Health Care Trends &Health Care Trends &

Consumer-Driven Consumer-Driven ““Wellness”Wellness”

Clyde J RobinsClyde J RobinsPresident, CompBenTaxPresident, CompBenTax

Vice President of HR, NutraceuticalVice President of HR, Nutraceutical

Bio VP Human Resources Past Chairman IBEW Local 57 Benefit Committee Merger Benefits Director-PacifiCorp Technical Advisor - WorldatWork Instructor, Facilitator (WorldatWork)

IHKM, SNEF, CCBA, Multiple US Associations

Consultant Pfizer, Pharmica, Sears, Microsoft, Nationwide Insurance, Target, Phillip

Morris, Caterpillar, Peabody Coal, PacifiCorp, Southwest Airlines, U.S. Department of Defense, and Motorola

National Benefit Advisory Board Co-Author: Accounting/Finance for HR Professionals

River Guide…

Snake River – June 2008

Future of Employer-Sponsored Health Care???

Health insurance cost Out-of-control claims loss Health care reform

“rapidly changing the face of

employer-sponsored health care

as we know it”

Options?

Employee Benefit Trends

Rising Health Care Rates State & Federal Mandated

Programs Health Savings Accounts Cost-Control Improvements Increases Patient Participation Wellness as an Alternative

Source: MHEDA Journal, Employee Benefits in 2008 by David A. Proctor

Medical Cost Trends 2008 Medical expense increases (actives and retirees under Age 65)

Without Rx up 10.5%, with Rx up 10.5%

2009 Medical expense increases (actives and retired over Age 65) Without Rx up 10.4%, with Rx up 10.3%

2010 Projected medical expense increases (actives and retired over Age 65) Without Rx up 10.6%, with Rx up 10.3%

Prescription Drug Carve-Out (actives and retirees under Age 65) 2008 10.1% increase 2009 9.1% increase 2010 9.1% increase

Source: 2010 Segal Health Plan Cost Trend Survey, Segal Group, Inc., 2009

Employer Changes toHealth Insurance Plans for 2010 More than 52% of companies said the economic downturn will have an

impact on their 2010 health care programs* 98% are continuing to offer medical benefits Adjusting Employer Contribution**

82% employer's contribution would remain the same 14% decrease employer contribution 4% increase employer contribution.

Changing Plan Design** 27% changing the number or type of plans offered 14% switching carriers 2% adjusting eligibility 21% making "other" changes

Sources: *Hewitt Health Management, 2009 **Employee Benefits News, “2010 Employer Buying Intentions Report”, December 2009

Employer Seeing Link Between Healthy Employees & a Healthy Bottom lineEmployer Seeing Link Between Healthy Employees & a Healthy Bottom line

50% to 70% of all diseases are associated with modified health risk and may be preventable.

Obesity accounted for 27% of the rise in medical care costs over a 15 year period.

Best way to ensure an employee’s good health is to engage them in healthy lifestyles.

From medicine to alternative approaches...vitamins, dietary supplements, exercise, and awareness.

Source: Holland, K. (2008) “Waistlines Expand into a Workplace Issue, New York Times, June 22, 2008

Key Factors in Health Care Cost

Prescription Drug Usage

Most trend rates projected to be lower in 2010 than 2009. “Step-therapy” Less expensive alternative Patients requesting generic over name brand drugs

The percentage increase for retail prescription drugs in 2009 was 9.8% and is projected to be 9.1% for 2010.

In 2010, slowdown in utilization trend is projected for prescription drugs.

Source: 2010 Segal Health Plan Cost Trend Survey, Segal Group, Inc., 2009

Ten Tips to Manage Prescription Costs

Source: April 2005, Benefit & Comp Solutions

“Prescription drugs represent 15 to 20 percent of total health care costs.”

1. Analyze your spending2. Share analysis with health vendors3. Coordinate with Medicare part D4. Change from flat dollar co-pay to percentage5. Charge full cost difference between brand name to generic6. Renegotiate pharmacy rebates7. Revise your list of exclusions8. Consider paying for e-prescriptions9. Provide decision support tools (CDHP)10. Communicate, communicate... Communicate11. Reduce Costs by using alternatives!

Health Care Legislation American Recovery and Reinvestment Act of 2009 (ARRA) FMLA Amendments Health Families Act American Health Choices Act Mental Health Parity Act Genetic Information Nondiscrimination Act (GINA) Michelle’s Law Children’s Health Insurance Program Reauthorization Act

(CHIPRA) HIPAA “Cost to Comply” Health Reform Act

President Obama ProposedHealth Care Reform Legislation Creating a National Health Insurance Exchange program

Offer a new public plan to individuals who do not have coverage

Moving employers to a pay-or-play mandate “Meaningful”

Providing reinsurance to employer for catastrophic costs incurred above an unspecified threshold amount

Offering small businesses a refundable tax credit Mandating that all children have health coverage, but no

individual coverage mandate for adults Expanding eligibility for Medicaid and SCHIP.

