Robert Heller

Presenting:

Alpha Benefits Group

Health Market ReviewPlease silence your cell phone.

Full Service Employee Benefit Firm

Brokerage & Consulting

Voluntary Benefits

Human Resource Support Services

Retirement Plans

Executive Benefits

Property & Casualty

Plymouth Meeting

Locations

Plymouth Meeting

Camp Hill

Bethlehem

Locations

New Camp Hill Office – Moving May 1, 2006!

COBRA Administration

Section 125 Cafeteria PlanPremium Only Plans (POP)

Flexible Spending Accounts

Full Flex Credit Based Plans

High Deductible Plan Design & AdministrationMedical Expense Reimbursement Plans (MERP Plan)

Health Reimbursement Arrangements (HRA)

Health Savings Accounts (HSA)

TM

Retirement Plan Services401(k)Roth 401(k)Profit Sharing403(b)New Comparability

Executive BenefitsKey Person CoverageDeferred CompensationSplit Dollar PlanEstate PlanningLong Term Care

Welfare Plan Documents5500 FilingWrap Plan Documents

Starting Point in Process

“Good Ole’ Boy Network” Changing

Trust and Confidence

What You Should Expect From a Broker:Knowledge of the Marketplace

Customer Service and Support

Clout With Carriers

Gets a Head Start on the Renewal Process

Value Added Services

COBRA Administration

Employee BenefitCommunication

Human ResourceServices

Personalized Claims Administration

SHRM Membership

Wellness Support

Many options are rate neutral regardless

of whether you are working directly with a carrier

or working through a broker.

Demand

From Your Broker!

Year In Review…

Single Digit Increases

Some Rate Decreases

Alpha’s average starting renewal in the past six months is 11%, aftergoing to market, it drops to 2%

Looks Good for Rest of 2006 & 2007

Still too Expensive

Year Single Cost % Increase Dollar Increase

2002 $250 N/A N/A

2003 $300 25% $50

2004 $360 20% $60

2005 $450 25% $90

2006 $490 9% $40

Percent vs. Dollar Increases

Why Good News?

Credible Data

Competition

Catch Up to Rest of the Country

Wellness Initiatives

Concerns

Aging Population

Pharmacy Component

Technology

Todd Hons

Presenting:

Medical Carrier Updates

Healthcare Survey Results

Carrier Updates

New Participation Guidelines75% participation required after spousal waivers

Spousal waivers from any carrier are valid (must provide photocopy!)

No more than 50% of the group may waive coverage

New Prescription Drug Plans – Effective 4/1/2006 or Upon RenewalFor groups 2-99 – new business or upon renewal must take one of the new options

New 3-tier co-pays and deductible options

CurascriptsNew specialty drug vendor for self-injectable drugs

KHP Prescription Drug Coverage Will Be TerminatedEffective at the first renewal on or after June 1, 2006

A Capital BlueCross prescription plan will replace the existing plan

Medical Underwriting for Groups 2-19 – Effective March 1, 2006Groups will receive discounted illustrative rates

Must submit application and HIPAA authorization form 30 days in advance

Final rates will be based on medical information received and final enrollment

Keystone Health Plan Central Works Through the CBC Broker Program – Effective January 1, 2006

Major advantage for groups 2 to 99

Groups may work with a broker atno additional cost (up to 99)

Important Rx ChangeIf a brand is prescribed and a generic is available and the member chooses the brand, he or she will be required to pay the brand co-pay plus the cost difference between the brand and generic

First HealthReplaces PHCS as HealthAmerica’s National Network

Gettysburg Hospital Tentatively Rejoining Network This Year

Individual Applications Required For Groups 51-99 Individual applications with medical questions required for each employee to get final rates in all counties except Lehigh, Northampton, and 5 county Philadelphia area

Average rate increase 3.5%

95% of companies completing applications enroll

Rx SelectFor Groups > 50 Employees

Standard Option for PPO Plans

Available as Rider for POS Plans

Removes Prior Authorization for Most Drugs

Proton Pump Inhibitors, Nexium, etc.

3-tier Prescription Incentive Change – Effective May 1, 2006Currently, when a brand name drug is purchased instead of the available generic medication, the member must pay the brand co-payment, plus an ancillary charge. Upon renewal, HA is updatingthe Rx coverage to remove the ancillarycharge. Therefore, members will only be billed the third tier co-payment.

