NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS 2011

Transcription

1 NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS 2011

2 About the survey Now in its 26 th year, the survey was established in 1986 A national probability sample has been used since This means that survey results are representative of all employer health plan sponsors in the US with 10 or more employees 2,844 employers participated in 2011 In this presentation, we refer to: - small employers employees - large employers 500+ employees - jumbo employers 20,000+ employees 2

3 Top Stories

4 Our headline stories! Health care reform is sharpening employers' focus on cost management and providing the business case for bold strategies CDHPs are poised to become a mainstream strategy by creating more cost-conscious consumers The big challenge in workforce health management is building employee engagement. Incentives clearly work to drive participation, and employers are starting to test their ability to improve health outcomes as well Employers that follow best practices -- such as data warehousing, valuebased designs and collective purchasing -- report significantly lower costs and trends 4

5 Growth in total health benefit cost per employee slowed to 6.1% in 2011 with a 5.7% increase expected for % 18.0% 16.0% 14.0% 12.0% 17.1% 12.1% Annual change in total health benefit cost per employee 14.7% 11.2% The good news: Growth in the average total health plan cost per employee slowed in % 10.1% 10.1% 8.0% 6.0% 8.0% 6.1% 8.1% 7.3% 7.5% 6.1% 6.1% 6.1% 6.3% 6.9% 6.1% 5.5% 5.7%* 4.0% 2.0% 2.1% 2.5% 0.0% -2.0% -1.1% 0.2% *Projected Source: Mercer s National Survey of Employer-Sponsored Health Plans 5

6 Growth in total health benefit cost per employee slowed to 6.1% in 2011 with a 5.7% increase expected for % 18.0% 16.0% 14.0% 17.1% Workers' earnings Annual change in total health benefit cost per employee Overall inflation 14.7% The bad news: Cost is still rising far faster than inflation or wages 12.0% 12.1% 11.2% 10.0% 10.1% 10.1% 8.0% 6.0% 8.0% 6.1% 8.1% 7.3% 7.5% 6.1% 6.1% 6.1% 6.3% 6.9% 6.1% 5.5% 5.7%* 4.0% 2.0% 2.1% 2.5% 0.0% -2.0% -1.1% 0.2% *Projected Source: Mercer s National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April)

7 Total health benefit cost per employee in 2011 Average total health benefit cost per employee tops $10, % $10, % $9, % $10,438 All employers Small employers ( employees) Large employers (500 or more employees) 7

8 Employers that consider these PPACA provisions to be a significant concern for their organizations 48% Employers will face additional cost pressure in 2014 as more PPACA provisions kick in but their biggest worry is the excise tax in % 27% 22% High-cost plans may be subject to 40% excise tax New full-time employees must be auto-enrolled Data based on employers with 50+ employees. Plans must pay 60% of covered services All employees working avg. 30+ hrs/wk in a month must be eligible for coverage 8

9 Against the backdrop of health reform, employers are taking bolder steps to manage cost Large employers They re planning to add low-cost plans like CDHPs... as the default plan for auto-enrollment 53% for newly eligible PTEs 17%* They re planning to narrow the scope of their benefit spending by transitioning some employer-paid benefits to voluntary 38% by reducing spending on dependent coverage 32% And they re determined to create a healthier workforce!. by adding or improving health management programs 87% *Among those not currently providing coverage to all employees working 30+ hours per week. 9

10 With reform adding administrative complexity, the trend toward outsourcing benefits administration is likely to accelerate 29% 18% 11% 2005* 2011 Likely to outsource as a response to reform (including those currently outsourcing) * Outsourced annual enrollment at a minimum 10

11 Will employers terminate medical coverage in response to PPACA? Large employers Very likely to terminate health coverage 2% 7% Likely to terminate No! Employers remain committed to offering coverage, so cost management will be a priority for years to come 49% 41% Not at all likely to terminate Not very likely to terminate 11

12 Biggest year-over-year increase in CDHP offerings and enrollment in 2011 Large employers Percent of employers offering CDHPs Percent of covered employees enrolled in CDHPs At the tipping point? Employers drive enrollment into lower-cost CDHPs 32% 20% 20% 23% 14% 6% 7% 8% 10% 13%

