third (32%) of consumers has used some form of social media for healthcare purposes. The self-absorbed “Me” generation is giving way to sharing communities on Facebook, Picassa, Linked-In, Plaxo, and YouTube.

Consumerism – a new force
can be a force to address quality and cost variations in a given market

Decision Support Tools for Cost & Quality Information
Variation in Cost & Quality Hospitals – CABG* Lower LOS Lower Cost Episodes of Care Align Strategy with the “Value Purchasing” Awareness Pay for Performance Tiered Networks Regional Centers of Excellence Cost Efficiency Quality Fewer Adverse Affects Lower Complication Rates Lower Mortality * Healthshare/SelectQualityCare weighted averages

Task #7 - Discussion on Type(s) and Use of Decision Support Tools
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Task #8 - Incentives, Rewards,
The Promise of Shared Savings Pay for Compliance & Pay for Performance “Two sides of the same coin”

Consumerism Incentives – Participation Based
Incentives must be participation and activity-based rather than outcomes-based. HIPAA laws prevent rewards based on health standards. The law allows incentive designs if the following requirements are met: Limit the reward to a specified amount (not to exceed between 20% of the cost of employee-only coverage; PPACA allows up to 30% in 2014). Be reasonably designed to promote health or prevent disease. Be available to all similarly situated individuals. There must be a feasible alternative for those that cannot reach the health standard because of a medical condition. Inform employees that individual accommodations and alternatives are available.

Wellness Incentives – Outcomes Based
While HIPAA generally prohibits plans from differentiating benefits or premiums based on health status, employers can still design and implement wellness programs with financial incentives. Only a "bona fide wellness program" can provide a reward based on a health standard or health outcome (i.e., a low cholesterol level). To be a "bona fide wellness program," the law specifies that the program must meet four requirements: 1. Limit the reward to a specified amount (not to exceed between 20% of the cost of coverage; 30% under PPACA in 2014). 2. Be reasonably designed to promote health or prevent disease. 3. Be available to all similarly situated individuals. There must be a feasible alternative for those that cannot reach the health standard because of a medical condition. 4. Inform employees that individual accommodations and alternatives are available. - National Business Group on Health

Wellness Incentives – Participation Based
All wellness programs that are based on participation rather than outcomes are permitted. For example, financial incentives or premium discounts for participating in a health fair, joining a health club, or attending smoking cessation program, regardless of the health outcomes or results, are allowed. - National Business Group on Health

Rewards & Incentives for Smoking Cessation
The NGBH conducted a Quick Survey on "Smoking Cessation Incentives/Disincentives." The results from 26 respondents showed: 69% of the respondents offered discounts on annual health care premiums/contributions for non-smokers, and 15% offered another type of benefit enhancement. Similarly, 45% of the respondents offered premium discounts for employees that participated in smoking cessation/wellness programs. 57% included smoking cessation as part of a broader wellness initiative/incentives at the worksite. - National Business Group on Health

Incentive Awards - Three Very Different Personal Care Accounts
Flexible Spending Accounts (FSAs) – Traditional Group Plans with Use-it-or-Lose-it Health Reimbursements Arrangements (HRAs) – Employers’ choice for cash flow flexible incentive based medical plan benefit designs (best suited for self-insured groups) Health Savings Accounts (HSAs) – Employees’ choice for funded portable triple tax advantaged with “High Deductible Health Plans” (best suited for individuals and small groups) Combination Accounts – creative but confusing

The Evolution of Encouraging Personal Responsibility
Plan Design Education Incentives & Rewards Participation Engagement Compliance Outcomes Health Status

NBGH Study The National Business Group on Health and Fidelity Investments survey: * 73% of Employers used incentives in 2011 in their health improvement programs. * The average incentive value was $460 (2010:$430 and 2009: $260). * Incentives used by employers include cash, gift cards and contributions to health savings accounts (HSA). * A small but growing percentage of employers link eligibility for enrollment in their health care plans to participation in health improvement programs. * 7% of employers in 2011 required completion of a health risk assessment for employees to be eligible for health care plan coverage, and * 10% will link completion of an HRA to plan eligibility in 2012. The survey is based on the responses of 139 employers, ranging in size from 1,000 employees to 100,000 employees.

O/P, Low In/P, High Maternity
Using Information & Incentives To Address Wellness & Disease Management Behavioral Changes Low Users Medium Users High Users Very High Users No Claims Generally Healthy Acute Episodic Conditions O/P, Low In/P, High Maternity Chronic & ersistent Conditions . O/P, Low In/P,High Catastrophic % Mem 15% 48% 14% 3% 12% 4% 1% % Dollars 0% 5% 21% 20% 63% 32% 17% 56% Prevention Wellness - Lifestyle Wellness - Lifestyle Minimize Minimize Maximize Maximize Wellness - Clinical Early Intervention Wellness - Clinical

Task #8 - Discussion on Type(s) and Use of Incentives & Rewards
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Task #9 – Viewing Healthcare Consumerism by Generations
Review of Plan Design Concepts by Generation

1st Generation Healthcare Consumerism
Focus on Plan Design and implementation of HRAs and/or HSAs and basic decision support tools. Impact: Discretionary Expenses Choices: Level and Type of Accounts with Plan Designs, information and Decision Support Services

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy. Social Networking Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Rand Study A recent Rand study found that when people shifted into health insurance plans with deductibles of at least $1,000 per person, their health spending dropped an average of 14 %. Health care spending also was lower among families enrolled in high-deductible plans that had HSAs. Account based plans are a good start, but if the goal is to change member behaviors and to engage them to make better informed health and healthcare decisions more than a new plan design is needed.

2nd Generation Healthcare Consumerism
Focus on Behavior Changes. How to use plan design to effectively change health and healthcare purchasing behaviors with individual and group incentives/rewards. Impact: Chronic & Persistent Conditions, Pre-Natal, Wellness & Preventive care. Choices: Covered Benefits, Type and Level of Matching Funds and Incentives for Prevention, Wellness, and Disease Management Programs

2nd Generation Healthcare Consumerism with Focus on Behavioral Changes
Healthcare Consumerism models require a shift in responsibility from the employer to the employee in the purchase and use of health and healthcare. Communication, information, and education along with the reward system drives this change. Passive Users of Health Care Services Educated, Engaged, and Empowered Health Care Consumers Basic Health Care Information Benefit Education Consumerism Behavior Support Access to Information & Decision Support

2nd Generation Behavioral Change a Key Determinant of Health

Healthcare Consumerism Drives New Behaviors from All Participants
Employee Passive Participant Active & Empowered Patient/Consumer, P4C Employer Primary Purchaser Plan Facilitator Financial Contributor Health Plan Barrier Enabler / Education & Information Provider Contracted Supplier Clinical and Service Standards, Care Manager, P4P

Consumer Behavioral Changes
Focus on Preventive Care 2. Live Healthy & Safely 3. Use Nurse Line for Common Issues 4. Treatment Compliance for Chronic Persistent Problems 5. Consider Health and Healthcare Issues Together 6. Use Lower Cost / Higher Quality Alternatives

Consumer Behavioral Changes
7. Choose Rx Substitutions 8. Talk to Doctors as Informed Consumers 9. Be Compliance with Disease Mgmt Treatment Plans 10. Learn About Diagnosis/Condition 11. Act Like a Consumer - Demand Value and Service 12. Consider Plan as an Accumulated Asset rather than a Time Limited Benefit

