Joel Allumbaugh CEO, National Worksite Benefit Group President, Maine Association of Health Underwriters ext. 201

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1 Joel Allumbaugh CEO, National Worksite Benefit Group President, Maine Association of Health Underwriters ext. 201

2 How Does Insurance Work? Employee Perspective Best case have coverage, don t use any health care and remain healthy (net premiums cost only) Worst case have coverage, have catastrophic health event (net premiums + maximum out of pocket) Everyone in between Important Terms Premium Deductible Maximum Out of Pocket 13% 5% 82%

3 How Much Health Care Do People Actually Use? 18% 13% Adults age (privately insured all year in Northeast, 2005) 20% 33% Median (half more/half less) $626 Average (mean) $2,178 16% $0 $1 $500 $501 $1,000 $1,001 $2,500 $2,501+ Source: Medical Expenditure Panel Survey, 2005,

4 Once a High User, Always a High User? For the top 10 of every 100 health care consumers (using more than $5,000 in 2005) in a given year (who consume 65% of all health care used) only 4 will be in the top 10 the following year (41%). However, those 50 with the lowest consumption (less than $800 per person in 2005, using 7% of all health care used) 38 will be low users the following year (75%). Source: Agency for Healthcare Research and Quality, Nov 2007, Statistical Brief #191.

5 Patient Centered Plans Majority of Patients Control All Their Spending Health Care Used by Patient $15,000 $12,500 $10,000 $7,500 $5,000 $2,500 $ At $2,500 deductible: 76% of patients control all health care dollars used All patients collectively control 41% of all health care dollars used Percent of All Patients

6 If so many spend so little, why is insurance so expensive? Pricing Insurance: Expense x Probability + Admin. Cost $100,000 expense, 2% chance you will incur it, 15% admin $100,000 x 2% = $2, % admin = $2,300 cost to insure Common 100% Probability expenses in most insurance policies: Routine exams Maintenance medication There are many other high probability items in most insurance policies.

7 Family Chamber Blue Options $30,000 $29,994 $26,127 $24,000 $18,000 $12,000 $6,000 $17,000 $7,894 $21,551 $8,000 $11,151 $17,747 $10,000 $7,747 $22,372 $10,000 $6,000 $13,127 $14,572 Tax Consequence Annual Individual Max Out of Pocket Annual Family Premium $0 PPO $7k ded. PPO $2k ded. HSA - $10k ded. HMO $2k ded. HMO $1k ded.

8 Changing your approach Employer Perspective Premium Old Model Premium New Patient Centered Model Health savings account (HSA) with optional employer contribution Health reimbursement account (HRA) employer promise to pay

9 $450 $400 $405 $395 $350 $96.25 $300 $250 $83.00 $200 $ $150 $100 $ $50 $0 Current Contributions HSA Contribution Premium Contribution Total Recommended Contributions

10 $6,000 $5,000 $5,000 $4,000 $3,000 $3,900 $ $3, $2,000 $1,000 $0 $3, Current $ $ New Patient Centered ER funded HRA Maximum Out of Pocket (remaining) ER funded HSA Premium Contribution Total

11 5 Year Trend Employer $ $500 $250 $405 $445 $490 $539 $593 $ $396 $406 $418 $430 $442 $ $227 $238 $250 $263 $276 $ HMO Premium HSA Premium HSA ER Contribution HRA ER Funding

12 Case Example Mobius, Inc to Present Change from Old Plan to Patient Centered Plan in 2007 Employee Only Coverage $4,000 $1,400 $3,500 Employee Only Premium $1,200 $1,000 $800 $600 $400 $200 $3,000 $3,000 $1,875 $1,300 $793 $721 $655 $596 $596 $535 $473 $455 $457 $473 $700 $700 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Employee Max OOP (Worse Case) $ $0 Year 1 At Renewal New Plan Add Patient Centered Plan Projected/ Actual Projected/ Actual National Worksite Benefits Group Old Plan Patient Centered Plan Max Employee OOP

13 Case Example Bar Harbor Biotechnology, Inc to Present New Patient Centered Plan in 2007 Employee Only Coverage $4,000 $1,400 Employee Only Premium $1,200 $1,000 $800 $600 $400 $200 $427 $2,500 $2,500 $555 $555 $1,100 $270 $611 $850 $672 $850 $428 $456 $3,000 $2,000 $1,000 $0 $1,000 Employee Max OOP (Worse Case) $ $2,000 Jackson Lab Estimated new plan cost New Patient CenteredPlan Projected/ Actual Projected/ Actual National Worksite Benefits Group Old Plan Patient Centered Plan Max Employee OOP

14 Keys to An Effective Patient Centered Benefit Fostering a culture of health care consumerism among all employees, beginning with senior executives Implementing a focused employee education campaign Offering wellness programs and incentives for healthy behaviors, as well as 100 percent coverage for preventive care Carefully constructing a benefits package that includes appropriate levels of employee financial responsibility

15 Key Findings of Patient Centered Employees 1. Committed in Wellness The Blue Cross Blue Shield Association 2007 CDHP Member Experience Survey showed HSA plan members were more engaged in wellness and prevention: Smoking cessation 6% 20% Stress management 8% 22% Nutrition/diet program 12% 27% Exercise program 12% 29% 0% 5% 10% 15% 20% 25% 30% Patient Centered Traditional

16 Key Findings of Patient Centered Employees 2. Focused on Cost & Quality The Blue Cross Blue Shield Association 2008 CDHP Member Experience Survey showed HSA plan members researched cost and quality of providers much more: Search the Internet for a lower priced Rx 15% 21% Use mail order Rx 30% 43% Ask doctor about cost of treatments 33% 52% Choose lower cost treatment option 23% 36% 0% 10% 20% 30% 40% 50% 60% Patient Centered Traditional

17 Key Findings of Patient Centered Employees 3. Saved for the Future The Blue Cross Blue Shield Association 2008 CDHP Member Experience Survey showed HSA plan members planned for health expenses more thoroughly: Discussed Health Expenses with Physician 27% 38% Estimated Future Health Care Expenses 22% 38% Tracked Health Care Expenses 40% 72% 0% 10% 20% 30% 40% 50% 60% 70% 80% Patient Centered Traditional

18 Joel Allumbaugh President, Maine Association of Health Underwriters CEO, National Worksite Benefit Group ext. 201