2018 SOUTHEAST MICHIGAN MID-MARKET GROUP BENEFITS SURVEY

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1 2018 SOUTHEAST MICHIGAN MID-MARKET GROUP BENEFITS SURVEY MAY / JUNE YEARS OF NATIONAL HEALTH CARE COSTS AVERAGE COST INCREASE BEFORE CHANGES 12.0% 10.0% 8.0% 8.3% 9.1% 9.8% 8.2% 7.4% 8.0% 7.1% 6.3% 6.3% 6.5% 6.0% 4.0% 2.0% 0.0% PROJECTED ANNUAL CHANG IN HEALTH BENEFIT COST PER EMPLOYEE - EXPECTED TREND BEFORE PLAN CHANGES SOURCE: MERCER S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS,

2 TO GET THERE: FOLLOW A THOUGHTFUL PROCESS SET OBJECTIVES HR AND FINANCE MAKE THEM CLEAR EFFICIENT ARRANGEMENTS OVERALL PLAN STRUCTURE INDIVIDUAL PLANS BEST PRACTICES OPERATIONAL PROCEDURES SYSTEMS AND AUTOMATION INNOVATION EXPLORE NEW IDEAS (SKEPTICAL) IMPLEMENT WHERE APPROPRIATE TRIED AND TRUE COST SAVING MODIFICATIONS MEET BUDGET LIMITATIONS 2 2 DEMOGRAPHICS

3 A QUICK REFRESHER TH PERCENTILE MEDIAN 75 TH PERCENTILE AVERAGE: ALL OF THE NUMBERS ADDED TOGETHER AND DIVIDED BY THE TOTAL RESPONSE COUNT WE LOOK AT 2018 LOCAL DATA COMPARED TO 2017 NATIONAL DATA MERCER NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS, 2017 WE EXAMINE LOCAL DATA FROM TWO PERSPECTIVES: ALL SURVEY PARTICIPANTS TRENDBENDERS 4 SUMMARY OF DEMOGRAPHICS THE SURVEY IS STATISTICALLY VALID WITH A 4.7% MARGIN OF ERROR PROGRESSIVE BENEFIT SOLUTIONS (PBS) ACTUARIAL SERVICES IN ADDITION TO THE 357 MICHIGAN-BASED PARTICIPATING ORGANIZATIONS, 18 SCHOOLS AND 17 MUNICIPALITIES PARTICIPATED. THEIR DATA IS NOT REFLECTED HERE 84% (333) ARE YEAR-OVER-YEAR RETURNING PARTICIPANTS 7% (27) ARE NEW PARTICIPANTS 7% (27) HAVE PARTICIPATED IN ALL 15 YEARS OF THE MARSH & MCLENNAN AGENCY SURVEY! THE AVERAGE NUMBER OF EMPLOYEES IS 859; THE MEDIAN NUMBER IS % OF PARTICIPANTS ARE UNIONIZED OR HAVE UNION PRESENCE 22% OF PARTICIPANTS ARE AUTO SUPPLIERS 5

4 TOP STORIES TOP STORIES OF 2018 LOCALLY, HEALTH PLAN COST INCREASE AT 5% AFTER PLAN CHANGES 5% IN 2017; 4% IN 2016 AVERAGE COST INCREASE BEFORE PLAN CHANGES: 8% (9% IN 2017) WHILE CDHP PLAN ADOPTION HAS SLOWED, CDHP EMPLOYEE ENROLLMENT CONTINUES TO GROW LOCALLY (2018), 53% OFFER; 30% OF EMPLOYEES ENROLL (VS. 52% 25% IN % 20% IN 2016) NATIONALLY (2017), 64% OFFER; 34% OF EMPLOYEES ENROLL (VS. 61% 33% IN % 28% IN 2015) CDHP EMPLOYEE CONTRIBUTIONS BOTH LOCALLY AND NATIONALLY HAVE DECREASED SE MICHIGAN, PPO DEDUCTIBLE HITS THE CENTURY MARK AVERAGE PPO DEDUCTIBLE IS $1,014 IN 2018 (2017 AVERAGE, $985) MEDIAN PPO DEDUCTIBLE LANDS AT $750 IN 2018 (2017 MEDIAN, $600) 7

5 TOP STORIES OF 2018 TO CONTROL COSTS, EMPLOYERS ARE TARGETING THEIR PRESCRIPTION DRUG PLANS MORE UTILIZATION MANAGEMENT PROGRAMS MORE SPECIALTY TIER PLAN DESIGNS MORE PRESCRIPTION DRUG CARVE-OUTS (SELF-FUNDED EMPLOYERS) TELEMEDICINE CONTINUES TO FLOURISH 3 OF 4 LOCAL/NATIONAL EMPLOYERS SPONSOR A TELEMEDICINE OFFERING ADOPTION OF HEALTH & WELLBEING AS A BUSINESS STRATEGY CONTINUES TO INCREASE TRENDBENDER VS. NON-TRENDBENDER : MEANINGFUL DIFFERENCE IN AVERAGE COST INCREASE 8 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 9

