Managing Employee
Benefit Costs in
the Health Care
Reform Era
Thom Mangan
CEO United Benefit Advisors
Copyright © 2013 United Benefit Advisors, LLC. All Rights Reserved.
About the UBA Health Plan Survey
Copyright © 2012 United Benefit Advisors, LLC. All Rights Reserved.
Why We’re Here
Copyright © 2012 United Benefit Advisors, LLC. All Rights Reserved.
3
Top Decision-makers’ Concern About the Cost
of Health Care Benefits with Respect To:
58.28%
44.64%
42.60%
35.50%
10.65%
5.63%
1.64% 0.47%
0.31% 0.31%
Corporate Costs
Critical Concern
Significant Concern
Impact on Employees
Some Concern
Little Concern
No Concern
4
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Increases in Health Insurance Premiums
Compared with Other Indicators 1988 - 2012
20.00%
18.0%
18.00%
16.00%
14.0%
13.9%
14.00%
12.9%
12.0%
11.2%
12.00%
10.9%
9.2%
10.00%
8.2%
8.5%
7.7%
7.3%
8.00%
6.1%
5.3%
6.00%
8.0% 8.2%
5.0%
4.00%
2.00%
0.00%
0.8%
-2.00%
1988 1989 1990 1993 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Health Insurance Premiums
Overall Inflation
Workers' Earnings
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 1999-2007; KPMG Survey of Employer-Sponsored Health
Benefits: 1993, 1996; The Health Insurance Association of America (HIAA): 1988, 1989, 1990; Bureau of Labor Statistics, Consumer
Price Index, U.S. City Average of Annual Inflation (April to April), 1988-2011; Bureau of Labor Statistics, Seasonally Adjusted Data
from the Current Employment Statistics Survey (April to April), 1988-2011.
5
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Health Care Costs Per Employee Per Year
$10,000
$9,000
$8,688
$8,960
$1,321
$1,369
$1,388
2010
2011
$8,211
$8,000
$6,881
$7,000
$6,000
$5,000
$3,821
$4,000
$3,000
$2,000
$1,000
$242
$0
1969
$623
$398
1979
$1,020 $1,377
1995
2007
Health Care
2012
CPI
6
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2014 and Beyond
7
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Health Care Costs Per Employee Per Year
1969
$242
$10,000
$9,000
$8,000
1979
$623
$7,000
$6,000
$5,000
$4,000
1995
$3,821
$3,000
$2,000
$1,000
2011
$8,960
$0
1969 1979 1995 2012
8
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2012 Health Care Trend – Med + RX
Type of Plan
2012 Trend
 Preferred Provider Organization
9.9 %
 Health Maintenance Organization
9.5 %
 Point-of-Service Plan
9.8 %
 Consumer-Driven Health Plan
9.8 %
 Indemnity Plan
10.5 %
 Prescription Drugs Only
9.6 %
9
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Why Should You Care
• Cadillac Tax – 2018 – 40% excise
•
•
•
Employee - $10,200
Dependent - $27,500
1% CPI
• Avg. Public Employers Penalty in 2018 (Family)
IL
$2,442
$9,802
MA $5,732
$19,699
2018
2020
2018
2020
10
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The Effects of Inflation
on Medical Premiums @ 5% / 10%
Year
5.00%
0.05 Per Year
Single
Family
10.00%
0.1 Per Year
Single
Family
2012
$5,472
$13,320
$5,472
$13,320
2015
$6,335
$15,420
$7,283
$17,729
2018
$7,333
$17,850
$9,694
$23,597
2021
$8,489
$20,664
$12,903
$31,408
2024
$9,827
$23,921
$17,173
$41,804
11
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Type of Plan Offered
60%
50%
46.9%
40%
30%
22.5%
19.1%
20%
9.8%
10%
1.7%
0.1%
0%
PPO
HMO
POS
CDHP
EPO
FFS
12
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Average Annual Medical Plan Cost per
Employee by Plan Type
$14,000
$12,274
$12,000
$10,000
$9,372
$9,308
$8,507
$9,227
$8,960
$8,403
$8,000
$6,000
$4,000
$2,000
$0
PPO
HMO
POS
CDHP
EPO
FFS
All Plans
13
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Annual Cost Per Employee – Total Cost
$12,000
$10,259
$9,451
$10,000
$8,763
$7,821
$7,694
$8,000
$6,000
$4,000
$2,000
$0
Northeast
Southeast
North Central
Central
West
14
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More Granular is More Accurate
National
$456
PPO
$475
HMO
$451
CDHP
$409
Central
$373
Southeast
$380
Northeast
$430
South Carolina
Georgia
$429
North Carolina
$372
$405
15
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Health Plan Costs
16
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What do you predict will happen to health plans
in the next 5 years?