2nd Generation Programs to Change Behaviors
Chronic Conditions e.g., Diabetes, Depression, Heart Disease, Asthma, MS/SA Catastrophic Conditions e.g., Cancer, Hepatitis C, Head Trauma Well e.g., Low Risk, Good Nutrition, Active Lifestyle At Risk / Acute Condition e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Lacerations, Infections Acute Conditions e.g., Infections, Respiratory, Lacerations Health Promotion Health Management Chronic Disease Management High Cost Case Management Website Wellness Appraisal Patient Identification and enrollment Navigational Support Address Comorbid Conditions Healthy Lifestyle Promotion Targeted Behavior Modification Patient Advocacy Practice Guidelines Physical Activity Campaign Care Coordination Care Coordination Address Comorbid Conditions Integrated Services, Communications, Measurement and Evaluation

2nd Generation Consumerism – Improving Health and Lowering Costs with Behavioral Changes
Low Users Medium Users High Users Very High Users No Claims Generally Healthy Acute Episodic Conditions O/P, Low In/P, High Maternity Chronic & Persistent Conditions O/P, Low In/P, High Catastrophic % Mem 11% 29% 17% 9% 4% 18% 1% % Dollars 0% 2% 3% 35% 14% 40% 30% 31% 67% Evidence Based Medicine Pre-Natal care Evidence Based Medicine Safety Programs, Regional Centers of Excellence Discretionary Expenses Disease Management Stress Management / Health & Performance Sample Impact Areas: Rx Rx Rx Rx Rx Rx Rx Office Visits Office Visits Hosp Admits Hosp Admits OfficeVisits Hosp Admits Hosp Admits DXL DXL, ER ER ER Specialists Specialists High Tech

3rd Generation Healthcare Consumerism
Focus on Health & Performance. How healthcare consumerism plan design and behavior change affects work performance and the corporate bottom line. Impact: Manageable Costs - Organizational health, turnover, absenteeism, productivity, disability, and presenteeism

What are “Manageable Employment Costs”?
Five components of “Manageable Employment Costs”: Health care: the dollars spent on health care whether self-insured or insured. Turnover: the direct hiring costs, temporary replacement costs, learning curve costs, and lost productivity costs. Presenteeism: the time an employee is at work and assumed to be productive, but is not productive. Disability: the direct costs associated with workers’ compensation and non-occupational disability. Unscheduled Manageable Absence: the cost of absence that could be positively influenced with proactive intervention.

3rd Generation Health & Performance Strategy
Health & Performance is a benefits strategy that is designed to balance the rising costs of health care while optimizing employee health & performance through targeted, strategic, and value-added interventions. Targeted, Strategic, Value-added Interventions Better Health Employee Performance

3rd Generation – Incentives and Rewards
Optimizing Individual and Organizational Health & Performance Holistic Health & Productivity Focus Culture of Health & Wellbeing Seamless Population Management Shared Responsibility/Accountability Organizational Alignment & Support Data Driven Process Excellence Wellness Prevention Demand Management/ EAP Disease Management Case Management Absence Management 3rd Generation “Account Based” Benefits and Incentives Platform

3rd Generation Health & Performance ROI
Health & Performance ROI will be measured by: Reduced unscheduled sick days Reduced paid time off Fewer disability claims, more and faster recoveries Reduced turnover Improved survey results on teaming, creativity, staff moral Resulting in: More productive employees More effective employees Increased teaming, creativity, moral, workplace conflicts Better bottom line results

3rd Generation Creating the Health & Performance ROI
Keep in mind: This is a multi-year strategy that results in cumulative savings over time ROI estimates are based on static number of members expect more to enroll each year which will increase savings Estimates assume the same benefit levels changes to the plan design could increase the ROI in the shorter term

Example of 3rd Generation Concept Consumerism Stress Management
Consumerism Stress Management is a process improvement methodology designed to quickly improve bottom line saving and progresses into a business strategy that optimizes a company’s human capital an innovation efforts. Consumerism Stress Management emphasizes employee participation, the inclusion of corporate and operational performance metrics, and the power of the Internet to achieve savings by quantifying and positively influencing stress-related “Manageable Employment Costs”.

3rd Generation – Stress Management and Corporate Impact
Research suggests that stress has been directly attributed to: 21.5% of total health care costs 40% of the primary reasons that employees leave a company 50% of presenteeism is a function of stress 33% of all disability and workers’ compensation costs 50% of the primary reasons that employees take unscheduled absence days

Related / Imbedded Health Costs From Stress
Source of Demand Major Body Systems And Pressure Affected by Stress Job Muscular System Family Digestive System Personal Cardiovascular Social Emotional Financial Endocrine, Immune Environment Cognitive

3rd Generation Stress Management
The Corporate Costs of Mental Illness Medical Intensity Type of Condition Direct MH Costs Co-Morbid Conditions Indirect Corporate Costs Low Cost Frustration Anxiety Low Stress Minor Depression LOW Tobacco Use Sleeplessness Colds/Flu Blood Pressure Moderate–HIGH Increased Errors Presenteeism Loss of Teaming Medium Moderate Stress Depression Anger Attention Deficit PostTraumatic Stress MEDIUM Hypertension Musculoskeletal Digestive Gastrointestinal Moderate-HIGH Unsch Absences Poor Morale Relation Conflicts Lost Productivity High High Stress Major Depression Schizophrenia Bipolar Disorder Obsessive Compulsive Panic Disorder Anorexia-Bulimia HIGH Cardiovascular Cancer Diabetes Asthma Back Pain Alcoholism HIGH-VERY HIGH Low Productivity Divorce Turnover Early Retirement Worker’s Comp Disability Catastrophic Violence Suicide Accidents Burns VERY HIGH Death Work Violence Disaster Recovery

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy. Social Networking Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

4th Generation Healthcare Consumerism
Focus on Lifestyle, Lifecycle, and Personal Health needs. How healthcare consumerism plan design and behavior change affects personal health and healthcare based on lifestyle and personalized needs. Impact: Lifecycle needs, Personal health, genetic pre-dispositions, predictive modeling, healthy habits, and wellness.

4th generation – Individual Ownership and Portability
Ownership, security, and portability of the PCA. Access to accounts post-employment. Vesting will be important to employees to secure the value of the accounts. Compared to HSAs, employees may ultimately expect “notional interest” on HRAs. Demand for more immediate use of the funds for non-plan QMEs and use of HRAs for paying health premiums.

4th generation – Individual Ownership and Portability (cont.)
Added HRA credits from unused vacation or sick leave. PCA will need to accommodate personal lifestyle expenses items such as, alternative medicines and acupuncture. Ability to use debit/credit cards to cover internet purchases and cyber-office visits. The IRS will have pressure to expand the definition of QME to cosmetic surgery and other personal care services.