13 Medical plan cost per employee Large employers $9,511 $10,020 $7,541 The appeal of HSAs is clear they cost about 20% less than other medical plan types PPO HMO HSA plan (includes employer account contribution) 13

14 Full replacement CDHPs becoming more common and survey results suggest that cost savings remain when entire population is enrolled Large employers Percent of CDHP sponsors offering no other plan Cost is higher for full-replacement, but not by much and still lower than even high-deductible PPOs HSA-eligible CDHP HRA-based CDHP 14% 9% 7% 17% 10% 21% Full replacement HSA-based plan: $7,744 All HSA-based plans: $7,541 All PPO plans: $9,511 High-deductible* PPO plans: $7, *In-network individual deductible of $1,

15 Employees becoming more comfortable with CDHPs Large employers About a fourth of employees now select a CDHP when they have a choice of another plan Employers that offer substantial account contributions to the HSA see higher enrollment HSA-eligible CDHP HRA-based CDHP 24% 25% 21% 18% 24% 29% 35% 14% Employer contribution to HSA >$750 Employer does not contribute to HSA 15

16 Health management -- the leading long-term cost containment strategy is migrating from the biggest organizations to the smallest Small employers ( employees) Large employers (500+) Jumbo employers (20,000+) Case management 35% 83% 96% Nurse advice line 53% 80% 89% Health risk assessment 34% 70% 89% Disease management 42% 82% 86% Lifestyle / behavior modification 33% 55% 77% Health portal (w/activity or incentive tracking) 41% 52% 65% Health advocate services 30% 52% 61% End-of-life case management 22% 47% 47% 16

17 Investment in health management programs varies widely which makes it harder to compare results 66% Large employers Jumbo employers 42% 24% 36% 18% 31% 6% 13% Although more employers are using specialty vendors for health management, many still offer only their health plans standard services Through health plan standard services only Through health plan some optional services Contract with one specialty vendor Contract with 2+ specialty vendors 17

18 Employers that invest more in health management are more likely to be satisfied with ROI Among large employers that have attempted to measure ROI Offer HM through health plan standard services only Offer HM through specialty vendor or purchase optional services from health plan Don t know Don t know 11% Not 7% satisfied 22% Not satisfied 36% 53% Satisfied 71% Satisfied with ROI with ROI 18

19 Use incentives or penalties in health management programs % % Employers are adding 40% incentives and 33% penalties to health 27% management programs to boost 21% participation and some have made them contingent on outcomes All large employers Employers with 10,000 or more employees 19

20 Average participation rates for health management programs Large employers 54% Employers that offer incentives see higher participation rates 42% 30% All employers offering program Employers offering incentives Employers not offering incentives 23% 24% 18% 19% 14% 12% Health risk assessment Disease management program* Lifestyle coaching* *Percentage of identified persons actively engaged in program 20

21 Employers are beginning to use incentives to reward outcomes rather than just participation Offering lower premium contributions to non-tobacco users is growing among all large employers and jumbo employers are beginning to provide incentives for achieving or maintaining health status targets 9% 10% 12% 5% 5% 5% Body mass index Cholesterol Blood pressure 21

22 New analysis shows employers are successfully controlling cost through use of best practices Employers with 5,000+ employees $10, % $8, % PPO/POS Annual cost PPO per cost employee per employee in 2011 Employers using most best practices Change PPO/POS in cost cost from per employee 2010 Employers using fewest best practices Employers that use the greatest number of best practices have lower costs and lower cost increases 22