Costs will shift more to employees
A move to Individual coverage and HSAs
All cost and quality data will be directly
accessible to employees in advance of
purchasing care
A return to more tightly controlled managed
care plans
Strongly Agree / Agree
87.32%
3.44%
58.96%
12.08%
45.15%
19.70%
41.35%
25.94%
Disagree / Strongly Disagree
17
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Health Plan Costs
• The average monthly premium was $456
single, $1,110 Family
• The 2012 average annual plan cost per
employee was $8,960 vs. $ 8,688 in 2011
18
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Health Plan Costs
• The 2012 employee share for plans with
employee contributions was up from $3,612 in
2011 to $3,776 in 2012 or 28.2% of the total
employee premium.
• The employer share for plans with employee
contributions decreased from 72.6% in 2011
to 71.8% in 2012.
19
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Renewal Analysis
Initial Offer Final Rate
All Plans
10.2%
5.0%
5.0% - 15.0%
46.2%
41.2%
0.0% - 25.0%
82.5%
76.1%
< 0.0%
9.8%
21.8%
> 25.0%
7.8%
2.7%
20
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Average Percent Increase
Last Plan Anniversary by Plan Type – PPO
10.0%
7.8%
7.9%
8.0%
6.0%
4.9%
4.0%
2.0%
0.0%
2010
2011
2012
National
21
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Average Percent Increase
Last Plan Anniversary by Plan Type – HMO
12.0%
9.6%
10.0%
8.8%
8.0%
5.6%
6.0%
4.0%
2.0%
0.0%
2010
2011
2012
National
22
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Average Percent Increase
Last Plan Anniversary by Plan Type – POS
10.0%
9.1%
7.8%
8.0%
6.3%
6.0%
4.0%
2.0%
0.0%
2010
2011
2012
National
23
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Average Percent Increase
Last Plan Anniversary by Plan Type – CDHP
10.0%
7.6%
8.0%
7.3%
6.0%
4.0%
4.0%
2.0%
0.0%
2010
2011
2012
National
24
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Average Annual Cost per Employee – PPO
$10,000
$9,005
$8,519
$9,308
55.0%
53.0%
$8,000
51.0%
$6,000
49.0%
47.0%
$4,000
45.0%
$2,000
43.0%
$0
41.0%
1
2
National
3
National ERs Offering
25
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Average Annual Cost per Employee – HMO
$12,000
20.0%
$8,107
$8,000
$8,960
19.0%
$7,585
18.0%
17.0%
$4,000
16.0%
$0
15.0%
2010
2011
National
2012
National ERs Offering
26
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Average Annual Cost per Employee – POS
$12,000
$10,000
10.0%
$9,303
$9,372
$8,991
9.5%
$8,000
$6,000
9.0%
$4,000
8.5%
$2,000
$0
8.0%
2010
2011
National
2012
National ERs Offering
27
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Average Annual Cost per Employee – CDHP
$10,000
23.0%
$8,403
$9,000
$8,000
$8,161
$7,590
22.0%
$7,000
$6,000
$5,000
21.0%
$4,000
$3,000
20.0%
$2,000
$1,000
$0
19.0%
2010
2011
National
2012
National ERs Offering
28
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Plan Design
Components
29
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PPO Plan Designs
• Median PPO Deductible = $1,000 / $2,250
• Median PPO Coinsurance = 80% / 60%
• Median PPO OOP Max. = $3,000 / $7,000
• Median PPO Office Visit Co-Pay = $25
30
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Median Copay - HMO
$35
$35
$30
$30
$30
$25
$25
$20
$20
$20
$15
$10
$5
$0
2010
2011
National PCP
2012
National SCP
31
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Average Single In-Network Out-Of-Pocket
Maximums – HMO
$2,798
$2,800
$2,700
$2,576
$2,600
$2,436
$2,500
$2,400
$2,300
$2,200
2010
2011
2012
National
32
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Median Coinsurance Percentage – HMO
100%
100%
100%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2010
2011
2012
National
33
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Top 5 Pharmacy Benefit Management (PBM)
1. Multi-tiered drug formularies that promote generic
utilization
•
30 brand names came off patent last year
• Generics are highly effective to treat 9 out of 10 patients
2. Narrowing pharmacy networks to leverage deeper
discounts
3. Carving out pharmacy management to a PBM
4. Specialty drug utilization management
•
$11 billion - 2012
• $19 billion - 2014
5. Value-based insurance plan – multi-tiers
•
Four-tier plans
• 2004 – 4%
• 2012 – 14%
34
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Median Rx Retail Copays – 2-tier
$40
$35
$30
$30
$30
$30
