Employee Benefits & Healthcare Reform: An Opportunity in Disguise

Employee Benefits & Healthcare Reform:

An Opportunity in Disguise

Survey Data Sources

• The J. Henry Kaiser Family Foundation• Roberts Woods Johnson Foundation • National Business Group on Health• Employee Benefit Research Institute (EBRI)• Health Insurance Plans• Price Waterhouse Coopers (pwc)• Towers Watson • AON Hewitt• Bswift• Alegeus Technologies • Aetna• Cigna• UHC• Etc. Etc. Etc.

Why an Opportunity in Disguise?

• The Affordable Care Act has put healthcare, and the cost

of healthcare, in the limelight

• Employees are expecting change

• ACA provides a stage from which to promote wellness,

personal responsibility, and present resources & tools

that can guide employees through the process

Premiums are Going Up and

Benefits are Going Down

Average Annual Premiums

Average Annual Premiums for Single and Family Coverage, 1999 – 2013

Average Annual Premiums and Contributions

Source: Kaiser / HRET Survey of Employer-Sponsored Health Benefits, 2003 – 2013

2003 2013

$2,412 $4,565

$6,657

$11,786

Employee Contribution Employer Contribution

Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2003 – 2013

$9,068

$16,351

80% Total Premium Increase

89% Worker Contribution

Increase

Average Annual Deductible

Average Annual Deductible for Single Coverage, by Plan Type, 2006 – 2013

2006 2007 2008 2009 2010 2011 2012 2013

HMO $352 $401 $503 $699 $601 $911 $691 $729

PPO $473 $461 $560* $634* $675 $675 $733 $799

POS $553 $621 $752 $1,061 $1,048 $928 $1,014 $1,314

HDHP / SO $1,715 $1,729 $1,812 $1,838 $1,903 $1,908 $2,086 $2,003

All Plans $584 $616 $735* $826* $917* $991 $1,097* $1,135


Average Deductible of $1,000 +

Percentage of Covered Workers Enrolled in a Plan with a General Annual Deductible of $1,000 or More for Single Coverage, By Firm Size, 2006 – 2013


What are Employers Doing?

Reactions to Rising Costs

• Adjusting plan design is perhaps the oldest technique—and it hasn’t worked

Dropping Coverage Entirely

Offering Only HDHP Options

Adopting a Defined Contribution Program

Reducing Coverage

Decreasing Premium Subsidies for EE's

Offering a HDHP Option

Adjusing Plan Design

3%

16%

17%

22%

27%

47%

59%

Employer Strategies in Response to Rising Costs

Source: Alegeus Technologies, Research Results Unveiled: 2014 Consumer and Employer Healthcare Benefits Survey

Enrollment in HDHPs Has Tripled Since 2009

Enrollment in Employer-Sponsored Health Plans by Type of Plan, 2009 – 2014

61%

8% 14%

63%

13% 9%

57%

17%12%

57%

17% 13%

54%

21%

9%

51%

26%10%

PPO Plans

High-DeductiblePlans

HMOPlans

- 16% - 29%+225%

’09 ’10 ’11 ’12 ’13 ‘14 ’09 ’10 ’11 ’12 ’13 ‘14 ’09 ’10 ’11 ’12 ’13 ‘14

Source: PwC Health Research Institute, Medical cost trend: Behind the Numbers 2015, June 2014, based on PwC 2014 Touchstone Survey

Market Traction

• Account-based health plans continue to gain traction in the market...

47%of employers now

offer HDHPs

60%of employers now

offer FSAs

42%of employers now

offer HSAs

23%of employers now

offer HRAs

Of those employers now offering HDHPs:

53%Offer incentives to choose HDHPs –

including HSA

contributions

66%Indicate HDHP / HSA

enrollment is growing or significantly

growing

30%Estimate of

employee population now enrolled in

HDHPs


HDHP / Firm Size

Among Firms Offering Health Benefits, Percentage that Offer an HDHP / SO, by Firm Size, 2013

Source: Kaiser / HRET Survey of Employer-Sponsored Health Benefits, 2013

HDHP Enrollment

Percentage of Covered Workers Enrolled in an HDHP / HRA or HSA – Qualified HDHP, 2006 – 2013


HDHP as the Single Option

Under Consideration

44%

38%Not Under

Consideration

AlreadyImplemented

18%

Are you considering implementing a high-

deductible plan as a full replacement option for

medical benefits over the next 3 years?

Most employers are considering or already offer a High-Deductible plan as the only option for employees

Source: PwC Health Research Institute, Medical cost trend: Behind the Numbers 2015, June 2014

Telemedicine

• Potential savings of $6B per year

Currently Implemented Considering in 2015 Considering in 2016 or 20170%

10%

20%

30%

40%

50%

60%

70%

80%

22%

37%

71%

Source: Towers Watson, 2014

Employers are looking for solutions to combat rising healthcare costs, as well as convenient solutions for employees

What’s Working?

