Increasing Health Care Costsand Your Employee Health Plan

Presented by: Alford, Staples, Lapeyre, & Robichaux

Health Care Costs Continue Climbing

• Health care costs have been increasing at an alarming rate for over a decade.

• Average health care costs increased 7.5 percent in 2010 (up from 6.9 percent the year before).

• Following years of growth, the rate of increase is projected to slow for 2012, to 7 percent.

National Trends

Source: Hewitt Health Value Initiative™, 2011

Annual Health Care Cost Increases, National Averages 2004-2012

National Trends

Source: Hewitt Health Value Initiative™, 2011

Annual Health Care Costs Per Employee, National Averages 2005-2012

Contributors to Rising Costs

Several factors have led to the climbing health care costs over the past decade, including:

• Demographics

• Expansion of health care providers

• Consolidation of managed care companies

• Political environment/government regulation

• Increased utilization and consumer demand

• New medical technology

• Weakening of managed care system

• Health care spending and medical cost inflation

• Increased prescription drug costs

Contributors to Rising Costs

Contributors to the current projected spike in health care costs:

•An aging population and workforce

•Poor general health among employees

Contributors to Rising Costs

• Aging workforce

o Population is aging

o Slower hiring levels have lead to older workforces

o Older workers are more prone to severe and costly health conditions

o Employers have seen a rise in the frequency and cost of catastrophic claims, presumably due to the aging workforce

Contributors to Rising Costs

• Poor general health

o Employees have become more and more unhealthy, which has also contributed to health care cost increases

o Preventable risk factors such as obesity and high blood pressure had led to increases in chronic, costly medical conditions such as diabetes and heart disease

What Employers Can Do

Employers are becoming more proactive in instituting strategies and programs to reduce overall health care costs, including:

•Using health care data to drive health care strategy

•Greater emphasis on consumer-driven health plans

•Promoting employee health and wellness

•Increased employee cost-sharing

•Auditing and increasing cost-sharing for dependents

•Strategic vendor management

•Looking at long-term solutions and plans, rather than short-term fixes

What Employers Can Do

• Using health care data to make strategic decisions

o A top employer strategy for reducing costs, according to a Hewitt Associates study

o Using measurable data and analytics to drive health benefits strategy

o Important to go beyond accessing the data, and understand how to apply it to making health plan decisions and implementing changes

What Employers Can Do

• Greater emphasis on consumer-driven plans

o Consumer-driven health care has become increasingly popular

o Balances cost-savings for the employer, with employee empowerment to make own health care decisions

o If paired with proper education, employees will become smarter health care consumers - which will save both the company and employees money

What Employers Can Do

• Promoting employee health and wellness

o A common initiative, aimed at increasing employee health and effectively lowering health care costs

o Many employers targeting specific diseases and creating more comprehensive programs

o Incentives for participation, particularly for actions that promote actual behavior change (such as participating in a certain program, rather than just taking a health risk assessment)

o Penalties for nonparticipation, especially in the form of higher premiums or other employee cost-shifting

o Wellness and disease management programs are highly dependent on quality employee education and communication tactics

What Employers Can Do

• Increased employee cost-sharing

o Companies will continue to shoulder the burden, but are passing off more costs to employees:

- Moving from fixed dollar copayments to coinsurance

- Increasing deductibles and out-of-pocket maximums

- Increasing cost-sharing for non-network providers

- Offering consumer-driven plans

- Increasing cost of brand name drugs to incentivize generic use

What Employers Can Do

• Dependent management strategies

o Conducting dependent eligibility audits can save companies huge amounts of money

- Studies show that an average of 3 to 12 percent of dependents are not actually eligible

o Many companies shifting to a per-member premium fee, rather than just “individual” and “family”

o Emerging trend is requiring spouses to pay more in premium or assessing a surcharge, to encourage spouses to enroll in their own employer’s plan

What Employers Can Do

• Strategic vendor management

o Another recent trend is companies evaluating their vendor relationships more aggressively

o Vendors not producing measurable results are being replaced or eliminated

o Looking for opportunities to consolidate vendor relationships to get the most for their money

What Employers Can Do

• Long-term strategies vs. short-term fixes

o Short-term tactics, such as employee cost-shifting, are still prevalent

o Many employers are also looking more closely at multi-year plans and longer-term initiatives to improve overall employee health and strategically manage costs in the future

o Especially in the wake of health care reform, many employers are worried about developing strategies that have sustainability in keeping costs down

Determining the Right Strategy for Your Company

• Is our program structure, plan design and pricing appropriate?

• Do we have all the right vendors, services, contracting and funding in place?

• Are our employee communication efforts appropriate and effective – especially in regards to employee health and wellness and consumerism?

• Do we have effective disease management and wellness programs for our employees?

• Do our pricing and plan design features encourage cost-conscious behavior on the part of our employees?

• Are we thinking about long-term solutions rather than simply quick fixes for this year?

The Impact of Prescription Drugs

• Prescription drugs are an important part of health benefits and make a big impact on cost

• Prescription drug spending has been one of the fastest growing components in health care over the past several years

o This growth has slowed lately, partially due to increased availability of generics and decreased medication adherence by patients

The Impact of Prescription Drugs

Prescription drug cost-cutting strategies:

•Instituting or rearranging your drug tier structure, to incentive use of generics and increase cost for specialty drugs

•Joining purchasing pools or drug discount programs

•Promoting the use of mail-order prescriptions

The Impact of Prescription Drugs

Prescription drug cost-cutting strategies:

•Promoting employee consumerism when buying prescriptions

•Encouraging medication adherence

o Lack of adherence can cause costly medical complications and exacerbate chronic conditions

o An employee education and communication initiative is needed for this to be effective

THANKS FOR YOUR TIME!

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