$25
$20
$15
$10
$10
$10
$10
$5
$0
2010
National Tier One
2011
2012
National Tier Two
35
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Median Rx Retail Copays – 3-tier
$50
$50
$50
$50
$45
$40
$35
$30
$30
$30
$30
$25
$20
$15
$10
$10
$10
$10
$5
$0
2010
2011
National Tier One
National Tier Two
2012
National Tier Three
36
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Median Rx Retail Copays – 4-tier
$90
$85
$80
$80
$75
$70
$60
$50
$50
$50
$50
$40
$30
$30
$30
$30
$20
$10
$10
$10
$10
$0
2010
National Tier One
2011
National Tier Two
2012
National Tier Three
National Tier Four
37
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Spotlight on CDHP
Findings: Debunking
the Savings Myths
38
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% of Employees Enrolled by Plan Type
by Region (CDHP)
26%
24%
21.3%
22%
19.3%
20%
18%
15.0%
15.3%
16%
14%
12%
10%
7.7%
8%
6%
4%
2%
0%
Northeast
Southeast
North Central
Central
West
39
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Real Average Annual Cost per EE with ER
HRA/HSA Contribution – All Plans
$10,403
$12,000
$9,435
$9,308
$10,000
$8,758
$8,000
$6,000
$4,000
$2,000
$0
PPO
CDHP w/HRA
CDHP w/HSA
CDHP w/Both
40
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Annual HRA Funding Levels
$928
$1,000
$900
$800
$700
$575
$600
$500
$400
$360
$300
$300
$200
$100
$0
Median Single
Average Single
Median Family
Average Family
41
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Spotlight on CDHP Findings:
Debunking the Savings Myths
• 2012 UBA Health Plan Survey shows
that CDHPs do not prove to generate
higher savings for employers than
other plan types with the same
deductible.
• Unless…
42
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Average Annual Cost per EE by Deductible
Level
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
CDHP
PPO
43
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Spotlight on CDHP Findings: Debunking the
Savings Myths
• Regardless of health plan design, health care
costs are rising because employees are making
uninformed health care consumer choices
• Lower health costs = informed consumer activity
• Plan type doesn’t matter – what’s needed is
employee communication on how to make better
health care consumer choices
• Plan Design Matters – HSAs provide much better
outcomes than HRAs. Reason – Patient
Responsible for the Deductible
44
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Other Findings:
Wellness Programs
45
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Percent Offering Wellness by Employee Size
70%
58.9%
60%
47.7%
50%
37.8%
40%
30%
23.1%
17.2%
20%
8.3%
9.8%
10%
0%
3 - 24
25 - 49
50 - 99
100 - 199
200 - 499
500 - 999
1000 +
46
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Wellness Programs and Components
90%
81.0%
80%
65.4%
70%
62.4%
60%
51.3%
50%
50.0%
41.5%
40%
30%
15.0%
20%
10%
0%
Health Risk
Assessment
Seminars /
Workshops
Physical Exam
or Blood Draw
Coaching
Incentives /
Rewards
Web Portal
Other
47
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Next Steps…
48
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Future National and Regional
•
•
•
•
•
•
•
High Performance/Tiered Provider Networks
Patient-Centered Medical Homes
Transparency in Pricing
Transparency in Outcomes
Accountable Health Care Organizations – ACO
ASO Plans
Increase in Premiums – Cost Shifting
49
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What Should I Do Today?
• Benchmark your plan – “You can’t manage what you can’t
measure”
• Determine your Goals and Objectives
• High Level of Benefits – Attract and Retain
• Mid-Level of Benefits – Competitive
• Low Level of Benefits – Just the Minimum to Meet
PPACA
• Manage Your Plan!
• Claims – 10% of your people are driving 80% of your
costs
• Plan Design Drives Performance
• Treat Wellness Like Workers’ Compensation
50
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This program, ORG-PROGRAM-140095,
has been approved for 1.25 (General)
recertification credit hours toward PHR,
SPHR and GPHR recertification through
the HR Certification Institute.
Please be sure to note the program ID number on your
recertification application form.
For more information about certification or recertification,
please visit the HR Certification Institute website at
www.hrci.org.
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