23 Respondents costs were analyzed based on their use of more than 20 cost-management best practices Plan design and health management More advanced costmanagement strategies Contribution for family coverage in primary plan is at least 20% of premium PPO in-network deductible is $300+ PPO plan has higher cost-sharing for specialists Offer CDHP HSA sponsor makes a contribution to employees accounts Rx mail-order copay is at least 2.5x retail copay Spousal surcharge Smoker surcharge Offer optional HM services through plan or specialty vendor Use incentives for HM programs Use incentives for achieving or maintaining health status targets Offer EAP Voluntary benefits integrated with core benefits High-performance networks Data warehousing Collective purchasing Value-based design On-site clinic One or more Rx strategies (i.e. mandatory generics) One or more specialty drug provisions (i.e., step therapy) One or more health plan innovations: Surgical centers of excellence Retail clinics Telemediated care Medical homes 23

24 Best practice trends to watch: Value-based design The largest employers are rapidly adopting value-based design Most common value-based design provisions: % 17% 25% 31% Waive/reduce cost-sharing for maintenance drugs Waive/reduce cost-sharing for specific drug therapies shown to reduce overall cost Waive/reduce cost-sharing for nondrug treatments based on effectiveness All large employers (500+ employees) Employers with 20,000+ employees 24

25 Best practice trends to watch: More efficient delivery systems Employers with 5,000 or more employees Employers are looking beyond plan design to how and where care is delivered In place in 2010 In place in 2011 Interested in pursuing Telemedicine 5% 11% 38% Medical homes 3% 6% 56% Surgical centers of excellence Not available 18% 51% High-performance networks Not available 14% Not available 25

26 More on cost

27 Total health benefit cost for active employees up 3.6% in 2011 Large employers +11.5% $5, % $6, % $6, % +6.1% $7,379 $7, % +6.1% $8,229 $8, % $9, % +3.6% $10,073 $10, %* *Average increase projected for 2012 after changes; increase of 7.2% predicted before changes 27

28 Factors that affect average cost per employee Industry large employers $9,794 $10,513 $10,754 $10,819 $10,889 $11,251 $8,146 Wholesale/ Retail Services Financial services Transp./ Communic./ Utility Health care Manufacturing Government 28

29 Factors that affect average cost per employee Region large employers $10,360 $11,115 $11,334 $9,442 South Midwest West Northeast 29

30 Factors that affect average cost per employee Employer size $9,702 $10,544 $10,425 $10,432 $10,336 $10, ,000-4,999 5,000-9,999 10,000-19,999 20,000 or more Number of employees 30

31 Factors that affect average cost per employee Employer/employee demographics large employers $10,438 $10,999 $11,779 $11,766 All large employers Average employee age 45 or higher Dependent coverage election 65% or higher 75% or more employees in unions 31

32 More on Consumerism and CDHPs

33 Health care consumerism in a nutshell Consumerism means taking personal responsibility for maintaining or improving one s health and for choosing cost-effective, quality health care providers Strategies for encouraging consumerism range from providing employee communication and information to innovative plan design Consumerism is more than a consumer-directed health plan 33

34 What is a consumer-directed health plan? A plan under which employees spend money from Health Reimbursement Accounts (HRAs) or Health Savings Accounts (HSAs) to purchase routine services directly. Nonroutine expenses are covered by traditional insurance after members meet a generally high deductible. Online health and financial tools are typically provided. 34

35 Sharp increase in CDHP offerings among large employers in 2011 Percent of employers offering/likely to offer CDHP, by employer size Number of employees Very likely to offer in % 9% 15% 16% 20% 22% % 14% 16% 18% 26% 28% 1,000-4,999 16% 22% 20% 24% 34% 38% 5,000-9,999 22% 28% 42% 39% 42% 49% 10,000-19,999 36% 40% 39% 41% 46% 46% 20,000 or more 41% 45% 43% 51% 48% 54% 35

36 Employers of all sizes prefer HSAs to HRAs Offer CDHP in 2011 Very likely to offer CDHP in 2012 HSA-eligible HRA-based HSA-eligible HRA-based Small employers 15% 5% 18% 10% Large employers 24% 10% 27% 12% Jumbo employers 35% 24% 41% 25% 36

37 Employees more likely to enroll in HRA-based plans Percent of covered employees enrolled*, among large CDHP sponsors 31% HRA-based plans HSA-eligible plans 21% 24% 12% Average enrollment Median enrollment * When CDHP is offered as an option alongside other medical plan choice 37