4th Generation – Personalized Health and Healthcare
Based on genomics, predictive modeling, and push technology. Preventive care will include both lifestyle and clinical factors. Treatments will include culturally sensitive care and guidance Cyber-health Aides - decision support systems and wireless connections that link each person to a personalized health and healthcare cyber-support system (e.g. diabetes phone). Personalized Internet Search engines based upon individual profile health and healthcare needs. Cyber-support systems built to profile activity and anticipate areas of interest (e.g. TIVO/Travelocity) Connected to services through monitors that will provide real time feedback on health status, lifestyle, and health concerns. (e.g. Health Buddy)

4th generation – Decision Support tools and Individual needs
“Arrive in time” information and services at critical moments for care. “Information therapy” is the active use of patient oriented information with clinical evidence based medicine. Information needs to be embedded into the process of clinical care—as information therapy. Potential areas for Information Therapy: Prostate surgery Back surgery ACL surgery Coronary artery bypass surgery Medication for depression End-of-life care Prescription of beta-blockers following heart attacks Early-stage breast cancer testing Colon cancer screenings Immunizations and eye test reminders for diabetics

Nondiscrimination Rules
Health plans may not discriminate against similarly situated individuals on the basis of a health status-related factor with respect to 1) eligibility for the plan, or 2) premiums for the plan. Health plans may not charge an individual a higher premium than applies to similarly situated individuals because of health status- related factors. However, health plans are allowed to make enrollment in the plan, or receipt of particular benefits, contingent on regular completion of health awareness or promotion activities that do not require individuals to satisfy a particular health standard. Moreover, employers are allowed to provide any kind of financial incentive to plan enrollees who provide documentation of completion of such activities.

Individuals & Health Status Factors
Health status-related factors include diagnosis of overweight, obesity, results of cholesterol tests and a history of overweight or eating disorders. They are defined in a variety of ways, as follows: • Health status • Medical condition (including both physical and mental illnesses) • Claims experience • Receipt of health care • Medical history • Genetic information • Evidence of insurability • Disability

2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare The Consumerism Grid 3rd Generation Consumerism Integrated Health & Performance Personal Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Population Mgmt, IHM, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info and services, information therapy Cash, tickets, Trinkets Health Incentive Accounts, activity based incentives Non-health corporate metric driven incentives Personal development plan incentives, health status related Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

Task #9 - Additional Considerations for Building Blocks of Healthcare Consumerism
PCAs ______________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Wellness____________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Disease Management _________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Decision Support ____________________________________________________ ____________________________________________________________________ ____________________________________________________________________ Incentives _________________________________________________________ ____________________________________________________________________ ____________________________________________________________________

Task #10 – Create/Design Basic Framework o Consumerism Options
Design: Deductibles, Copays, Coinsurance, Max OOP, Fund Balances, Wellness, Disease Mgmt, Incentives, Carve-outs, etc. Traditional PPO Plan PPO with HRA PPO with HSA Other

Potential Anti-Selection from Consumerism on an Optional Basis
Introduction of Consumerism on an optional basis will limit the cost reduction. In particular, with HDHP’s fewer members will be impacted and are those selecting HDHP’s are likely to have an existing favorable health status (anti-selection). Companies and members can benefit most by introducing consumerism with both a HDHP option and consumerism features for current plans. Example - Selection in An Option Environment OPTION # 1 OPTION # 2 % Members Participating Clms/Part.Mbr. Vs Clms/All Mbrs. Remaining Members 10% 75% 90% 103% 30% 85% 70% 106% 50% 100%

Design a PPO Plan Traditional PPO Desirable PPO Deductible Deductible
Preventive Preventive What would you Include? Deductible Deductible How large of a Deductible? 20% Coins to a Maximum OOP PPO 80% Coverage In-Network 20% Coins to a Maximum OOP PPO 80% Coverage In-Network In-Network Coins? In-Network Max OOP? OON Coins? OON Max OOP? 100% Coverage 100% Coverage Other: Carve-out Vision, Dental?

Design a High Deductible PPO/HRA Option
Sample PPO / HRA PPO / HRA What would you Include? Any Coinsurance? How Much in Initial HRA? Preventive Preventive How Large of a Deductible Gap? HRA ($500-$1000) HRA In-Network Coins? In-Network Max OOP? OON Coins? OON Max OOP? Deductible Gap ($ ) Deductible Gap PPO 80% Coverage In-Network __% Coins to a Maximum OOP of $_______ PPO __% Coverage In Network OOP of $______ 20% Coins to a Maximum OOP $2-5,000 PPO 80% Coverage In Network Other: Carve-out or Incl.?: Rx, MH & SA, Vision, Dental 100% Coverage 100% Coverage HRA Incentives? Wellness, DM. Other?

Design a High Deductible PPO/HSA Option
Sample PPO / HSA PPO / HSA What would you Include? Any Coinsurance? How Much in Initial HSA? Preventive Preventive HSA=($1000=2600) In-Network Coins? In-Network Max OOP? OON Coins? OON Max OOP? HSA = _____ 20% Coins to a Maximum OOP $5000 (incl deductible) PPO 80% Coverage In Network ___% Coins to a Maximum OOP _______ PPO __% Coverage In Network Other: Carve-out or Incl.?: Rx, MH & SA, Vision, Dental 100% Coverage 100% Coverage HSA Incentives? HRA Incentive? Wellness, DM. Other?

A Unified Theory of Plan Design
All Medical Plans can be view as catastrophic plans with first dollar benefits funded by: 1. Post-tax self pay – Pure high deductible 2. Insurance – traditional HMO, EPO, POS, PPO, or Indemnity 3. Health Reimbursement Arrangements (HRAs) - HRA with Deductible Gap 4. Health Savings Accounts (HSAs) – Legally defined High Deductible Health Plan (HDHP) 5. Flexible Spending Accounts (FSAs) 6. Combinations of the above

PPO Plans Differ Mainly in the Way Initial Dollars are financed
Traditional PPO Insurance Funding of Early Expenses PPO with HSA Funding of Early Expenses PPO with HRA Funding of Early Expenses Preventive Preventive Preventive Deductible HRA HSA 20% Coins to a Maximum OOP PPO 80% Coverage Deductible Gap 20% Coins to a Maximum OOP PPO 80% Coverage PPO 80% Coverage 20% Coins to a Maximum OOP 100% Coverage 100% Coverage 100% Coverage Similar Catastrophic Protection

Sample Consumerism PPO Plan Designs
Traditional PPO Insurance Funding of Early Expenses PPO with Voluntary Ee HSA Funding of Early Expenses and Er HRA Match PPO with Er HRA Funding of Early Expenses Preventive % coverage Preventive % coverage Preventive % coverage Deductible $500 Er HRA $1000 Voluntary Ee Funded HSA up to $1250 20% Coins to a Maximum OOP of $5,500 PPO 80% Coverage Deductible Gap $1,000 $1250 HRA Er Match to HSA to cover part of: 20% Coins to a Maximum OOP of $4,800 PPO 80% Coverage 20% Coins to a Maximum OOP of $5,000 PPO 80% Coverage 100% Coverage 100% Coverage 100% Coverage Max OOP = $6000 Min OOP = $4800 w/ HRA Match Max Ee Cost = OOP+ +HSA+Lowest Premium Max OOP = $6000 Max Ee Cost = $6000+Prem Max OOP = $6000 Max Ee Cost = $6000+ Lower Prem Incentive HRAs from Initial “$0” Balance Incentive HRAs from Initial $1000 Balance Incentive HRAs for CY Co-Insurance Only

Task #10 – Create/Design Basic Framework of Healthcare Consumerism Options
PPO PPO/HRA PPO/HSA Other Preventive Care Benefits Front-end Deductible Beginning Account Balance Deductible Gap PPO Coinsurance – In/Net PPO Coins Max OOP-InNet PPO OON Coinsurance PPO OON Coins Max OOP Carve-out Programs: Rx, Vision, Dental Incentives - DM Incentives - Preventive Care Matching Er HRA to Ee HSA Other Decision Support Tools

Task #11 – Implementation Planning & Time Frames
The Challenges and A framework for Implementation

