managing employee benefit costs in the health care reform era thom mangan

Managing Employee Benefit Costs in the Health Care Reform EraThom ManganCEO United Benefit Advisors

About the UBA Health Plan Survey

Why We’re Here

Top Decision-makers’ Concern About the Cost of Health Care Benefits with Respect To:

58.28%

35.50%

0.31% 0.31%

44.64%42.60%

10.65%

1.64% 0.47%

Corporate Costs Impact on Employees

Critical Concern Significant Concern Some Concern Little Concern No Concern

Increases in Health Insurance Premiums Compared with Other Indicators 1988 - 2012

1988 1989 1990 1993 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-2.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

6.1%7.3%

8.0% 8.2%

Health Insurance Premiums Overall Inflation Workers' Earnings

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 1999-2007; KPMG Survey of Employer-Sponsored Health Benefits: 1993, 1996; The Health Insurance Association of America (HIAA): 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2011.

Health Care Costs Per Employee Per Year

1969 1979 1995 2007 2010 2011 2012$0

$1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

$10,000

$3,821

$6,881 $8,211

$8,688 $8,960

$242 $398 $1,020 $1,377 $1,321 $1,369 $1,388

Health Care CPI

2014 and Beyond

Health Care Costs Per Employee Per Year

1969 $242

1979 $623

1995 $3,821

2011 $8,9601969 1979 1995 2012

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000

$10,000 Chart Title

2012 Health Care Trend – Med + RX

Type of Plan 2012 Trend Preferred Provider Organization 9.9 % Health Maintenance Organization 9.5 % Point-of-Service Plan 9.8 % Consumer-Driven Health Plan 9.8 % Indemnity Plan 10.5 % Prescription Drugs Only 9.6 %

• Cadillac Tax – 2018 – 40% excise

• Employee - $10,200• Dependent - $27,500• 1% CPI

• Avg. Public Employers Penalty in 2018 (Family)IL $2,442 2018

$9,802 2020

MA $5,732 2018 $19,699 2020

Why Should You Care

The Effects of Inflation on Medical Premiums @ 5% / 10%

0.05 0.1Year Single Family Single Family

2012 $5,472 $13,320 $5,472 $13,320

2015 $6,335 $15,420 $7,283 $17,729

2018 $7,333 $17,850 $9,694 $23,597

2021 $8,489 $20,664 $12,903 $31,408

2024 $9,827 $23,921 $17,173 $41,804

5.00% Per Year 10.00% Per Year

Type of Plan Offered

PPO HMO POS CDHP EPO FFS0%

1.7%0.1%

Average Annual Medical Plan Cost per Employee by Plan Type

PPO HMO POS CDHP EPO FFS All Plans$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$9,308 $8,507

$9,372

$8,403 $9,227

$12,274

$8,960

Annual Cost Per Employee – Total Cost

Northeast Southeast North Central Central West$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000 $10,259

$7,694

$9,451

$7,821

$8,763

More Granular is More Accurate

National$456

HMO$451

PPO$475

CDHP$409

Central$373

Southeast$380

Northeast$430

Georgia$429

North Carolina$405

South Carolina$372

Health Plan Costs

Costs will shift more to employees

A move to Individual coverage and HSAs

All cost and quality data will be directly accessible to employees in advance of

purchasing care

A return to more tightly controlled managed care plans

87.32%

58.96%

45.15%

41.35%

12.08%

19.70%

25.94%

Disagree / Strongly Disagree Strongly Agree / Agree

What do you predict will happen to health plans in the next 5 years?

• The average monthly premium was $456 single, $1,110 Family

• The 2012 average annual plan cost per employee was $8,960 vs. $ 8,688 in 2011

Health Plan Costs

• The 2012 employee share for plans with employee contributions was up from $3,612 in 2011 to $3,776 in 2012 or 28.2% of the total employee premium.

• The employer share for plans with employee contributions decreased from 72.6% in 2011 to 71.8% in 2012.

Health Plan Costs

Renewal Analysis

Initial Offer Final Rate

All Plans 10.2% 5.0%

5.0% - 15.0% 46.2% 41.2%

0.0% - 25.0% 82.5% 76.1%

< 0.0% 9.8% 21.8%

> 25.0% 7.8% 2.7%

Average Percent Increase Last Plan Anniversary by Plan Type – PPO

2010 2011 20120.0%

10.0%7.8% 7.9%

National

Average Percent Increase Last Plan Anniversary by Plan Type – HMO

2010 2011 20120.0%

National

Average Percent Increase Last Plan Anniversary by Plan Type – POS

2010 2011 20120.0%

10.0%9.1%

National

Average Percent Increase Last Plan Anniversary by Plan Type – CDHP

2010 2011 20120.0%

National

Average Annual Cost per Employee – PPO

1 2 3$0

$2,000

$4,000

$6,000

$8,000

$10,000

$8,519$9,005

$9,308

National National ERs Offering

Average Annual Cost per Employee – HMO

2010 2011 2012$0

$4,000

$8,000

$12,000

$7,585$8,107 $8,960

Average Annual Cost per Employee – POS

2010 2011 2012$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$8,991$9,303

$9,372

Average Annual Cost per Employee – CDHP

2010 2011 2012$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$7,590 $8,161