Lifestyle ReturnsIntegrated health-enhancing incentives into your company’s benefit coverage

Highmark Radiology Management ProgramPartnered with National Imaging Associates (NIA)

Introduced New Programs With Co-pay or Co-insurance on Diagnostic Services

CAT, PET, MRI Scans

MedmarkNew specialty pharmacy for specialty medications such as injectables, biological agents, etc.

ePlatformProgram to manage coverage through online services

If qualified, group gets 2% discount!

For Groups > 50 EmployeesWill accept spousal waivers from any carrier

After spousal waivers, 75% participation required

Does not apply to groups under 50 employees

Highmark Blue Shield must be the sole carrier

A minimum of 50% of the group must enroll

New plans coming out July 2006 for groups 2 – 50High deductible plans with office visit co-pays

United Healthcare/Oxford/MAMSI

Aetna

Third Party Administrator (TPA) located in Lancaster

Provides self-funded and fully insured plans

100% owned by BlueCross of Northeastern PA

Large statewide doctor and hospital network

High deductible with no other features

Health Savings Account (HSAs)

Health Reimbursement Arrangement (HRAs)

Medical Expense Reimbursement Plans (MERP Plan)TM

The Concept Makes Sense

Larger out of pocket cost reduces employer/employee premium

Turns employee into consumer

Employees utilize medical plan pay more

Isn’t insurance designed to pay for catastrophic?

Major insurance carriers slow to adopt plan design

Not enough discount in rates

Employee communication issues

Confusion over regulations

Employers view this as just a “cost shifting” method as opposed to a way to reduce overall costs

Medical Expense Reimbursement Plans (MERP Plan)

Stepping stone to HSAs?

TM

Governed by IRC Section 105

Utilized with an insurance carrier’s high deductible plan

Permits employers to self-insure certain medical expense costs

78% have claims of less than $1,000

35% have no claims!

5% have 50% of the total claims

BUY LESSCOVERAGE

To Reduce Premiums, Buy Less Coverage

Employer secures high deductible plan (i.e. $2,000) for major expenses (in/out patient surgery) from carrier

Generally less than 20% of employees utilize these types of expenses

Communicate lower deductible (i.e. $250) to employees

Employer self insures from $250 to $2,000 ($1,750 maximum exposure), only if actually incurred

Employer utilizes premium discount savings to fund the self insured portion

Typically part of PPO plan with office visit co-pay and drug card

Alpha Benefit Administrators administers the self funded portion for the employer

Advantage over HSA in that the employee can retain the doctor visit co-pays and Rx co-pay card while still having PPO arrangement for service

All expenses over $2,000 are the responsibility of the insurance carrier

Cash flow advantage – Employer only pays if expenses are incurred

Serves as a starting point for getting into high deductible plans without having to communicate a complicated process to employees

Alpha Benefit Administrators can provide proposal on savings and costs

Example 1: 223 EmployeesReceived a 25% Medical Increase = $353,500

Implemented MERP Plan 1-1-05 to 12-31-05

Group made no changes to employees’ benefits

Final increase was 11% or $157,000

Savings of 14% or $196,500

1-1-06 group received 9% increaseIncreased MERP Plan deductible

A decrease in cost is projected

TM

TM

Example 2: 99 EmployeesReceived an increase from an association

Implemented MERP Plan 7-1-04 to 6-30-05

Provided three options to employees

End result was 19% less than the previous year’s cost

Savings of $73,000

7-1-05 group received 14% increase = $65,000Increased MERP Plan deductible

A 3% increase is projected

TM

TM

Example 3: 53 EmployeesReceived a 40% increase = $119,500

Implemented MERP Plan 8-1-04 to 7-31-05

Group made no change in benefits to employees

Final increase was 14% or $42,000

Savings of 26% or $77,500

8-1-05 group received 5% increase Increased MERP Plan deductible

A 6% decrease is projected

TM

TM

High Deductible Plans In-Force

MERP Plans 90

HSA 8

TM

High Deductible Plans In-Force

MERP Plans 90

HSA 8 Alpha Experienced With MERP Plans

Leader in Central/Eastern PA with this concept

More plans in-force than other providers

Not one employer has gone back to the traditional approach

TM

TM

Issues to Consider With Your MERP Plan

Administrator

Independent from carrier

Not as seamless as appears

HRA vs. MERP Plan contractual differences

TM

TM

Why Are HSA’s Now Making More Sense?

Carriers offering more plan designs

Better pricing

Greater employee/employer acceptance

Employers desperate to control costs

MERP Plan/HSA conceptTM

What Makes Alpha’s “HSA Today” Different?