Employer Challenges in Developing a Healthcare Consumerism Strategy
Lower Costs, Increased Employee Satisfaction, Quality/Value Driven Healthcare, Improved Access to Care Enterprise-wide Impact of Health & Healthcare Building the Future Employer Benefits Program Collaboration Standardize IT Platforms Focus on High Cost / High Volume Users Pay-for-Performance Consumerism Healthcare Consumerism Demand-Driven Healthcare

Communication Milestones
Accept Health Plan as an Accumulating Asset Rather than a Short Term Benefit Acceptance I accept the changes Practical Application Notes Communications Process What does it mean to me? How does it work? Education Awareness What is it? Employee Decision-Making Cycle

Yr__- __ Yr__-__ Yr__-__ Yr__-__ Incentives & Rewards
Time Frame for Implementation of Consumerism (may be Dependent Upon Vendor Capabilities) Yr__- __ Yr__-__ Yr__-__ Yr__-__ 2nd Generation Consumerism Focus on Behavior Changes 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare 3rd Generation Consumerism Integrated Health & Performance Personal Care Accounts Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Integrated Hlth Mgmt, Population Mgmt, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info& services, info therapy, Social Networking Cash, tickets, Trinkets Health Incentive Accts, activity based incentives Non-health corporate metric driven incentives Personal dev. plan incentives, health status related Wellness/Prevention Early Intervention Disease and Case Management Information Decision Support Incentives & Rewards

Integrated Health Management A Logical Stake in the Ground ?
2nd Generation Consumerism Focus on Behavior Changes Integrated Health Management A Logical Stake in the Ground ? 1st Generation Consumerism Focus on Discretionary Spending 4th Generation Consumerism Personalized Health & Healthcare 3rd Generation Consumerism Integrated Health & Performance Personal Care Accounts Wellness / Prevention Early Intervention Disease Mgmt & Case Management Information & Decision Support Tools Incentives & Rewards Initial Account Only Activity & Compliance Rewards Indiv. & Group Corporate Metric Rewards Specialized Accts, Matching HRAs, Expanded QME 100% Basic Preventive Care Web-based behavior change support programs Worksite wellness, safety, stress & error reduction Genomics, predictive modeling push technology Information, health coach Compliance Awards, disease specific allowances Integrated Hlth Mgmt, Population Mgmt, Integrated Back-to-Work Wireless cyber –support, cultural DM, Holistic care Passive Info Discretionary Expenses Personal health mgmt, info with incentives to access Health & performance info, integrated health work data Arrive in time info & services, info therapy, social networking Cash, tickets, Trinkets Zero balance acct, activity based incentives Non-health corporate metric driven incentives Personal dev. plan incentives, health status related

A New Developing Generation of Healthcare Consumerism
Revealing the 5th Generation A New Developing Generation of Healthcare Consumerism

Personal Accounts Condition Management Incentives & Rewards
Longevity Personal Accounts Health Mgmt Wellness/Prevention Condition Management Information Decision Support Incentives & Rewards

PwC Study A PricewaterhouseCoopers study found that nearly a third (32%) of consumers has used some form of social media for healthcare purposes. The self-absorbed “Me” generation is giving way to sharing communities on Facebook, Picassa, Linked-In, Plaxo, and YouTube.

5th Generation Healthcare Consumerism
1. From Personalized (self) to Community (others) 2. From Health to Productive Longevity 3. From Self-help to helping Others 4. From Being Served to Sharing 5. From Taking to Giving 6. From Secular to Spiritual 7. From Monetary to Emotional 8. From Head (logic) to Heart

5th Generation Consumerism Adapted from Blue Zone by Peter Buettner
Longevity Basics Move Naturally – Be Active Without Thinking About It Painlessly Cut Calories by 20% Avoid Meat & Processed Foods Drink Red Wine in Moderation Take Time to See the Big Picture 6. Take Time to Relieve Stress 7. Participate in a Spiritual Community 8. Make Family a Priority 9. Surround with Others who Share Values Adapted from Blue Zone by Peter Buettner

Integrated Health Management Program Implementation Option for Multiple Generations
Process Integration & Disciplined Improvement Company Data Warehouse & Metrics General Manager The secret is cooperation and synergy between components supporting the corporate strategies Personal Care Accts. FSAs, HRAs, HSAs Integrated Absence Mgmt Acute Case Mgmt Disease Mgmt Programs Demand Management Prevention Wellness Utilization and Case Management Communication Education NETWORK A / TPA A NETWORK B / TPA B

More than just Theory and Promises
Potential Savings & Actual Industry Results from Early Generation Implementations More than just Theory and Promises “To achieve transformation to a future model of healthcare consumerism, all participants must advance in a consistent way to the future model.”

The Value Proposition 5-8% Savings over 5 years with 2% lower trends
Low Range of Savings 5% x 5 years + 2% x 5 years = 35% High Range of Savings 8% x 5 years + 2% x 5 years = 50% 20-35% lower Rx costs Low Range: % x 20% = 4% High Range: % x 20% = 7%

Potential Savings from Full Implementation of Consumerism Achievement of savings and improved outcomes is dependent upon both the Type and Effectiveness of the programs implemented. Gross* Savings as % of Total Plan Costs (Programs Applicable to All Members) Effective Programs Implemented Traditional plans Consumerism Plans Passive 1st Generation 2nd Generation 3rd Gen & Future Basic 2% 3% 7% 10% Expanded 3-4% 5-8% % 20.0+% Complete 4% 17% 25% Comprehensive (Future) 5% 20% 30% *Excludes Carry-over HRAs/HSAs and any added Administrative Costs of Specialized Programs

Healthcare Consumerism
Experience Results

American Academy of Actuaries 2009 Non-partisan CDH Consumerism Studies
1st Year Savings: The total savings generated could be as much as 12 percent to 20 percent in the first year. All studies showed a drop in costs in the first year of a CDH plan from -4 percent to -15 percent. A control population of traditional plans experienced increases of +8 percent to +9 percent. 2+ Year Savings: At least two of the studies indicate trend rates lower than traditional PPO plans by approximately 3 percent to 5 percent. If these lower trends can be further validated, it will represent a substantial cost-reduction strategy for employers and employees. Cost Shifting: The studies indicated that while the possibility for employer cost-shifting exists with CDH plans, (as it does with traditional plans) most employers are not doing so, and might even be reducing employee costsharing under certain circumstances.

2011 Rand Study of CDHCs The largest-ever assessment of high-deductible health plans finds that while such plans significantly cut health spending, they also prompt patients to cut back on preventive health care, according to a 2011 RAND Corporation study. Studying more than 800,000 families from across the United States, researchers found that when people shifted into health insurance plans with high deductibles, their health spending dropped an average of 14 percent when compared to families in health plans with lower deductibles. Health care spending also was lower among families enrolled in high-deductible plans that had moderate health savings accounts sponsored by employers.

Experience Results Aetna reported in 2011 that employers who switched to account-based health plans as their only plan option had saved $21.8 million per 10,000 members over the past five years. Cigna published a 2012 study concluding that employers can save an average of $9,700 per employee over five years by switching to account-based health plans. According to Towers Watson and the NBGH, companies that successfully move their employees into account-based health plans can achieve significant savings on their health benefit costs. For example, companies with at least half of their workers enrolled in an account-based health plan report that their per-employee costs are over $1,000 lower than companies without an account-based health plan.