$8,403

Plan Design Components

• Median PPO Deductible = $1,000 / $2,250

• Median PPO Coinsurance = 80% / 60%

• Median PPO OOP Max. = $3,000 / $7,000

• Median PPO Office Visit Co-Pay = $25

PPO Plan Designs

Median Copay - HMO

2010 2011 2012$0

$20 $20

$30 $30

National PCP National SCP

Average Single In-Network Out-Of-Pocket Maximums – HMO

2010 2011 2012$2,200

$2,300

$2,400

$2,500

$2,600

$2,700

$2,800

$2,436

$2,576

$2,798

National

Median Coinsurance Percentage – HMO

2010 2011 20120%

10%20%30%40%50%60%70%80%90%

100% 100% 100%

National

1. Multi-tiered drug formularies that promote generic utilization• 30 brand names came off patent last year• Generics are highly effective to treat 9 out of 10 patients

2. Narrowing pharmacy networks to leverage deeper discounts

3. Carving out pharmacy management to a PBM4. Specialty drug utilization management

• $11 billion - 2012• $19 billion - 2014

5. Value-based insurance plan – multi-tiers• Four-tier plans• 2004 – 4%• 2012 – 14%

Top 5 Pharmacy Benefit Management (PBM)

Median Rx Retail Copays – 2-tier

2010 2011 2012$0

$10 $10 $10

$30 $30 $30

National Tier One National Tier Two

2010 2011 2012$0

$10 $10 $10

$30 $30 $30

$50 $50 $50

National Tier One National Tier Two National Tier Three

2010 2011 2012$0

$10 $10 $10

$30 $30 $30

$50 $50 $50

$85$80

National Tier One National Tier Two National Tier Three National Tier Four

Spotlight on CDHP Findings: Debunking the Savings Myths

% of Employees Enrolled by Plan Type by Region (CDHP)

Northeast Southeast North Central Central West0%

26%21.3%

Real Average Annual Cost per EE with ER HRA/HSA Contribution – All Plans

PPO CDHP w/HRA CDHP w/HSA CDHP w/Both$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000$9,308

$10,403

$8,758

$9,435

Median Single Average Single Median Family Average Family$0

$1,000

Annual HRA Funding Levels

• 2012 UBA Health Plan Survey shows that CDHPs do not prove to generate higher savings for employers than other plan types with the same deductible.

• Unless…

Average Annual Cost per EE by Deductible Level

None Under 1,000

1,000-1,499

1,500-1,999

2,000-2,499

2,500-2,999

3,000-3,499

3,500-3,999

4,000-4,499

4,500-4,999

5,000+$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

CDHP PPO

Regardless of health plan design, health care costs are rising because employees are making uninformed health care consumer choicesLower health costs = informed consumer activity• Plan type doesn’t matter – what’s needed is

employee communication on how to make better health care consumer choices

• Plan Design Matters – HSAs provide much better outcomes than HRAs. Reason – Patient Responsible for the Deductible

Other Findings: Wellness Programs

Percent Offering Wellness by Employee Size

3 - 24 25 - 49 50 - 99 100 - 199 200 - 499 500 - 999 1000 +0%

8.3% 9.8%

Health Risk Assessment

Seminars / Workshops

Physical Exam or Blood Draw

Coaching Incentives / Rewards

Web Portal Other0%

90% 81.0%

Wellness Programs and Components

Next Steps…

• High Performance/Tiered Provider Networks• Patient-Centered Medical Homes• Transparency in Pricing• Transparency in Outcomes• Accountable Health Care Organizations – ACO• ASO Plans• Increase in Premiums – Cost Shifting •

Future National and Regional

• Benchmark your plan – “You can’t manage what you can’t measure”

• Determine your Goals and Objectives• High Level of Benefits – Attract and Retain• Mid-Level of Benefits – Competitive• Low Level of Benefits – Just the Minimum to Meet

PPACA • Manage Your Plan!

• Claims – 10% of your people are driving 80% of your costs

• Plan Design Drives Performance• Treat Wellness Like Workers’ Compensation•

What Should I Do Today?

This program, ORG-PROGRAM-140095, has been approved for 1.25 (General) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute. Please be sure to note the program ID number on your recertification application form. For more information about certification or recertification, please visit the HR Certification Institute website at www.hrci.org.

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