The only complete focused HSA administrative system in the country

Why would I choose Alpha for my HSA provider?

Value Added Services that we provide:Don’t have to switch HSA providers every time you change medical insurance carriers

Coordinate the HSA with the cafeteria planInsurance premiums & Limited Purpose FSA

Online access to Claims VaultAn electronic storage facility for medical claims & receipts

Available for EOB import when provided by carrier or TPA

“Certification” of qualified medical expenses

Contribution management to eliminate over-contributions

Toll free phone support

Tax form assistance1099, 5498, 1040, and 8889 preparation

Online Access to Your HSA

More than just an account balance

Revolutionary Claims Vault Technology (Patent-Pending)

Claims certification service

Online claims entry

Online withdrawal requests

Interest earned summary (currently paying 4.6%)

Ability to update your HDHP or personal information

SM

Group of 102 EmployeesRenewal premium $763,657 (+$134,853)

Changed carriers to $567,573 annual premium

Savings from original renewal $196,084

Employer funded HSA account $34,500

Employee funded HSA account $43,851

Claims estimate $42,600

Overall increase from prior year $15,873, however, we also got $78,351 in HSA funding for the year!

TM

TM

Developer and leading national provider of workplace wellness paradigm:

Brings workplace wellness to life by humanizing and personalizing the wellness process

Enhances or replaces the traditional wellness delivery technology with persuasive power of personal, face-to-face, human interaction – LIVE, not over the phone or internet

Average participation is over90% of employees

“People Powered Wellness”

Dates for providing Disclosure Notice to CMS

Plan years ending in 2006: March 31, 2006

Plan years ending in 2007 and beyond: Within 60 days after the beginning of the plan year (ex. Plan begins 1/1/2007, deadline is 3/2/2007)

Within 30 days of terminating a plan that provides prescription drug benefits

Within 30 days of a change in the creditable coverage status of a plan that provides prescription drug coverage

Dates for providing a creditable coverage notice to employees/retirees:

By November 15th of each year, starting in 2005

Prior to an individual’s initial enrollment period

Prior to the effective date of coverage for any Medicare-eligible individual that joins your group’s plan

When the plan you sponsor terminates

When the plan you sponsor changes its prescription drug coverage so that it is no longer creditable or becomes creditable

Upon an individual’s request

ZocorComes off patent 6/23/2006

ZoloftComes off patent 6/30/2006

Once generics are available, these drugs will be moved to non-formulary for most carriers

Alpha is often asked what plans and contributions are most common. We surveyed our clients to get a representation

of:

Employer/Employee Contributions Average plan designs

Here are the results

0

5

10

15

20

25

30

35

% o

f C

om

pan

ies

100 90 85 80 75 70 60 55 50 0

Percentage of Employer Contribution to Cost

2004

2005

2006

0

5

10

15

20

25

30

% o

f com

panie

s

100 90 70 50 45 40 30 25 20 15 10 0

Percentage of Employer Contribution to Cost

200420052006

76% of companies surveyed pay 75% or more of the single contribution

66% of companies surveyed pay 20-25% of dependent costs, down from 73% in 2005

26% pay nothing toward dependent costs, up from 21% in 2005

40% of those surveyed said they envision increasing the employees cost next year, down from 60% in 2005

0%

10%

20%

30%

40%

50%

$10 $15 $20 $25 > $25 Plan Copay Amount

% o

f Com

pani

es

2004

2005

2006

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

$0 $1 - $249 $250 $251 -$499

$500 > $500

% o

Com

pan

ies

2004

2005

2006

2004

2005

PPO 66%

PPO 69%

POS 14%

HMO 15%

TraditionalIndemnity 5%

HMO 16%

POS 7%

TraditionalIndemnity 8%

2006

PPO 70%

POS 15%

HMO 12%TraditionalIndemnity 8%

Have already 2%

High probability 16%

Possible 40%

Not Likely 42%

What is the likelihood of your company implementing

an HSA?

79% have a 3-tiered formulary plan as opposed to 78% in 2005 and 70% in 2004

9% have deductibles then coinsurance as opposed to 12% in 2004 and 15% in 2004

10% have a 2-tiered co-pay (usually 10/20) as opposed to 6% in 2005 and 12% in 2004

2% have straight coinsurance as opposed to 4% in 2004 and 3% in 2004

Renewal increase are lower than the previous years

High deductible plans are continuing to become more popular

Results point to two major trends in the industry:

Thank you for attending!

This presentation will be available for download at:

www.alphabenefits.com