Task #12 (Summary) - Medical Plan Costs and Potential Consumerism Savings Worksheet
Well e.g., Low Risk, Good Nutrition, Active Lifestyle At-Risk e.g., Inactivity, High Stress, Overweight, High Blood Pressure, Smoking Chronically-Ill e.g., Diabetes, Musculoskeletal, Heart Disease Catas-trophic e.g., Cancer, Rare Diseases No Claims Generally Healthy O/P (Low) In/P (High) Maternity Distribution of Med Costs ___% Avg $ Cost (000’s) $0 $____ $______ $_____ Est. CDHC Savings Pct. 0% 15% 12.5% 8% 5% 20% $ CDHC Savings (000’s) Incremental HRA Costs Amount Pct. Est. CDHC Savings $_______ _____% Incremental HRA Costs Net Annual Savings

IHC Editorial Advisory Board Healthcare Visions, Inc.
Government Exchanges Ronald E. Bachman Chairman IHC Editorial Advisory Board President & CEO Healthcare Visions, Inc.

Gov’t (Public) Health Information Exchanges (GHIEs) & Gov’t (Public) Health Insurance Marketplaces (GHIXs)

Government Health Information Exchanges (GHIEs)
Typically transmit healthcare-related data among: facilities, health information organizations, and agencies according to state or federal standards. The purpose of these Exchanges is to improve healthcare delivery, information gathering, and transparency. These Exchanges are an integral component of the health information technology infrastructure under development in the United States.

PPACA Health Insurance Exchanges (Overview)
The Patient Protection & Affordable Care Act (PPACA) established government (public) health insurance exchanges. Who: Government Health Insurance Exchanges are for: 1. individual purchasers of health insurance, and 2. small groups (small group exchanges are defined by states and can be up to 50 employees or 100 employees). When: Effective January 1, 2014 1. American Health Benefit Exchange (AHBE for individuals), and 2. Small Business Option Program (SHOP for groups). The word “Exchange” can be confusing. PPACA defines gov’t health insurance exchanges (both federal and state-based). However, “Exchange” can refer to a “Health Information Exchange” (HIE), a “Health Insurance Exchange” (HIX). Because of the confusion “Marketplace” has generally replaced the original use for Insurance Exchanges. There are both government (public) and private forms of Information Exchanges and Insurance Exchanges (Marketplaces).

Employer Mandate for Large Group Employers (50 or more)
Employer Shared Responsibility Payments A penalty of $2,000 times the number of full-time employees minus 30 employees if the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange. If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and gets a tax credit subsidy to buy insurance through an Exchange, then the annual penalty is the lesser of (a) the penalty for the employer mandate, or (b) $3,000 times the number of full-time employees who received a tax credit to buy insurance through the Exchange.

Employer & Individual Mandate (Fewer than 50 employees)
Employers with fewer than 50 employees are exempt from the employer mandate to provide insurance. Small Employers can provide a tax advantaged “Defined Contribution” through a state allowed Health Reimbursement Arrangement. Individuals are mandated to buy insurance (can purchase from public or private exchanges or directly from insurers). If individuals don’t buy health insurance the minimum tax is $95 per person in 2014 and going to $695 in 2016 (up to 3-times for a family indexed for inflation in subsequent years). The maximum penalty is 2.5 percent of taxable income.

Government Health Insurance Exchange Marketplaces (GHIXs)
GHIXs are the entities for PPACA mandated private insurance, mandated coverage, provide premium subsidies, control plan designs, set premium levels (or require approval of rate increases), shift funds among carriers through risk adjusters, and establish state or nationwide insurance mandates. Subsidies may be available to individuals purchasing insurance thru GHIXs. Small employers may also be eligible for a tax credit to offset the costs of group insurance. Used to identify individuals eligible for gov’t programs such as Medicaid, High Risk Pool coverage, and Children’s Health Insurance Plans.

PPACA Exchanges Defined (GHIXs)
A central provision of PPACA requires the establishment of exchanges in each state—online marketplaces through which eligible individuals and small business employers can compare and select health insurance coverage from participating health plans. Begin enrollment by October 1, 2013, with coverage to commence January 1, States have some flexibility with respect to exchanges by choosing to establish and operate an exchange themselves (i.e., state-based), or by ceding this authority to Health & Human Services (HHS) – (i.e. federally facilitated).

Governance Models of State-based GHIXs
States may run one statewide exchange, regional exchanges within the state, or participate in a multi-state exchange. Can be governed by a state agency (new or existing), a quasi-governmental agency, or a non-profit entity. GHIX Models Active purchaser: Exchange uses the market leverage of enrollees to evaluate plan bids and selectively offer plans, and/or negotiate to restrict cost growth of plan offerings. The Massachusetts Health Connector is an example of an active purchaser.

Governance of State-based GHIXs (Continued)
Market Facilitator or Open Marketplace: Exchange relies solely on qualified health plans meeting minimum standards for entrance into the exchange, and allows market forces to set plan premiums. The Utah Health Exchange is based on the market facilitator model.

GHIX Partnerships State Plan Management: Plan management functions include the collection and analysis of plan information, plan monitoring and oversight, and data collection and analysis. Health & Human Service (HHS) will coordinate with the state regarding plan oversight, including consumer complaints and issues with enrollment reconciliation. State Consumer Assistance: A state would oversee in-person consumer assistance, manage direct assistance helping people sign up for insurance, and conduct outreach. HHS would be responsible for other consumer assistance functions including call center operations, managing the consumer website, and written correspondence with consumers to support eligibility and enrollment. Both Plan Management & Consumer Assistance: If electing this option, states would perform both these functions.

GHIX Implementation 48 States and D.C. were eligible to establish GHIXs. HHS provided grants of $1 M to each state for research and planning to determine how Exchanges could be operated and governed. Add’l funds were provided to develop state-based GHIXs. Exchanges under the PPACA are government agencies or non-profit organizations where private health insurance policies are offered to individuals and small groups with PPACA eligibility and coverage mandates, including premium subsidies for low income individuals.

GHIX Implementation GHIXs with fully insured individual plans will be available in Fully service SHOP GHIXs with multiple insurer options have been delayed until Single insurer option may be available States needed to show progress in establishing GHIXs by January 1, 2013 or a federal Exchange may be implemented in those states. Until 2016, states can set Exchange eligibility at 50 or 100 employees. In 2017, states may include employers with more than 100 employees.

Federal Poverty Level (FPL) Charts
48 Contiguous States and DC For family units of more than 8 members, add $4,020 per person Percent of FPL (2013) Family Size 100% 133% 150% 200% 300% 400% 1 11,490 15,282 17,235 22,980 34,470 45,960 2 15,510 20,628 23,265 31,020 46,530 62,040 3 19,530 25,975 29,295 39,060 58,590 78,120 4 23,550 31,322 35,325 47,100 70,650 94,200 5 27,570 36,668 41,355 55,140 82,710 110,280 6 31,590 42,015 47,385 63,180 94,770 126,360 7 35,610 47,361 53,415 71,220 106,830 142,440 8 39,630 52,708 59,445 79,260 118,890 158,520

Essential Benefits PPACA defines required essential benefits as ten broad categories of coverage: (1) Ambulatory Services, (2) Emergency Services, (3) Hospitalization, (4) maternity and Newborn Care, (5) Mental Health and Substance Abuse Services, (6) Prescription Drugs, (7) Rehabilitative Services, (8) laboratory Services, (9) Preventive and Wellness and Chronic Disease management Services, & (10) Pediatric, including oral and vision care.

