2. 2 Entire contents © 2008 Forrester Research, Inc. All rights reserved. But what do benefit executives think about the current healthcare landscape?

3. 3 Entire contents © 2008 Forrester Research, Inc. All rights reserved. We asked benefits executives just that... Annual survey conducted in partnership with Employee Benefit News (EBN) Approximately 910 respondents participated in this year’s survey Respondents include benefits executives across North America Variety of company sizes, industries and geographies represented

4. 4 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Benefits and cost containment trends »Growth/decline in benefits offered »Cost containment strategies used Growth in Disease Management and Health/Wellness benefits Leading CDH plan structures Agenda

5. 5 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Benefit richness is being diluted, but not at the expense of preventative care and growth in the consumer-directed health market

6. 6 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Top benefits currently offered mirror 2006 Prescription Benefits Preventative care (e.g., annual physical) FSA for employee health expenses Health and wellness benefits or programs (e.g., smoking cessation) Structured disease management programs (e.g., programs for diabetes or depression)

7. 7 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Small employers struggle to offer these key benefits Prescription benefits Structured disease management program Health and wellness benefits or programs Preventative care FSA for employee health expenses 97% 100% 99% Which of the following benefits or programs does your company offer to/provide for employees Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study 85% 86% 92% 50% 83% 92% 37% 56% 67% 47% 53% 70% Small companies (less than 99 employees) Medium companies (99 too 999 ) Large companies (999+ )

8. 8 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Tried and true cost containment strategies remain »Use of formulary or benefit design to encourage the use of more favorably priced medication »Increase generics utilization But employers of all sizes continue to lean on cost-sharing and increasingly dilute benefits

9. 9 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Currently use cost sharing as strategy Plan to use cost sharing as strategy Small employers (less than 99 employees) Medium employers (99 too 999 ) Large employers (999+ ) Large employers most likely to turn to cost sharing as containment strategy 53%22% 64%16% 69%13%

10. 10 Entire contents © 2008 Forrester Research, Inc. All rights reserved....but small employers are reducing benefits Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Currently reducing benefits as containment strategy Plan to reduce benefits as containment strategy Small employers (less than 99 employees) Medium employers (99 too 999 ) Large employers (999+ ) 27%16% 24% 10% 24%11%

11. 11 Entire contents © 2008 Forrester Research, Inc. All rights reserved. What other perks are employers looking to reduce? Retiree health benefits » 17% of large employers, and 15% of small, either currently or intend on eliminating retiree health benefits Spousal coverage » 26% of large employers, and 21% of small, either currently or intend on requiring spouses to go on own plan if available Less than 2% of employers, across all sizes, say they intend to stop offering health insurance in entirety

12. 12 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Will consumer-directed health plans and preventative health save the day?...many benefits professionals think so and continue to increase wellness offerings while cementing their CDH platforms

13. 13 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Currently offerPlan to offer within the next two years Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study 2006 2007 54%14% 50% 15% : Which of the following benefits or programs does your company offer to/provide for employees? Structured disease management programs? Base: all respondents who provide employees health insurance Growth continues in the disease management market

14. 14 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Employers tackle most expensive, chronic conditions Diabetes Asthma Cardiovascular and coronary artery diseases High risk pregnancy Depression Back pain Obesity

15. 15 Entire contents © 2008 Forrester Research, Inc. All rights reserved.