38 More on HSA-eligible CDHPs

39 HSA-eligible CDHP enrollee profile, compared to PPO and HMO enrollees Large employers Employees enrolled in: HSA-eligible CDHP PPO HMO Average age % electing dependent coverage 57% 57% 57% 39

40 Change in HSA enrollment over time Among large employers that have offered an HSA-eligible CDHP* for 3 years, average percent of eligible employees enrolled 18% 21% 24% * As an option alongside other medical plan choices 40

41 Employee contributions for HSA-eligible CDHP coverage significantly lower than for PPO and HMO coverage Large employers No contribution required Average monthly dollar amount Average contribution as a % of premium HSA-eligible CDHP Employee-only Family 15% 6% $58 $233 18% 25% PPO Employee-only 8% $111 23% Family 4% $366 31% HMO Employee-only Family 11% 3% $102 $376 22% 30% 41

42 Account contributions, deductibles, and OOP maximums Large HSA sponsors % of sponsors making account contribution Employer contribution amount* (median) Deductible (median) Out-of-pocket maximum (median) Employee-only 75% $500 $1,500 $3,000 Family 75% $1,200 $3,000 $6,000 * Among employers that contribute to the account 42

43 More on HRA-based CDHPs

44 HRA-based CDHP enrollee profile, compared to PPO and HMO enrollees Large employers Employees enrolled in: HRA-based CDHP PPO HMO Average age % electing dependent coverage 55% 57% 57% 44

45 Change in HRA enrollment over time Among large employers that have offered an HRA-based CDHP* for 3 years, average percentage of eligible employees enrolled 29% 24% 25% * As an option alongside other medical plan choices 45

46 Employee contributions for HRA-based CDHP coverage significantly lower than for PPO and HMO coverage Large employers No contribution required Average monthly dollar amount Average contribution as a % of premium HRA-based CDHP Employee-only Family 14% 4% $79 $275 24% 25% PPO Employee-only 8% $111 23% Family 4% $366 31% HMO Employee-only Family 11% 3% $102 $376 23% 30% 46

47 Account contributions, deductibles and OOP maximums Large HRA sponsors Employer account contribution (median) Deductible (median) Out-of-pocket maximum (median) Employee-only $500 $1,500 $3,000 Family $1,000 $3,000 $6,000 47

48 Key features of HRA-based CDHP Large HRA sponsors The HRA is the only medical plan offered to enrollees (full replacement) Account funds may be rolled forward and used after retirement A maximum is placed on the amount of funds in account that may accumulate or roll over Maximum for an individual (median) Maximum for a family (median) 21% 27% 34% $1,500 $3,000 48

49 More on Health Management

50 More large employers able to measure health management return on investment (ROI) Employers offering health management programs Large employers Jumbo employers Have measured ROI using... Health plan or health management vendor Consultant or other third-party vendor (other than health management vendor) Internal staff Of those measuring ROI, percent that are satisfied with their return on investment in health management programs 14% 9% 3% 64% 33% 16% 4% 59% 50

51 Health management incentives Based on large employers offering the program Provide incentive for completion of health risk assessment Median annual amount of premium reduction Large employers 37% $240 Jumbo employers 57% $240 Provide incentive for participating in biometric screening Median annual amount of premium reduction 22% $226 27% ID Provide incentive for participating in lifestyle coaching Median annual amount of premium reduction 24% $300 54% ID ID = Insufficient data 51

52 Type of incentive used with health risk assessment Among large employers providing health risk assessment incentive Lower premium contributions 43% Cash 40% Contribution to HRA, HSA, FSA 10% Lower deductible, copay or other cost sharing 7% 52

53 Type of incentive used with biometric screening Among large employers providing biometric screening incentive Lower premium contributions 42% Cash 37% Contribution to HRA, HSA, FSA 9% Lower deductible, copay or other cost sharing 9% 53

54 Type of incentive used with behavior modification program Among large employers providing behavior modification incentive Lower premium contributions 37% Cash 36% Contribution to HRA, HSA, FSA 9% Lower deductible, copay or other cost sharing 9% 54