Essential Benefits by State (State selected Reference Plan)
New HHS guidelines have proposed the adoption of a state-based “benchmark” approach. Rather than HHS defining essential benefits for all, each state can choose a “reference” plan from the following: The largest plan by enrollment for any of the three largest small group insurance products in the state; Any of the largest three state employee benefit plans; Any of the largest three national Federal Employee Health Benefits Program plans; or The largest commercial HMO plan in the state.

Essential Benefits Default Plan
If a state does not choose a reference plan, HHS will use the largest plan by enrollment in the small group market. The chosen benchmark must satisfy coverage requirements in all ten essential benefit categories. A health plan will be required to offer benefits that are “substantially equal” to the state reference plan. Plans can adjust benefits, including both the specific services covered and any quantitative limits, provided all ten categories of the essential benefits are covered. The variations by state could produce problems for self-funded plans operating in multiple states, as every state could have different mandates for essential benefits.

Benchmark Plans, as of January 3, 2013
Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services United States 26 Recom’ed 25 Default NA 2 State Ee plan 45 Small grp plan 4 Commerc’l HMO 21 CHIP 29 FEDVIP 1 Incl’d 3 CHIP 42 FEDVIP 6 Incl’d 48 Incl’d 3 FEHBP 30 Yes 21 No Alabama Default BCBS of AL- 320 Plan, PPO Small group plan FEDVIP Included Yes Alaska BCBS of AK- Alaska Heritage Select Envoy, PPO FEHBP Arizona Recom’ed State of Az Self-Insure (Admin by United), EPO State employee plan No Arkansas HMO Partners Open Access POS CHIP California Kaiser- Sm Grp, HMO Colorado Kaiser- Ded/CO HMO 1200D Conn ConnectiCare, HMO Commercial HMO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Delaware Recom’d Highmark (BCBS of DE)- Simply Blue, EPO Small group plan CHIP FEDVIP Included No District of Columbia Group Hospitalization and Medical Services (CareFirst BCBS)- BluePreferred, PPO Yes Florida Default BCBS of FL- BlueOptions, PPO Georgia BCBS of GA- HMO Urgent Care 60 Copay Hawaii Hawaii Medical Service Association (BCBS)- Preferred Provider Plan 2010, PPO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Idaho Default Blue Cross of ID- Preferred Blue, PPO Small group plan FEDVIP Included Yes Illinois Recom’d BCBS of IL- BlueAdvantage Entrepreneur, PPO CHIP No Indiana Anthem (BCBS)- Blue Access, PPO Iowa Wellmark (BCBS)- Alliance Select, PPO Kansas BCBS of KS- Comprehensive Major Medical, PPO Kentucky Anthem (BCBS), PPO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Louisiana Default BCBS of LA- GroupCare, PPO Small group plan FEDVIP Included Yes Maine Anthem (BCBS of ME), Blue Choice, PPO Maryland Recommended CareFirst (BCBS)- HMO HSA Open Access CHIP FEHBP Mass. BCBS of MA- HMO Blue Michigan Priority Health, HMO Commercial HMO No Minnesota Health Partners- Small Group Product, PPO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Mississippi Recom’d BCBS- Network Blue, PPO Small grp plan CHIP FEDVIP Incl’d Yes Missouri Default Healthy Alliance (BCBS)- Blue Access Choice PPO Montana BCBS of MT- Blue Dimensions, PPO Nebraska BCBS of NE- Blue Pride PPO Nevada Health Plan of Nevada UHC- POS C-XV-500-HCR No New Hampshire Anthem (BCBS)- Matthew Thornton Blue, HMO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services New Jersey Default Horizon (BCBS)- HMO Access Small grp plan FEDVIP Incl’d Yes New Mexico Recom’d Lovelace- Classic, PPO CHIP Included New York Oxford, EPO North Carolina Recom’d1 BCBS of NC- Blue Options, PPO Small group plan No North Dakota Sanford Health, HMO Comm’l HMO Ohio Community Insurance Company (Anthem BCBS)- Blue Access, PPO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Oklahoma Default BCBS of OK- BlueOptions, PPO Small group plan FEDVIP Included Yes Oregon Recommended PacificSource- Preferred CoDeduct Value, PPO CHIP No Pennsylvania Aetna, POS Rhode Island BCBS of RI- Vantage Blue PPO South Carolina BCBS of SC- Business Blue Complete, PPO

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services South Dakota Recom’d Wellmark (BCBS)- Blue Select, PPO Small group plan FEDVIP Included Yes Tennessee Default BCBS of TN, PPO Texas BCBS of TX- BestChoice, PPO Utah Utah Basic Plus State Employee Plan, HMO State employee plan Vermont The Vermont Health Plan (BCBS of VT) - BlueCare, HMO Commercial HMO CHIP No

Essential Health Benefit (EHB) Benchmark Plans, as of January 3, 2013 Location EHB Benchmark Plan Name Plan Type Pediatric Dental Vision Mental Health Includes Habilitative Services Virginia Recom’d Anthem (BCBS)- KeyCare, PPO Small group plan CHIP FEDVIP Incl’d Yes Washington Blue Shield- Regence Innova, PPO West Virginia Default Highmark (BCBS of WV)- Super Blue Plus 2000, PPO No Wisconsin United- Choice Plus, POS Wyoming BCBS of WY- Blue Choice Business, PPO

Private Exchanges & ACOs
Ronald E. Bachman Chairman IHC Editorial Advisory Board President & CEO Healthcare Visions, Inc.

Private Health Information Exchanges (PHIE)
Typically web-based portals providing consumer health and health care information. These Exchanges provide individuals and company health plans with medical and clinical education, treatment options, care costs, provider quality metrics, repositories for personal medical records, and much more. Others may provide medical information and online clinical care. Examples: WebMD, MDLiveCare

Comparison of Public & Private Insurance Exchanges
Public Exchange Private Exchange Sponsor Gov’l Entity – either state or fed’l government (the default if no state-based exchange) Private Company Product/Service Offerings PPACA qualified medical benefits: Medical, Dental, Vision through multiple carriers Medical, Dental, Vision and other products: Life insurance, disability, supplemental products (e.g. cancer, legal, HO, Auto) through a single or multiple carriers Target Market Individuals and Small Groups up to 50 or 100 Ees (varies by state) Small & Large Groups: Active employees and retirees of companies plus dependents Financing Individual, small employer, federal gov’t with subsidies up to 400% of FPL Consumer and employer Mercer’s Private Exchange Pulse Survey, 2013

Private Health Exchanges (PHIXs)
When: Some local exchanges have been operating for many years. New regional and national private exchanges may start operating in 2013 and PPACA increased awareness and the need for a new health insurance purchasing system. In addition, some of the private exchange developers hope to get a share of the PPACA government exchange business.

Private Health Insurance Marketplaces (PHIXs)
What: Typically are web-based portals focusing on consumer guidance and information for the private purchase of health insurance. These Exchanges serve as marketing and lead generation sites for brokers/agents. Individual and group product descriptions, premium estimates, and purchases can be made online or by follow up with an agent. Private sites may also provide information and guidance for those eligible for government insurance options (Medicaid, CHIP, or Social Security Disability).

Employer Mandate for Large Group Employers (50 or more)
If the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange the penalty is $2,000 times the number of full-time employees minus 30 employees . If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and gets a tax credit subsidy to buy insurance through an Exchange, then the annual penalty is the lesser of (a) the penalty for the employer mandate, or (b) $3,000 times the number of full-time employees who received a tax credit to buy insurance through the Exchange.

