We provide a comprehensive array of consulting services, including:

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1 We provide a comprehensive array of consulting services, including: ááhealth and Welfare ááretirement ááclaims Audit áácompliance áácommunications ááadministration and Technology áácompensation and Bargaining Benefits, Compensation and HR Consulting For more information, contact Ruth Donahue, Vice President at

2 , Trends Health Plan News at a Glance for the Public Sector Third Quarter Learn more by clicking on the blue text below. Key Statistics Increase in Medicare Advantage (MA) Enrollment Between 1999 and, the enrollment in MA plans has steadily increased from 6.9 million to 19 million. Since 2010, when the Affordable Care Act (ACA) became law, enrollment has grown 71 percent. Source: Recreated with permission. Medicare Advantage Spotlight: Enrollment Market Update (The Henry J. Kaiser Family Foundation, June ) The results of the Commonwealth Fund Scorecard on State Health System Performance indicate that the rate of premature death (before age 75) for treatable conditions increased in two-thirds of states. These deaths are primarily a result of heart disease and other chronic conditions but the trend is also due to death from opioid and alcohol abuse. The Pharmacy Benefit Management Institute released the Trends in Specialty Drug Benefits Report. Key findings include: Over half of plan sponsors (51 percent) use coinsurance for pharmacy benefits, compared to 43 percent who use copayments. Formulary exclusions continue to increase in popularity as a way to manage specialty drug trend. More than half of plans include formulary exclusions for specialty drugs while 38 percent are considering implementing this strategy. Compliance News Repeal of the Affordable Care Act (ACA) The senate voted to begin working on legislation to repeal the ACA. Segal Consulting has developed a chart comparing the provisions of the ACA with the House-passed bill and draft of the Senate bill. Preventive Services Update The ACA requires non-grandfathered health plans to provide certain preventive services in-network without charge. An updated list of required preventive services under the ACA was published by several federal agencies. Stability for the Individual Market A final rule aimed at providing some stability to the individual insurance market was published by the Department of Health and Human Services. This includes coverage available through the federal Marketplace/state Exchanges. The rule does not apply to employer-sponsored plans yet employers may be affected by some requirements, particularly those with early retirement programs. Segal Consulting released a summary of ACA dollar amounts and percentages (that are indexed to various measures of inflation or that change from year to year). A comparative chart was also released summarizing the key features of Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs). Segal Health Care Reform Resources The Health Care Reform Resources page on Segal s website links to all publications and other resources related to health care reform. The Vendor Marketplace Aetna sued Humble Surgical Hospital (Humble), claiming that Humble billed patients at or near in-network rates but submitted inflated reimbursement requests to Aetna. A U.S. District Court found in favor of Aetna. U.S. health regulators approved the expansion of Merck s cancer drug called Keytruda. When added to chemotherapy, the drug can treat lung cancer (which is the leading cause of cancer deaths in the U.S. according to the American Cancer Society). Anthem announced it will not renew its 10-year contract with ESI when it expires at the end of The Anthem business is worth $17.1 billion in annual revenue for ESI. What Employers Are Doing to Manage Plans: Selected Strategies The U.S. Preventive Services Task Force released recommendations for the use of the cholesterol-lowering drugs, known as statins, for adults who meet certain qualifications. These adults will not pay a copayment for select low-to-moderate dose statin drugs if their plan is non-grandfathered. PBM preventive drug lists will begin including select statins with no copayment this fall. The inclusion of statins will increase costs for employers (approximately $0.19 to $0.50 per member per month depending on copay structure and plan design). Employers should review their prescription drug plans prior to the effective date of plan years beginning on or after December 1,. Out-of-network billing schemes continue to increase plan costs. Since PPOs are still the most prevalent plan, employers should pay attention to coverage costs and ensure that vendors are protecting their plan from such abuses. Employers should also consider using data mining to understand out-of-network abusive patterns, auditing payments to out-of-network providers, increasing member out-of-pocket maximums and cost sharing for out-of-network utilization to mitigate costs. Many self-funded plans are considering/installing onsite or near-site clinics as a way to provide a true patient-centered medical home to their beneficiaries. When designed and incented correctly, plan-sponsored clinics can help the plan gain better control of primary care, help direct care to quality providers, and can work very well as a hub of wellness. To discuss the implications for your plan, contact your Segal consultant or get in touch via our website. Copyright by The Segal Group, Inc. All rights reserved.