55 Eligibility and Coverage Provisions

56 Coverage for part-time employees Large employers with at least some PTEs Make coverage available to PTEs: 65% Average number of hours required for eligibility: 23/week Of the employers covering PTEs: 8% offer different plans to PTEs and FTEs Average PTE contribution, as a % of premium 35% for employee-only coverage 41% for family coverage 56

57 Same-sex domestic partner coverage varies by region Large employers 79% % 46% 49% 55% 39% 26% 34% 27% 28% All large employers West Midwest Northeast South 57

58 Special provisions addressing spouses with other coverage available Large employers Jumbo employers 13% 7% 7% 2% Spouses with other coverage are not eligible Spouses with other coverage must pay surcharge 58

59 Slim majority of employers cover bariatric surgery Large employers Large employers Jumbo employers 46% 48% 28% 24% 30% 24% Covered, but member must comply with behavior modification program/standards Covered the same as any medically necessary procedure Not covered 59

60 Preferred Provider Organizations

61 PPO* cost per employee, Large PPO sponsors $5,220 $5,730 $6,181 $6,518 $7,029 $7,429 $7,861 $8,334 $9,033 $9, Note: Some of the survey respondents that carve out prescription drug benefits to a freestanding pharmacy benefit manager did not include prescription drug cost in their PPO cost. If all cost for freestanding Rx benefits were included, we estimate the average PPO cost per employee would be 2.5% higher. * Results for include PPO plans only. Results beginning in 2008 include PPO and POS plans 61

62 PPO* cost per employee, by region Large PPO sponsors % + 4.0% $9,816 $10,247 $9, % $9,459 $9,989 $10,388 $7, % $8,575 West Midwest Northeast South * Includes POS plans. 62

63 Employee contribution requirements for PPO Large PPO sponsors Individual Family Employers requiring contribution Average contribution as a % of premium Average monthly contribution 92% 96% 23% 31% $111 $366 63

64 Employee cost-sharing requirements for PPO Large PPO sponsors Deductible Require deductible Individual amount (median) Family amount (median) Primary care physician s office visit Require copay Copay amount (median) Require coinsurance Coinsurance amount (median) Specialist s office visit Require higher copay for specialist visit Copay amount, when higher (median) Lab tests / X-rays Require copay Require coinsurance Coinsurance amount (median) In-network 83% $500 $1,000 81% $20 23% 20% 48% $35 17% 59% 20% Out-of-network 93% $750 $1,800 12% $25 89% 40% % 91% 40% 64

65 Employee cost-sharing requirements for PPO, continued Large PPO sponsors Out-of-pocket maximum Plan includes maximum Individual OOP max (median) Hospitalization Require per-admission copay Copay amount (median) Require coinsurance Coinsurance amount (median) Emergency room visits Require separate copay Copay amount (median) In-network 86% $2,000 19% $250 72% 20% 80% $100 Out-of-network 86% $4,000 12% $250 93% 40%

66 Employee contribution requirements for PPO Smaller Employers Employee-only coverage Employers requiring contribution Average contribution as a % of premium Average monthly contribution employees 79% 27% $ ,999 employees 92% 23% $112 Family coverage Employers requiring contribution Average contribution as a % of premium Average monthly contribution 95% 45% $524 96% 32% $367 66

67 Employee cost-sharing requirements for PPO Employers with employees Deductible Require deductible Individual amount (median) Family amount (median) Primary care physician s office visit Require copay Copay amount (median) Require coinsurance Coinsurance amount (median) Specialist s office visit Require higher copay for specialist visit Copay amount, when higher (median) Lab tests / X-rays Require copay Require coinsurance Coinsurance amount (median) In-network 85% $1,000 $1,500 89% $20 12% 20% 40% $40 25% 37% 20% Out-of-network 90% $1,000 $2,500 26% $30 76% 30% % 80% 30% 67