Employer & Individual Mandate (Fewer than 50 employees)
Employers with fewer than 50 employees are exempt from the employer mandate to provide insurance. Small Employers can provide a tax advantaged “Defined Contribution” through a state allowed HRA. Employees are mandated to buy insurance (can purchase from public or private exchanges or directly from insurers). If employee doesn’t buy health insurance the minimum tax is $95 per person in 2014 and going to $695 in 2016 (up to 3-times for a family indexed for inflation in subsequent years). The maximum penalty is 2.5 percent of taxable income.

Types of PHIXs by Sponsor
Business group PHIXs: developed from existing employer associations. Typically will ensure portability for ees, but only when the ee moves between participating ers and health plans. Insurer-sponsored PHIXs: developed for insured policyholder, making it easy to move current small es into an exchange and allow individual ees a wider choice of health plan design. The portability (the ability of a consumer to keep the same coverage as they move between jobs) is available to individuals moving companies covered by the same insurer.

Types of PHIXs (continued) by Sponsor
Independent companies: developed with various sponsorships, existing relationships, and business models. These companies include existing information technology vendors, consultants/brokers, and entrepreneurs. These players seek to meet the needs of existing health industry customers, employer groups, and broker clients. They see the opportunity to expand on existing services and technology to create new businesses in a growing market.

Types of PHIXs by Carrier Offering
Single-carrier Exchanges: These exchanges are promoted by a single payor. They target employers that wish to maintain some role in choosing both the insurance carrier and plan design Multi-carrier Exchanges: Promoted by brokers or benefits consultants to provide a broad range of payor and plan design options. Multi-carrier exchanges typically list individual products on a menu of offerings.

Potential for PHIXs The mid- and large-group markets that will not be involved in the state-based federal PPACA exchanges. Er costs: fixed and controllable using HRAs (Defined Contributions). Ees: will be able to choose their plan design. Coverage will eventually be portable, so employees can keep the same coverage as they change or lose jobs. Unlike individual coverage today, the Ee contributions may be made tax free through using a Sec. 125 payroll deduction. Two-income families may be able to use contributions from different Ers to purchase a single plan for the whole family.

Mercer’s Private Exchange Pulse Survey, 2013
Value of PHIXs Employers Employees Cost Reduced Cost &/or Defined Contribution Cost Efficient, Convenient Purchasing Convenience Simplified Administration Comprehensive Coverage Choice Empowered Employees Personalized Coverage, Supplemental Products Mercer’s Private Exchange Pulse Survey, 2013

PHIX and Voluntary Products
% Employers offering Supplemental Products Accident Insurance 43% Cancer / Critical Illness Policies 38% Auto / Homeowners Insurance 3% % Employees wanting to Increase Some Benefits and Decrease Others Group Size 1-499 35% 45% 42% 5000 or more 39% Mercer’s Private Exchange Pulse Survey, 2013

Types of PHIX by Business Model
The Group Model: there may be as many as 20 different health plans for an employee to choose from but they’re all in a group platform and they are generally from just one carrier. Individual Model: Individual insurance policies. Especially good for smaller groups that have not been offering group insurance and can’t meet the minimum participation of funding requirements of the group model.

Business Model Concerns for Carriers
• Margin compression: Greater choice of health plans may reduce overall payor margins. Multi-carrier exchanges may commoditize products and lead to higher transaction fees (e.g. individual commissions) • Administrative burden: Employees will need more support to select their plans. Payors and PHIXs will need to integrate products, member and billing data (i.e. increased administrative costs and complexity). • Disintermediation: The exchange administrator may control the sales and marketing process, diluting a payor’s contact with the customer and thus its ability to manage the relationship.

HRAs for Small Employers & Limited Use by Large Employers
U.S. Department of Labor ruled that HRAs are group health plans and therefore cannot have annual limits. HRAs can be used by small employers (under 50 Ees) to assist funding of health insurance since they have no mandate. The DOL guidance means that a large employer would be subject to substantial penalties if they use stand alone HRAs for funding Ee purchses of QHPs. Any size Er can use HRAs for retirees or for the purchase of Supplemental products such as dental or vision.

Defined Contribution & Functions of Private Exchanges

Projected Growth of Private Exchanges: Mercer
Mercer: The % of US employers considering offering a private exchange for active and/or retired employees has tripled in the past year to 56%. Mercer said that 10 major insurance carriers—including Aetna, Cigna, Humana, UnitedHealthcare and a number of Blue Cross and Blue Shield plans—have signed on to the firm’s private exchange for 2014 enrollment. Mercer’s exchange will be available to employers with at least 100 employees

Projected Growth of Private Exchanges: Aon
Aon Hewitt said all of the new clients have at least 5,000 employees and represent a range of industries. With the additional clients, Aon Hewitt said 330,000 employees will be receiving coverage through its exchange. In total, Aon Hewitt anticipates more than 600,000 U.S. employees and their families will be covered under plans in the Aon Hewitt Corporate Health Exchange in

Self-Insured Plans PPACA creates significant mandate differences and cost implications between fully insured and self-insured plans. Self-insured employer plans are explicitly exempted from some PPACA requirements. Self- Insured Plans are NOT: Required to provide minimum essential benefits (required to meet the cost-sharing limits, benefit levels, and “minimum essential coverage” but are not required to provide the “minimum essential benefits”). Required to participate in a risk-adjustment system, Subject to single risk pool standards, Subject to 3-1 age pricing compression and other rating mandates, Subject to medical loss ratio (MLR) mandates, Subject to review of premium increases, and Subject to the annual insurance fee that starts in 2014 for fully insured plans.

Self-Insured Plans The existing benefits of self-insured are retained. They are NOT: Subject to state premium taxes, Subject to state coverage mandates, and Subject to insurance reserve requirements. Under PPACA, employers will retain the choice of fully insured and self-insured arrangements. However, fully insured plans will mostly be offered through health exchanges because federal employee premium subsidies (up to 400% of the federal poverty level) will only be available through exchanges. The size of groups eligible for participation in an exchange may vary by state and can increase over time based on PPACA requirements.

Self-Insured Plans Because PPACA exempts self-insured plans from some costly requirements, it may be financially beneficial for an employer (regardless of size) to consider self-insurance. As PPACA is implemented, self-insuring may become a better value than fully insured plans for small firms with good historical experience and a good risk profile. In 2009, self-insured plans were offered to 13.5% of plans with fewer than 100 employees, 25.7% of Plans with employees, and 82.1% of plans with more than 500 employees (Agency for Healthcare Research and Quality),

Self-Insured Plans Cost competitive reinsurance arrangements are available. High claims risks can be mitigated with specific and aggregate stop-loss coverage. Courts have consistently upheld ERISA federal exemptions from state insurance laws and the use of reinsurance for small groups, even as states have tried to restrict them. It is uncertain at this time if federal laws or regulations will change to prohibit this gambit. Under PPACA, if the health of self-insured groups deteriorates they can then join an exchange. In the exchange, their experience is spread over the entire exchange pool as part of a single risk pool.