3 State Employee Health Benefits Costs and Cost Sharing Increasing How Does Your Jurisdiction Compare? Average total premiums for employee-only and family coverage in PPOs/POS plans and HDHPs/CDHPs have risen by double digits between and. 10% 11% 14% 16% 8% 6% PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs Some state plans experienced increases well below the average, while others saw premium costs rise by even greater percentages. Although average increases for HMOs/EPOs were in the single digits, premiums for employee-only coverage in that plan type were 11 percent higher than premiums for PPOs/POS plans and 46 percent higher than for HDHPs/CDHPs. On average, states are requiring employees to share more of the premium cost. PPOs/POS Plans HDHPs/CDHPs HMOs/EPOs 16% 14% 10% 11% 13% 12% 25% 23% 24% 22% 22% 20% State employees who have employee-only coverage in HDHPs/CDHPs continue to have an attractive premium cost-sharing requirement, an indication that states with account-based plans are investing in promoting health care consumerism. Segal Consulting s latest State Employee Health Benefits Study is based on a review of information available on websites of all states and the District of Columbia about coverage offered to full-time employees as of January 1, through hundreds of plans (including plans with July 1, effective dates). Averages are based on all plans offered for and without taking into account changes in offerings. Request the report of the full study results.

4 Key Questions to Ask About Your Jurisdiction s Health Coverage How can we manage our health plan cost increases to get them in line with what other jurisdictions are experiencing? How can we be sure the coverage choices we offer are the right ones for our employees and their families? How competitive is the coverage we offer compared to our chosen peer jurisdictions and the private sector employers with which we compete for talent? How often should we review our cost-sharing requirements in light of employee compensation? How well do our employees understand the value and risk associated with each of the coverage options our plan provides? Segal can help you answer those questions and review the effectiveness of these aspects of your health plans: Plan types, Number of plans offered, Number of premium tiers, Cost-sharing requirements, Benefit levels, Eligibility criteria, Prescription drug coverage, Wellness, Retiree health coverage, Vendor management, Data analytics, Administration, Technology, Employee communications, and Compliance. Segal works with states and other public plans and employers on the design of their health benefit plans. To discuss your offerings and cost-management strategies, contact Richard Ward. Copyright by The Segal Group, Inc. All rights reserved.

5 Price Inflation and Specialty/Biotech Drugs Drive Health Plan Cost Trend Increases Wages continue to be outpaced Specialty and biotech drugs trend* increase makes up a 35 percent increase in projected Rx drug cost trend for, up from 25 percent just two years ago. Average increase in network reimbursement allowances** for services such as hospitals, imaging and primary care providers are driving most of price inflation. This contributes to overall cost trend increases. Network Reimbursement Hospital Imaging Primary Care Provider 4.1% 3.3% 2.8% Rate TOP cost-management STRATEGIES Implement specialty pharmacy management Intensify current pharmacy management programs Contract with value-based providers, including accountable care organizations and Patient-Centered Medical Homes Lower primary care cost through telemedicine, walk-in clinics and on-site clinics Increase financial incentives in wellness design Health plan cost trends in outpace wage increases more than threefold. 11.3% Rx Drugs Open-Access PPO/POS Plans 7.8% Wage Increases 2.5% * A trend is a forecast of per capita claims cost increases. ** Network reimbursement allowances are the amount paid to network providers for specific health treatments and services. These are just a few key findings from the Segal Health Plan Cost Trend Survey, taken from claims data submitted by nearly 100 managed care organizations, health insurers, pharmacy benefit managers and third-party administrators. Read the report of the survey results. To learn more about health care cost-management strategies that are right for your organization, contact Ed Kaplan, Eileen Flick or Richard Ward. Copyright by The Segal Group, Inc. All rights reserved.