Affordable Benefits in Today’s Market

1. Affordable Benefits in Today’s Market Lehigh SHRM Conference Thomas N. Dondore, SPHR HRS/TND Associates, Inc www.hrstndassociates.com 610 371 9505

2. Total U.S. Health Care Costs 2005 $1.9 Trillion 2009 $2.5 Trillion 2015* $4.0 Trillion

3. Picture of America • Chronic diseases claim the lives of more than 1.7 million Americans annually. • Seventy percent of all deaths are related to chronic disease each year. • Ten percent of Americans (25 million) are limited in their daily activities by chronic disease. • Thirty-three percent (57.3 million) of the working age population are estimated to have at least one chronic condition. Seventy percent of healthcare costs in the U.S. are for chronic disease. Source: Centers for Disease Control and Prevention (2004a), Center for Studying Health System Change (2004

4. Age-Adjusted Death Rates for All Causes in the U.S. • Since 1960, death rates for all causes have decreased by 38%, reflecting advances in medical science and lifestyle changes.

5. A central question remains … Should decisions be controlled by government or by consumers in a freer and more competitive marketplace? System Bad? Or costs bad?

6. International Health Spending per Capita •  In fact, the U.S. spends much more per person on healthcare than other countries, as well as a larger percent of Gross Domestic Product.

7. How We Got Here • Pace of society • Need for instant gratification • Transcendence of technology • Belief that there’s a cure for everything • Wonder drugs • Entitlement mentality • Total misunderstanding of insurance

8. 1¢ Durable Medical Products 2¢ Nursing Home and Home Health 9¢ 14¢ 14¢ 31¢ 29¢ Admin Other Services Hospital Care Physician Services Prescription Drugs The Nation’s Health Dollar: Where Does It Go? Physician & Clinical Services 22% Physician & Clinical Services 22% Source: Adapted from Centers for Medicare and Medicaid Services

9. THE HEALTHCARE DILEMMA At an annual increase of 15%, the cost of a health insurance program will double every 5 years.

10. How Does Trend Affect My Rates? Example: Claim Deductible Insurance Carrier Payment 2008 $500 -$400 $100 x .9 $90 2009 $575 -$400 $175 x .9 $157.5 % Increase 15% 0 75% Assumptions: | Deductible $400 | Coinsurance 90/10 | Claim $500 | Trend @ 15%

11. Uninsured in America • Census Bureau estimates 47 to 50 million uninsured 2003 15.6% Uninsured 1993 15.3% Uninsured 1996 15.6% Uninsured 307,711,208 Currently 15.2% of population One birth every.................................. 7 seconds One death every.................................. 13 seconds One international migrant (net) every............ 36 seconds Net gain of one person every..................... 11 seconds

12. Uninsured in America • 14 million Americans are Eligible but Not enrolled in Medicaid & Children Health Insurance Plans (CHIP’s) • 15 Million in households under $25,000 of income • 15 million with household income above $50,000 of which 7.6 million households above $75,000 • 18 million between 18 and 34 years old

13. U.S. Average: 15.1% PA about 11% U.S. Uninsured Percentage by State (before MA program) Source: U.S. Census Bureau 2006 Massachusetts now has about 97% coverage. Forced system.

14. The next big thing Consumer choice in health care

15. Consumers are Disengaged Consider This Fact: • Most consumers pay more for a haircut than they pay for a doctor visit.

16. HSAs HRAs Reduce Insurance Premiums • Together, a HIGH deductible insurance plan and an HRA/HSA can provide the perfect combination of affordability, flexibility and security for employers with groups who are willing to assume a little more risk in exchange for significant premium savings! • Problem – PA insurers have yet to find the right place to price them • Problem – Educating employees to accept them

17. HRA – Health Reimbursement Arrangements • The value of a HRA is that it allows an employer to choose a health insurance plan that has higher co-pay options and/or deductibles. The HRA off sets a portion of the employees out-of-pocket expenses. • The HRA plan is set with predetermined limits and is funded/paid for by the employer. • HSAs set up ee owned long term account that both can fund

18. Pre-2002 MERP’s • A Medical Expense Reimbursement - Section 105 of IRS code • No rollover of dollars at end of plan year • Employer funded and owned • MERP’s have been around since 1956

19. Advantages for Employers – HRAs (MERP) • You do not need to pre-fund the account • You retain ownership of the funds if the employee terminates • HRAs are available to any size group • HRAs allow employers to offer a high deductible plan and allocate the savings to the HRA for future employee-directed healthcare.