Base Year 1 Year 2 Year 3 Year 4 Year 5 Year 6$2,800

$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200

$4,400

“Option” HRA / HSA

Source: 9th Annual Aetna HealthFund Study

Savings based on both plan and member spending

• Based on normalized allowed claim PMPM trends averaged over 6 years

Option HRA / HSA

Savings$108

Savings$120

Savings$168

Savings$204

Savings$264

Savings$300AHF study group

Control group

“Full Replacement” HRA / HSA


Base Year 1 Year 2 Year 3 Year 4 Year 5 Year 6$2,800

$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200

$4,400

Savings$432

Savings$432Savings

$324Savings$336

Savings$324Savings

$228

Control group

AHF study group

Savings based on both plan and member spending

• Based on normalized allowed claim PMPM trends averaged over 6 years

Full Replacement HRA / HSA

Average Spend


Total pharmacy costs

Inpatient facility

Ambulatory facility

Emergency room

Specialist physician

Primary physician

Radiology

Lab

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000

Difference-16%

Difference-5%

Difference-4%

Difference-9%

Difference-9%

Difference-7%

Difference-4%

Difference-1%

AHF study group

Control group

Households Spend Less for All Types of Health Costs Versus a Matched Population

2x

…more logins to provider websites

…more likely to fill out a health assessment

…more use of the personal health record

…more use of price information tools, including pharmacy drug costs and Member Payment Estimator


Members Use the Information Provided

• Online tools for cost of care and benefits information are used overwhelmingly more by consumers with HDHPs

Will CDH Drive Behavior Change?

Not Sure

No - Not at All

Yes - Somewhat

Yes - Significantly

6%

14%

42%

38%

9%

8%

55%

28%

Employer Employee

HDHPs and Tax Advantaged Accounts are Designed to Make Employees More Aware and Accountable for Healthcare Spending;

Will it Change Behavior?


Education is Critical

HSA Understanding: 10 Years Later

2.8% Of respondents got 9 of 9 questions correct

30% Of respondents “passed” with 7 of 9 questions correct

My employer owns my HSA

If I don't use my funds by the end of the plan year, I lose them

I can have a healthcare FSA and an HSA at the same time

I can change my annual election amount at any time that I want to

I can contribute to an HSA regardless of which health plan type I'm enrolled in

If my balance reaches a certain amount, I can invest my HSA contributions

I gain access to my full annual HSA election amount on the first day of the plan year

I can leverage my HSA savings to cover future healthcare expenses into retirement

Contributions that I make to an HSA are tax-free

73%

64%

50%

53%

46%

59%

37%

74%

82%

Consumer Responses to HSA Understanding Quiz(Correct Answers)


FSAs Have Existed Much Longer...

.3% Of respondents got 9 of 9 questions correct

50% “passed” with 7 of 9 answered correctly

If my balance reaches a certain amount, I can invest my FSA contributions

I can change my annual election amount at any time that I want to

My employer owns my FSA

I can leverage my FSA savings to cover future healthcare expenses into retirement

I'm allowed to roll over a certain amount of unused funds at the end of each plan year

If I don't use my funds by the end of the plan year or grace period, I will lose them

I can contribute to an FSA regardless of which health plan I am enrolled in

I gain access to my full annual FSA election amount on their first day of the plan year

Contributions that I make to an FSA are tax-free

77%

70%

31%

66%

46%

73%

79%

85%

88%

Employee FSA Perceptions(Correct Answers)


More Consumer Support Needed

Consumers want better benefit communication and decision-support from employers

Most employers offer limited support today:


65% 60% 33% 17%

Communicate about health

benefit offerings only during open

enrollment

Rely only on plan summary

documents and enrollment

forms

Offer plan comparison tools and multimedia & education content

Offer an interactive recommendation engine based on

personal data inputs

Consumers Value Easy-to-Use Account Features

• Debit card is #1 ranked account feature across all benefit account types

• 75% of consumers value integration of insurance claim data to streamline review and payment

• 65% of consumers value multi-channel account access (online, mobile, etc.)

• 60% of consumers value self-service features (such as mobile claim submissions, online bill pay, etc.)


Wellness Incentives

Wellness Incentives

>500 employees Base = employers offering wellness programs

2012

2013

2014

15%

12%

10%

36%

33%

30%

24%

25%

24%

21%

26%

27%

4%

3%

9%

Investment in Wellness Incentives per Employee,Large Employers

Less Than $50 $50 to $249 $250 to $499 $500 to $1,000 More than $1,000

Source: bswift SourceMedia Research, 2012 – 2014

Wellness Incentives

>500 employees Base = employers offering wellness programsSource: bswift SourceMedia Research, 2012 – 2014

Additional paid time off

Reduced co-pay / co-insurance for Rx

Eligible for richer plan and / or lower deductible

Additional contributions to a HSA or HRA

Wellness points to convert to cash, gift cards, etc. or gift cards and cash

Health insurance premium discounts, credits surcharges or penalties

4%

9%

13%

13%

38%

58%

3%

6%

6%

12%

48%

64%

2%

5%

7%

27%

56%

64%

Types of Wellness Initiatives, Large Employers2014 2013 2012

For More Information Visit Our Websitegroupbenefitsllc.com

orContact Tim Finnell:

[email protected] 901.259.7999

Documents

Employee Benefits & Healthcare Reform: An Opportunity in Disguise