Growing Large Group and ASO Income

1. Growing Large Group and ASO Income Emmet O’Gara MedeAnalytics

2. Online Resource Center www.medeanalytics.com/er

3. Today’s Presenter Emmet O’Gara, AVP of Payer Solutions Emmet O’Gara has over 16 years of experience in the payer industry, primarily focusing on finance, operations and analytics. As associate vice president of Payer Solutions at MedeAnalytics, Emmet and his team help payers address critical business issues through the use of analytics. Before he joined MedeAnalytics in 2009, Emmet held leadership positions at Blue Cross Blue Shield of Massachusetts, Cigna Healthcare, Accenture and Cap Gemini Ernst & Young.

4. What this Webinar Covers Using Employer Reporting to: • Provide new offerings to the market to drive premium revenue and higher margins • Establish a competitive advantage in the marketplace • Substantially reduce the volume of ad hoc data requests and associated administrative expense • Maintain and grow membership

5. Driving Premium Revenue and Higher Margins 5

6. Challenges to Sustainability • MLR floors • Zealous regulation of rate increases • The Maine Supreme Judicial Court unanimously found that the State did not need to consider profitability when setting rates. • New York announced new audits that will question the underlying data and actuarial assumptions used to justify rate hikes. • The Massachusetts DOI limited rate increases in the individual and small group markets to 2.3%, the lowest increase in a decade.

7. New Offerings • Provide new offerings to the market, which drive premium revenue and subsequent high-margin dollars. Our experience is that our clients are reselling this capability for an additional $0.20 to $0.35 PMPM and garnering significant revenue. • For example: • Participating membership – 1 million • High end increment of premium @ $0.35 PMPM - $4.2 million • Average increment of premium @ $0.28 PMPM - $3.4 million • Low end increment of premium @ $0.20 PMPM - $2.8 million • By offering this capability to employers and assuming ~50% buy in, a health plan might garner between $2.1 and $1.4 million in new revenue.

8. Establishing Competitive Advantage 8

9. Competitive Advantage • Critical clients demand comprehensive reporting • Often those customers cannot understand the value the health plan brings with their current reporting due to: • Complex contracting arrangements with providers • Carved out services (pharmacy, DM, etc.) • DM programs that may be outsourced • Wellness programs requiring long investment There may be a perception that your brokers, consultants and competitors provide the “complete” picture.

10. Demonstrate that the Plan: • Pays for services that work and doesn’t pay for inefficient, duplicative or no-impact services • Has reduced financial barriers to essential care • Has improved adherence to recommended treatments • Has improved employee health and productivity • Has reduced direct and indirect medical costs Above all, demonstrate value.

11. Content Matters We believe there are four major questions that employer reporting needs to address: • Who are we? – focused on the demographics of the employer group • How much are we spending? – looking at claim and administrative costs to the employer as well as how that compares to other employers • Where are the dollars going? – focusing on the utilization of services • What can we change or impact? – focused on opportunities such as medical management, prevention and wellness and benefit design changes

12. Content • Demographics • Male/Female Counts • Age Bands • Total Subscribers/Total Members • Turnover/Tenure • Medical Utilization • Expenses Summary – Facility; Conditions; Network • Pharmacy Rx Compliance and Utilization; Brand/Generic; Mail/Retail/Specialty • By Regional location; Employer LOBs and Departments • In/Out Network • Admissions/Visits by Facility • IP/OP/Prof Cost Drivers • Medical Management • High-Cost Claimants • Case Management • Disease Management • Patient Summarizations • Group Conditions Expense Details by Service • Worksite Wellness • Preventive Care

13. Engagement Matters • All credible accounts • Provide quarterly, semiannual or annual printed reporting • 500 or more subscribers • Provide monthly printed reporting • Provide account-specific, self-service analytics • 1,000 or more subscribers • Provide monthly printed reporting • Provide account-specific, self-service analytics • Provide consultative support prior to the renewal