Source: Towers Perrin, 2009 Health Care Cost Survey, “The Health Dividend: Capturing the Value of Employee Health”. 2009

Direction of Employee BenefitsDirection of Employee Benefits

Indemnity Plans Managed Care –

PPO, HMO, POS

Defined Benefit Pension

Vacation/Sick Leave Base + Incentive

Consumer DrivenHealth Care HRA/HSA Consumer Driven

Wellness/Alternative Health Care

Defined Contribution 401(k)

PTO Equity Based

Compensation

Employer/ Entitlement

Health Care

Retirement

Time Off

Even, Comp

Employee/Consumer Driven

“Spend money as if it comes out of our own pockets”

Key Factors in Health Care Cost Unnecessary Spending

2009 Health Care Costs – Over $2.6 Trillion Dollars

Source: National Coalition on Health Care, 2009

Only 1% of costs spent on prevention!

High Risk Employees Cost More

Individuals at high risk fordepression have 70.2%higher costs than those atlower risk

%

Impact on Individual Health Care Costs: High vs. Lower-Risk Employees

Source: Goetzel

Percentage Enrollments in Health Plansby Year for All Employers (2003 to 2009)

Source: National Survey of Employer-Sponsored Health Plans, Mercer Human Resource Consulting, 2009

?

Worst Comment in Health Care“It is only $20 (or 20%).”

Increase utilization adds to claims loss ratio.

Impact of Rising Health Care Costs Economists found rising health care costs

correlation* drops in in health insurance coverage increase in government supplemented programs

Health costs concerns are changing behaviors 3 in 10 switched medications in the past year…to save money 70% participate in a wellness program for financial incentives

Embracing innovations that enhance self-care, convenience, personalization, and control of personal health information 42% want access to an online personal health record 65% of consumers are interested in home monitoring devices

Source: *National Coalition on Health Care, “Health Insurance Costs”, 2009 Deloitte, 2009 Survey of Health Care Consumers, Key Findings, Strategic Implications

Employer Commitment: How do you describe your company’s role today?

Meeting employee’s financial protection needs Motivating employees to manage their health care

purchases responsibly Identifying and managing health risks/conditions in

employee population Supporting employees’ capability to make sound

health care decisions Providing competitive benefits for dependents

Source: Towers Perrin, 2009 Health Care Cost Survey, “The Health Dividend: Capturing the Value of Employee Health”. 2009

Employer Driving Results: Successful Consumer Driven Health Plans

Building the link between workforce health and business results

Ensuring leadership and program policy buy-in Engaging employees and promoting a culture of health Investing in a broad range of existing and emerging health

management programs and approaches Designing and pricing programs to create transparency

and appropriate incentives Rigorously measuring program against goals Building action plans to address gaps and opportunities

Source: Towers Perrin, 2009 Health Care Cost Survey, “The Health Dividend: Capturing the Value of Employee Health”. 2009

CDHC Objective

Transform employer’s health benefit plan into one that puts economic purchasing power – and decision-making – in the hands of participants.

Supply 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.

Source: PriceWaterhouseCoopers, 2004

CDHC/HDHC “Sticker Shock” High Deductibles

Contribution Limit, Employer (HRA) & Employee

(HSA)

Minimal Preventative Care

Prescriptions Subject to Deductible

Cannot Over Withdraw

Dual Coverage – Coordination of Benefits

125 Medical FSA Correlation

Employee Administration Responsiblity

Cost Components of Health Care

Traditional

H.S

.A.

Difference

Traditional

Out of Pocket Max

Out of Pocket Max

Consumer Driven Health Care

InsuranceCo-Pay

Employee

InsuranceCo-Insurance

InsuranceResponsibility

Company H.S.A.

Employee H.S.A.

Employee Insurance

Deductible

Offer Health Care Plan that would:

OR Move toTraditional Plan

(Spouse’s Plan or Job Change)

Who becomes the Magnet?

Adverse Selection

Traditional

HDHC

Stand-Alone

HDHCvsGov’t

Sponsored Plan

vs

Only the Consumers Can Make A Difference:

Consumer Choices Choose discounted network of doctors

& hospitals, if it works for your needs Request generic drugs Utilize vitamins & supplements Nutrition, exercise & healthy life style

choices Preventative care Outpatient vs. Inpatient Insta care vs. Emergency room

Employee

Employer

H.S.A. H.S.A.

Work/Life Issues

Flexible Schedule Remote Office Capabilities Location & Environment Job Security Tax Beneficial Benefits Culture Perks/Extracurricular

A Comprehensive Wellness Program

Disease prevention – 55% Medical self-care – 51% Exercise/physical fitness – 41% Smoking cessation – 40% Stress management – 30% Alcohol/other drugs – 36%

Back care – 36% Nutrition – 31% High blood pressure – 29% Mental health – 25% Weight control – 24%

Prevalence of Worksite Wellness Programs

Source: American Institute for Preventative Medicine, 2004

What can you do to reduce expenses and increase

the quality of life for your employees?

What can you do to reduce expenses and increase

the quality of life for your employees?

Key Elements of Successful Wellness Programs Consumerism

Consumer driven health care (CDHC) HSA/HDHP 100% Rx subject to deductible

Consumer driven wellness (CDW) Prevention/Self Care

Supplements Prescription Drug Alternatives

Performance Monitoring and Rewards Education

Nutrition Fitness Lifestyle Communication with Health Care professionals

Additional Benefits Derived from Your Wellness Program

Source: Human Resource Executive; Survey for 531 HR Professionals

Who can control unavoidable health care costs?

2009 – Over $2.6 Trillion Dollars2010 – ??? Trillion Dollars

Source: National Coalition on Health Care, 2009

Cost Shifting vs WellnessCost Shifting vs Wellness

Cost Shifting Wellness

$