16. 16 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Gaps exist in measurements of DM The biggest gap between what employers want to measure and what they actually measure lies in indirect cost categories: »Duration of medical leaves »Absenteeism »Lost productivity

17. 17 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Employers increasingly offer health and wellness programs Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study 2006 2007 Which of the following benefits or programs does your company offer to/provide for employees? Health and wellness benefits or programs? 23% 57% 21% 54% Currently offerPlan to offer within the next two years

18. 18 Entire contents © 2008 Forrester Research, Inc. All rights reserved. The greatest overall growth in health and wellness programs comes from: »Targeted education and support programs »Nutrition education »Health coaching »Convenient diagnoses and monitoring opportunities

19. 19 Entire contents © 2008 Forrester Research, Inc. All rights reserved....in fact more than half of employers offer Smoking cessation Flu shots Health risk assessments (HRAs) Weight management/reduction Nutrition education On-site health screenings Stress management

20. 20 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Employer size defines the wellness market Company size matters in DM and wellness »While 70% of large employers currently offer DM programs, only 37% of small companies do »With health and wellness benefits, 67% of large employers are offering these benefits with only 47% of small

21. 21 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Why wellness and lifestyle programs? Cost, of course But also... To promote a healthy workplace As part of a broader care management strategy Goodwill

22. 22 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Despite this intention, less than half offer incentives Do you offer employees incentives to participate in DM or wellness programs? 48% Yes 52% No Did you know? In 2006, 47% of employees offered incentives to participate in DM or wellness programs. Base: all respondents who provide employees health insurance

23. 23 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Those that do, offer cash Which of the following incentives do you use to encourage DM or wellness participation? Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

24. 24 Entire contents © 2008 Forrester Research, Inc. All rights reserved. The CDH market continues to mature... and benefit executives are starting to show their preferences

25. 25 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Employers favor offering a HDHP with HSA Currently offerPlan to offer within the next two years 23%17%40% 14%10%24% 12%4%16% Health savings account (HSA) tied to a high-deductible (CDH) plan Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan High-deductible health plan (HDHP) but without a savings/spending account Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Base: all respondents who provide employees health insurance Which of the following benefits or programs does your company offer to/provide for employees

26. 26 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Perhaps because HSA products are expected to produce the greatest costs savings Which of the following health benefits strategies does your company use to control costs? Currently usePlan to use within the next two years 21%19%40% Health savings account (HSA) tied to a high-deductible (CDH) plan 12% 24% 12%5%17% High-deductible health plan (HDHP) but without a savings/spending account Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan

27. 27 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Medium sized employers last to turn to CDH Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Small companies (less than 99 employees) Medium companies (99 too 999 ) Large companies (999+ ) Health savings account (HSA) tied to a high-deductible (CDH) plan Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan High-deductible health plan (HDHP) but without a savings/spending account 43% 29% 48% 19% 20% 31% 17% 14% 20% Which of the following benefits or programs does your company currently offer or intend on offering within the next two years ?

28. 28 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Do you offer a debit card program? Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Debit cards offered by nearly half of employers

29. 29 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Why consumer-directed health? Cost, of course But also because... Employers believe employees should be more responsible for their healthcare costs A desire exists to offer innovative benefits Employers want to encourage employees to live healthier

30. 30 Entire contents © 2008 Forrester Research, Inc. All rights reserved. But not all employers are turning to CDH What are the main reasons employers chose not to offer a CDHP? »Resistance from employees »Employees not ready to be HC consumers »Hesitancy to put more financial burden on employees »Don’t believe the savings will be significant

31. 31 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Will you change your primary health plan next year? Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Half of employers will stay with current health plan

32. 32 Entire contents © 2008 Forrester Research, Inc. All rights reserved. But smaller companies are more hesitant Will you change your primary health plan next year? Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study Small employers (less than 99 employees) Medium employers (99 too 999 ) Large employers (999+ ) Yes Don’t know No Maybe – we will put out to bid 2% 4% 8% 33% 43% 67% 54% 40% 15% 11% 13% 9%

33. 33 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Final thoughts Companies will continue to share the burden of rising premiums with their employees Preventative health and disease management will continue to grow and disease management vendors will expand (and improve) offerings HSA products will surpass other CDH products, often at the expense of other savings accounts such as FSAs...and in response, carriers will respond by focusing on flexibility in plan design and preventative health incentives

34. 34 Entire contents © 2008 Forrester Research, Inc. All rights reserved. Thank you Julie Snyder (617) 613-6448 jsnyder@forrester.com