68 Employee cost-sharing requirements for PPO, continued Employers with employees Out-of-pocket maximum Plan includes maximum Individual OOP max (median) Hospitalization Require per-admission copay Copay amount (median) Require coinsurance Coinsurance amount (median) Emergency room visits Require separate copay Copay amount (median) In-network 77% $2,500 15% $250 58% 20% 76% $100 Out-of-network 77% $4,000 9% ID 85% 40% ID = Insufficient Data 68

69 Prescription Drug Benefits

70 Prescription drug benefit cost is now growing more slowly than overall medical plan cost Cost increase in primary medical plan for large employers 16.9% 16.1% 14.3% 11.5% 9.9% 9.3% 7.6% 7.6% 6.3% 5.1%

71 About one in ten employers have added a fourth cost-sharing tier in their drug plans Cost-sharing provisions in employers primary plan Cost-sharing structure: Same level of cost-sharing for all drugs 2 levels for generic, brand drugs 3 levels for generic, formulary brand, non-formulary brand 4 or more levels Other Retail 3% 10% 72% 12% 3% Mail-order 5% 11% 71% 10% 4% 71

72 Average copayment amounts in prescription drug plans In large employers primary medical plan Retail Mail-order In plans with 2 copay levels Generic $11 $19 Brand-name $27 $50 In plans with 3 copay levels Generic $10 $19 Formulary brand $30 $57 Non-formulary brand $49 $97 72

73 Use of coinsurance in drug plans Percent of large employers requiring coinsurance Generic drugs Formulary brand Non-formulary brand Specialty / biotech Any drug category Retail 10% 16% 17% 5% 27% Mail-order 9% 13% 15% 4% 24% 73

74 Drug benefits have been carved out of primary medical plan, by employer size employees 10% 1,000 4,999 employees 19% 5,000 9,999 employees 42% 10,000 19,999 employees 48% 20,000 or more employees 57% 74

75 Participates in a prescription drug purchasing coalition or collective 22% 15% All large employers (500 or more employees) Jumbo employers (20,000 or more employees) 75

76 Specialty drug cost-management strategies Based on employers with 1,000 or more employees Utilization management 49% Step therapy 42% Formulary management 38% Retail lockout 30% Higher cost-share for specialty medications 24% Medical lockout 12%

77 Dental Care Benefits

78 Dental cost per employee, by region Large dental plan sponsors All large employers / -0.5% West / +0.1% Midwest / +0.5% Northeast / -5.3% $761 $757 $732 $736 $809 $ $913 $914 South / +3.5% $635 $657 78

79 Dental plan design Large dental plan sponsors Plan includes annual benefit maximum 93% Individual maximum (median) $1,500 Plan includes separate max for orthodontic 89% Individual ortho lifetime max (median) $1,500 79

80 Dental plan design (continued) Large dental plan sponsors In-network Out-of-network Individual deductible % requiring deductible 81% 75% Median deductible $50 $50 Family deductible % requiring deductible 76% 71% Median deductible $150 $150 80

81 Other dental services covered Large dental plan sponsors Sealants 81% Implants 55% Adult orthodontics 38% Posterior composites 37% TMJ treatment 19%

82 Voluntary and Work-Life Benefits

83 Voluntary benefits are integrated with core benefit program on same administrative platform Large employers that offer one or more voluntary benefits Voluntary benefits are not integrated 38% 62% Voluntary and core benefits are integrated on same platform 83

84 Provide voluntary insurance benefits (paid partially or fully by employee) Large employers Supplemental employee term life 86% Disability 83% Dependent term life 82% Vision 76% Accident 58% Cancer / critical illness 38% Whole / universal life 36% Long-term care 32% Travel 20% Auto / homeowners 17% Hospital indemnity 14% 84

85 Most important objectives for offering voluntary benefits Large employers To help employees take advantage of group purchasing power 70% To give employees the opportunity to fill gaps in employer-paid benefits 66% To offer additional benefits at no cost to the employer 59% To accommodate employee requests 46% Other 4% 85