20. Employee Benefits • Medical reimbursements are made tax-free • Employer Funded • Designed to off set out-of-pocket expenses • Freedom of Choice • Less likelihood of premium increases • COBRA compliant

21. To be continued • With outcomes of pending health care reform….if Congress can really get it done!

22. Get Ready for our prediction on Health Care Reform……. • We have no idea, whatsoever!

23. Best guesses on reform • Whatever it is it won’t happen until 2013 at the earliest. (meaning another nearly five years and a doubling of premiums) • No 24/7 plan • 50/50 on public option • House has three plans pending • BIG BUCKS!!!

24. Savings Now Stuff to Know • Underwriting - field and standard • Commissions >100 rate neutral • Brokers – Working FOR you? • Financing options – larger groups • Plan Design – Options from carrier • Plan Presentation – Your company’s strategy for coverage HRS/TND Associates, Inc.

25. Savings Now - Commissions • Rate neutral concept – generally under 100 lives the carriers pay a fixed commission; brokers cannot negotiate • Trend to per capita fees, not percentages • Over 100, brokers can request quotes based on a predetermined rate • Use a broker/go direct with carrier at >100 rates are identical • Carriers prefer to work with brokers – Gas (Wholesalers/Clearing house)

26. Employer’s Design Strategy • First $ paying is most expensive – both Rx and Dx • Opt out programs pay off • Spouses out • Benefit surveys – focus on benefits ee’s want • Knowledge of the general health of your workforce

27. Employer’s Design Strategy • Deductibles: those who use the most, pay the most • Co-premium (ee contribution) payment means all ees pay • 100% plan coverage vs. 80/20 or 90/10 • Subsidy on deductibles

28. Employer’s Design Strategy Consider your own internal “self-insurance” program • Purchase higher deductible coverages • Company pays portion of the deductible with proof of payment (EOB) • Ex. $1000 deductible plan and company pays $500 for each ee

29. Employer’s Design Strategy • Must have at least a premium only 125 plan – pre-tax deductions • Tiers of premium – 3, 4, or 5 • Dual options – if over 20 participants • What are common premium sharing programs? (27%)

30. Top tips to try Deadlines matter • 33 days is drop dead time • 24 hours to 14 days quoting times • Consider mail and delivery times • Renewal delivery scheduled so you have little shopping time • Self insuring some items – STD, i.e. • There are no exceptions

31. Top tips to try Have your documentation ready • Proof of corporate identity • Proof of individual employment • Waivers, enrollment forms and proper application forms • First month premium check

32. Top tips to try • SHOP SHOP SHOP • You do NOT have an annual contract – you can change carriers and brokers at any time! • Waivers--Offer incentives for ee’s to waive coverage • Consider Plans with minor health screening prior to rating

33. Tips to Try • Get your quotes early - 60 days or more • Use a broker – select carefully and have them compete. Ask “What will you do for me after open enrollment”

34. What we should do now • 1. Fight the Big FiveChronic conditions (including coronary artery disease, diabetes, congestive heart failure, asthma, and depression) are responsible for 75 percent of our health care spending. • What can you do now?

35. What we should do now • 2. Reduce Medical Errors by Thinking Like an Airline • When a plane crashes, it’s public investigation – if it’s medical boo boo, it is swept under the rug. We lose 100,000 to medical errors each year – like a 747 crash every day! • What can you do now?

36. What we should do now • 3. Pay Employees for Healthy Habits • Use incentives and penalties. • Wellness is not a tomorrow payoff, but it must happen. • What can you do now?

37. What we should do now • 4. E-Prescribe • Paper scripts are archaic, cause 1.5 million injuries and 7,000 deaths each year from errors. • Medicare needs to incentive docs to use it. • Software to do it is free to docs • What can you do now?

38. What we should do now • 5. More retail clinics, fewer ER visits • 30 to 80% less cost than D. O. Visit and scads less that ER’s • Staffed by PAs and NPs. • AMA not keen on idea. • What can you do now?

39. What we should do now • 6. Don't Hire Smokers • Miracle-Gro did it and went from 25% smokers and 50% obese to 8% smokers in 4 years. • Incentives and well programs offered • 90% did health assessment • What can you do now?

40. What we should do now • 7. Electronic Medical Records • Current govt. incentives in play • Modeled after the Vet’s system • Save up to $80 billion if 90% of providers participated • Reduce errors, too. • What can you do now?

41. Thank you for your attention A complete copy of this slide program is available on our website homepage at www.hrstndassociates.com Also available on the website are 10 more What You Should Do Now! YOUR Questions???