14. Reducing Ad Hoc Requests 14

15. Why? • Data complexity increases daily • Employers demand more information more often • Managing a self-insured population requires data • Continuing to respond to ad hoc request growth by adding headcount is unsustainable

16. Key Requirements to Reduce Ad Hoc Requests • Fast turnaround of the data • 30 days of lag is no longer acceptable • 24 to 48 hours should be the target • Frequent updates • Monthly was the old standard • Weekly updates enable financial reporting • Daily opens up a whole new world • Ease-of-use and high performance • Self-service analytics can have a very steep learning curve • Slow performance impedes use • Automation • Many “ad hoc” reports are ordered every month • Analysts should not spend half their time formatting reports

17. Associated Cost Reduction Spending resources on collecting data, assembling data, building reports, formatting those reports, then printing/binding/shipping reports is low value. Our experience with other clients has them realizing reallocation of an estimated 25-40% of the FTEs dedicated to creating and maintaining reports for employers, brokers and consultants. • FTE allocation for Employer Reporting 20 • Loaded salary, assuming $85,000 average $1.7 million • Reallocation of 25% to 40% • High end reduction of 40% (i.e. 8 roles) - $680,000 • Average reduction of 32% (i.e. 6 roles) - $544,000 • Low end reduction of 25% (i.e. 5 roles) - $425,000 By deploying this capability, a plan can reallocate resources or dedicate the resources it already has to tasks more in line with their abilities—such as analysis—rather than running and formatting reports.

18. Maintaining and Growing Membership 18

19. A Zero-Sum Game • In 2008, 65% of US workers were employed by large employers.1 • 99% of large employers offered health insurance in 2011.2 • Employees of large employers were far more likely to accept coverage than employees of smaller employers.3 • Membership growth is a zero-sum game. • Census Bureau. Statistics about business size (including small business) from the U.S. Census Bureau [Internet]. Washington (DC): Census Bureau; 2008 [last revised 2011 Oct17; cited 2012 Jan 18]. Available from: http://www.census.gov/econ/smallbus.html • Kaiser Family Foundation, Health Research and Educational Trust. Employer health benefits: 2011 annual survey. Menlo Park (CA): KFF; 2011 Sep. • Ibid.

20. SHOP Exchanges • The Congressional Budget Office (CBO) estimates that 5 million individuals will be covered by SHOP exchanges by 2019, while RAND Corporation estimates 35 million. • The Affordable Care Act (ACA) opens SHOP exchanges to large groups in 2017—employers with more than 200 employees—but adoption is expected to be low. • Regardless, the ACA makes self-insured plans more attractive to companies which can afford stop-loss or which are large enough to not need it. Congressional Budget Office. Letter to the Hon. Nancy Pelosi [Internet]. Washington (DC): CBO; 2010 Mar 20 [cited 2012 Mar 20]. p. 9. Eibner C, Girosi F,  Price CC, Cordova A, Hussey PS, Beckman A, et al. Establishing state health insurance exchanges: implications for health insurance enrollment, spending, and small businesses [Internet]. Santa Monica (CA): RAND Corporation; 2010 [cited 2012 Jan 18]. (Technical Report).

21. Maintaining and Growing Membership • The cost of acquiring new members is 15 times that of maintaining membership. • On a 1,000,000 member business line, 3% to 5% attrition translates into an estimated $146 million to $284 million in lost revenue annually. A little math shows that maintaining membership, even marginally, has significant value:

22. Employer Reporting Employer Reporting provides health plans, brokers and employers with an interactive platform to share performance metrics and make rational, data-driven decisions about benefit design, communication needs and wellness initiatives. Features and Benefits • Provides guided self-service analytics aboutfinancial cost and use, and clinical experience • Gives an integrated view of plan performance • Collaborative environment enablesconsultative sales relationship • Informs data-driven benefit designs • Enables a “culture of health” • Results in increased retention

23. Questions Emmet O’Gara emmet.ogara@medeanalytics.com (603) 799-5483

24. For More Information www.medeanalytics.com/er