86 Retiree Health Care

87 While employers remain committed to providing coverage to active employees, offerings of retiree medical plans* are falling once again Percent of large employers 46% 40% 41% 35% 38% 31% Offer coverage to pre-medicare-eligible retirees Offer coverage to Medicare-eligible retirees 35% 28% 29% 23% 28% 29% 31% 28% 25% 24% 21% 21% 21% 21% 19% 16% *Plan must be offered on an ongoing basis (i.e., new hires are eligible). 87

88 Offer retiree coverage* in 2011, by employer size Pre-Medicare-eligible Medicare-eligible 45% 35% 35% 22% 23% 30% 26% 29% 14% 16% 7% 4% ,000-4,999 5,000-9,999 10,000-19,999 20,000 or more Number of employees *Plan must be offered on an ongoing basis (i.e., new hires must be eligible). 88

89 Have reduced or terminated benefits for employees hired or retiring after a specified date Large retiree plan sponsors Pre-Medicare-eligible retirees Medicare-eligible retirees Terminated coverage Terminated coverage 19% 27% 64% 20% Reduced benefits 58% 20% Reduced benefits All retirees receive the same benefits All retirees receive the same benefits 89

90 Expect to continue to offer a retiree medical plan to new hires for at least the next five years Large retiree plan sponsors Not sure 18% No 17% 65% Yes

91 Recap

92 Key takeaways: Health reform is sharpening focus on cost management Cost pressures in 2011 included new PPACA provisions: Extending dependent eligibility to children up to age 26 (resulted in an average increase in enrollment of 2%) Removing lifetime and some annual benefit limitations Removing pre-existing condition exclusions for children under 19 Looking ahead to the PPACA provisions still to hit, many employers are concerned about the excise tax on high-cost plans Still, relatively few expect to terminate health coverage -- so cost management will be a top priority in the years of change ahead As the 2011 survey results show, many employers have already accelerated their cost management efforts 92

93 Key takeaways: CDHPs poised to become mainstream cost management strategy Offerings of CDHPs grew sharply in from 23% to 32% of large employers, and from 16% to 20% of small employers 65% of large employers expect to offer one within the next 5 years Enrollment in CDHPs rose from 11% to 13% of all covered employees; this is up from just 3% in 2006 The average per-employee cost of an HSA-based CDHP is about 20% lower than that of a PPO -- $7,541 compared to $9,511, among large employers Employers adding CDHPs may be looking ahead to 2014, when many will experience an increase in enrollment due to auto-enrollment and the requirement to extend coverage eligibility to all employees working 30+ hours per week CDHPs may also help employers avoid hitting the threshold for the excise tax, the PPACA provisions that concerns the most employers 93

94 Key takeaways: The big challenge in health management right now is building employee engagement Use of health management incentives jumped from 27% to 33% of large employers. Over half of employers with 10,000+ employees now use them. More employers are tying the incentive to the health plan. For Health Assessments, most common incentive among large employers is now a lower premium contribution (43%) rather than cash (40%). Median value of contribution: When cash/gift card: $75 When lower contribution: $240 Incentives work! Average participation in lifestyle programs doubles when incentives are used, and Health Assessment completion nearly doubles. Outcomes-based incentives are emerging: More than a third of jumbo employers offer lower premium contributions or other incentives to nonsmokers and 5% provide incentives for achieving healthy BMI, BP, cholesterol levels. 94

95 Key takeaways: Employers that follow cost-management best practices are experiencing success in controlling health benefit cost The survey asks employers about 25 strategies that could be considered cost-management best practices. Respondents were divided into four equal groups based on the number of best practices they follow. When the top and bottom groups were compared, the employers using 8 or fewer best practices had, on average, 13% higher total cost per-employee cost than those using 13 or more and 20% higher PPO/POS cost. Average cost increases for 2011 were higher as well for the group using the fewest best practices compared to those using the most. For employers with PPO/POS plans, the difference was 7.3% versus 5.5%. While not conclusive, these results* support what many employers believe: effective strategies exist to reduce health benefit cost growth! *This analysis was based on survey respondents with 5,000 or more employees because only employers of this size were asked to complete all of the questions concerning best practices. Results are unweighted. 95

96 Questions

97