Index of PHIXs (A-B) Alegeus WealthCare Marketplace Aon Hewitt Corporate Health Exchange Array Health Private Health Exchange Assurex Global Marketplace Platform Benefitfocus HR InTouch Marketplace Edition BeneFit Marketplace™ from Empowered Benefits BenefitMall Individual Exchange Bloom Private Exchange Platform for Employers Bloom Private Exchange Platform for Health Plans

Index of PHIXs (H-M) hCentive WebInsure Private Exchange Health Partners America Insurance Exchange Horizon Select (Horizon BCBS of New Jersey) InsureXSolutions Private Exchange Lawley Marketplace from Lawley Benefits Group Liazon Bright Choices Exchange Mercer Marketplace MyCieloChoice (Individual Exchange) MyPlanSource

Index of PHIXs (C-E) Capital BlueCross MyCoverage Selector™
CHOICE Adminstrators Exchange Solutions Cielostar Private Exchange Solution ConnectedHealth Smart Choices Exchange ConnectedHealth Consumer Marketplace ConnectedHealth Smart Choices Platform™ Digital Benefits Marketplace ExtendRetiree

Index of PHIXs (P-W) PeopLease Benefits Marketplace
RightOpt, a Private Health Insurance Exchange Solstice Marketplace Towers Watson OneExchange Virtus Benefits Private Marketplace Willis Advantage

Accountable Care Organizations (ACOs)
An accountable care organization is a group of payers, physicians, hospitals and other healthcare providers that voluntarily collaborate to provide efficient, high-quality and coordinated care to an assigned population of patients. If providers reduce costs and/or improve specified quality metrics in a certain timeframe, they are able to receive financial rewards from or share in the savings with Medicare or a commercial payer. ACO arrangements can also involve risk, in which the provider would have to pay back a portion or all of the costs that exceeded the payer's established benchmark.

7. As of August 2013, 488 healthcare entities are practicing accountable care, according to a Leavitt Partners report. 8. Medicare ACOs now represent 52 percent of all ACOs, as there are 253 organizations contracting with CMS for accountable care, according to the August 2013 Leavitt Partners report. 9. Unlike a health maintenance organization, beneficiaries do not join ACOs — their providers do. Patients are notified of their providers' participation in a commercial or Medicare ACO. Patients can decline having their protected health information shared within the ACO, or choose to receive care from another physician if they do not wish to participate.

4. The goals of ACOs are known as "the triple aim.“ (1) improving the experience of care, (2) improving the health of populations and (3) reducing per capita costs of healthcare. 5. Physician groups are the largest leaders of ACOs, although hospital systems are a close second, according to a 2013 Leavitt Partners report. 6. As of February 2013, ACOs covered 37 million to 43 million Medicare and commercial patients, according to an Oliver Wyman report.

Index of ACOs (Becker's Hospital Review: "100 Accountable Care Organizations to Know.“)
Abington (Pa.) Health. Adventist Health-Portland (Ore.). Advocare Walgreens Well Network (Marlton, N.J.). Advocate Health Care (Oakbrook, Ill.). Alexian Brothers Accountable Care Organization (Arlington Heights, Ill.). Allina Health (Minneapolis). Arizona Connected Care (Tucson). Atlantic Accountable Care Organization (Morristown, N.J.).. Atrius Health (Newton, Mass). Aurora Accountable Care Organization (Milwaukee).

Banner Health Network (Phoenix). Baptist Health System (San Antonio). Barnabas Health ACO-North (West Orange, N.J.). BayCare Health System (Clearwater, Fla.). Baylor Quality Alliance (Dallas). Beacon Health (Brewer, Maine). Bellin-Thedacare Healthcare Partners (Green Bay, Wis.).. Beth Israel Deaconess Care Organization (Westwood, Mass Billings (Mont.) Clinic. BJC HealthCare ACO (St. Louis). Brown & Toland Physicians (San Francisco).

Cape Cod Health Network ACO (Hyannis, Mass.). Carolinas HealthCare System (Charlotte, N.C.). Cedars-Sinai Accountable Care (Beverly Hills, Calif.). Chicago Health System ACO. Children's Hospital of Philadelphia. Cleveland Clinic Florida (Weston). Cornerstone Health Care (High Point, N.C.). Crystal Run Healthcare ACO (Middletown, N.Y.). Dartmouth-Hitchcock (Lebanon, N.H.). Dean Clinic and St. Mary's Hospital ACO (Madison). Diagnostic Clinic Walgreens Well Network (Tampa Bay, Fla.). Dignity Health (San Francisco).

Essentia Health (Duluth, Minn.). Everett (Wash.) Clinic. Fairview Health Systems (Minneapolis). Franciscan Alliance (Mishawaka, Ind.). Genesys Physician Hospital Organization (Flint, Mich.) Greater Baltimore Health Alliance (Towson, Md) Hackensack (N.J.) Alliance ACO.. Health4 (Columbus). HealthCare Partners California ACO (Torrance, Calif.). HealthCare Partners of Nevada (Las Vegas). HealthPartners (Bloomington, Minn.). Health Management Associates (Naples, Fla.).

Heartland Health (St. Joseph, Mo.). Heritage California ACO (Northridge). Hoag Memorial Hospital Presbyterian (Newport Beach, Calif.). Holy Cross Hospital (Fort Lauderdale, Fla.). Hunterdon Healthcare Partners (Flemington, N.J.). Indiana University Health (Indianapolis). John Muir Health (Walnut Creek, Calif.). JSA Medical Group (Saint Petersburg, Fla.). Kelsey-Seybold Clinic (Houston). KentuckyOne Health Partners (Louisville, Ky.). Key Physicians (Chapel Hill, N.C.).

Lahey Clinical Performance ACO (Beverly, Mass.). MaineHealth Accountable Care Organization (Portland). Memorial Hermann Health System (Houston). Mercy Health Select (Cincinnati). Methodist Le Bonheur Healthcare (Memphis, Tenn.). Methodist Patient-Centered ACO (Dallas). Michigan Pioneer ACO (Detroit). MissionPoint Health Partners (Nashville, Tenn.). Moffitt Cancer Center (Tampa, Fla.). Monarch Healthcare (Irvine, Calif.). Montefiore ACO (New York City). Mount Auburn Cambridge Independent Practice Association (Brighton, Mass.).

NCH Healthcare System (Naples, Fla.). Northwest Ohio ACO (Toledo). Novant Health (Winston-Salem, N.C.). Ochsner Accountable Care Network (New Orleans). OneCare Vermont (Colchester, Vt.). Optimus Healthcare Partners (Summit, N.J.). Orlando (Fla.) Health. OSF Healthcare System (Peoria, Ill.). Park Nicollet Health Services (St. Louis Park, Minn.). Partners HealthCare (Boston). Penn Medicine (Phila.) Physician Health Partners (Denver). Physician Organization of Michigan ACO (Ann Arbor).

Plus (Fort Worth and Arlington, Texas). PrimeCare Medical Network (Ontario, Calif.). ProHealth Physicians (Farmington, Conn.). ProMedica (Toledo). Providence Health & Services, Southern California (S.F.) Renaissance Health Network (Wayne, Pa.). Scott & White Healthcare Walgreens Well Network (Temple, Texas). Seton Health Alliance (Austin, Texas). Sharp HealthCare (San Diego). St. Luke's Clinic Coordinated Care (Boise, Idaho). Steward Promise (Boston).

Texas Health Resources (Arlington). Triad HealthCare Network (Greensboro, N.C.). UCLA Health ACO (Los Angeles). UnityPoint Health (Des Moines, Iowa). University of Michigan Health System (Ann Arbor). VirtuaCare ACO (Marlton, N.J.). Wellmont Integrated Network (Kingsport, Tenn.). Wilmington (N.C.) Health.

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