6 MOST EMPLOYERS OFFER MULTIPLE PLANS NUMBER OF PLANS OFFERED BY SURVEYED COMPANIES: 16% OFFER 1 PLAN 29% OFFER 2 PLANS 32% OFFER 3 PLANS 23% OFFER 4 OR MORE 84% OF COMPANIES OFFER AT LEAST 2 PLANS 10 PLAN OFFERINGS PERCENTAGE OF SURVEYED COMPANIES OFFERING PPO, HMO, AND/OR A CDHP: PPO 84% 85% 84% 84% HMO 31% 29% 43% 41% CDHP 52% 53% 61% 64% 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2017 MMA MICHIGAN SURVEY 2018 MMA MICHIGAN SURVEY 11

7 PPOs DOMINATE ENROLLMENT PERCENTAGE OF EMPLOYEES ENROLLED IN PPO, HMO, AND CDHP: PPO 53% 52% 52% 61% HMO CDHP 14% 14% 14% 18% 33% 34% 25% 30% 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2017 MMA MICHIGAN SURVEY 2018 MMA MICHIGAN SURVEY 12 PLAN OFFERINGS PPO VS. CDHP A 5-YEAR LOOKBACK % OF PLAN OFFERING PREVALENCE MMA - MICHIGAN NATIONAL PPO CDHP PPO CDHP % 53% % 64% % 38% % 39% % OF ALL ENROLLMENT MMA - MICHIGAN NATIONAL PPO CDHP PPO CDHP % 30% % 34% % 15% % 18% 13

8 PPO MARKET SHARE BLUE CROSS BLUE SHIELD CONTINUES TO DOMINATE THE MICHIGAN PPO MARKET WITH 75% MARKET SHARE (75% IN 2017) ALLIANCE HEALTH & LIFE: 3% AETNA: 3% PRIORITY HEALTH: 2% 14 MARGINALLY MORE COMPETITION IN HMO MARKET PERCENTAGE OF HMO MARKET SHARE FOR MICHIGAN PROVIDERS: 68% 73% 5% 4% 14% 11% TOTAL HEALTH CARE HAP BCN 2017 MMA MICHIGAN SURVEY 2018 MMA MICHIGAN SURVEY 15

9 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 16 IN-NETWORK PPO DEDUCTIBLES MEDIAN DEDUCTIBLES SHOWN IN WHITE, AVERAGE DEDUCTIBLES IN RED ABOVE EACH COLUMN (MERCER DOES NOT REPORT AVERAGES) $2,500 $2,000 $1,500 NATIONAL 2016 (MERCER) NATIONAL 2017 (MERCER) MMA MICHIGAN 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 (+2.9%) $1,500 $1,500 (+1.3%) $2,037 $2,063 $1,942 $1,500 $1,500 $1,000 $954 $985 $1,014 $1,200 $500 $600 $650 $600 $600 $750 $0 SINGLE FAMILY 17

10 MEDIAN PPO COINSURANCE 20% in-network 40% out-of-network MEDIAN PPO COINSURANCE HAS HELD STEADY AT 20% FOR IN-NETWORK AND 40% FOR OUT- OF-NETWORK, BOTH LOCALLY AND NATIONALLY MMA - MICHIGAN PREVALENCE IN-NETWORK COINSURANCE PLAN DESIGN 2018 (employer / employee) 100% / 0% 8% 90% / 10% 10% 80% / 20% 78% 70% / 30% 4% 60% / 40% <1% 18 MEDIAN PPO OFFICE VISIT COPAY MEDIAN PPO OFFICE VISIT COPAY HAS HELD STEADY AT $25, LOCALLY AND NATIONALLY 19

11 PREVALENCE OF SPLIT COPAYS SPLIT COPAYS ARE $30/$40 (PRIMARY CARE/SPECIALIST) LOCALLY, $25/$40 NATIONALLY 58% 60% 51% 57% 57% PERCENTAGE OF EMPLOYERS WITH SPLIT COPAYS 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 MMA MICHIGAN 20 COVERAGE FOR EMERGENCY CARE $150 $150 $150 $150 $150 $35 $40 $40 URGENT CARE COPAY MEDIAN COPAY FOR EMERGENCY CARE 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 MMA MICHIGAN 21

12 OUT-OF-POCKET MAXIMUM PRE- AND POST-ACA COPAYS COINSURANCE MAXIMUM OUT-OF-POCKET MAXIMUM EMBEDDED COINSURANCE MAXIMUM COINSURANCE AND COPAYS C OUT-OF-POCKET MAXIMUM DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE DEDUCTIBLE OPTION 1 OPTION 2 PRE-2014 POST EMBEDDED COINSURANCE MAXIMUM (ECM) THE IN-NETWORK MEDIAN EMBEDDED COINSURANCE MAXIMUM INCLUDES ONLY COINSURANCE DOLLARS (NO DEDUCTIBLES OR COPAYS) 51% OF SOUTHEAST MICHIGAN EMPLOYERS HAVE AN ECM PLAN FEATURE IN 2018 (44% IN 2017) COPAYS $5,000 $5,000 OUT-OF-POCKET MAXIMUM EMBEDDED COINSURANCE MAXIMUM $2,500 $2,500 DEDUCTIBLE OPTION 1 SINGLE FAMILY 2017 MMA MICHIGAN 2018 MMA MICHIGAN 23

13 OUT-OF-POCKET MAXIMUMS (WITH ECM) THE IN-NETWORK MEDIAN OVERALL OUT-OF-POCKET MAXIMUMS, FOR EMPLOYERS WITH AN EMBEDDED COINSURANCE MAXIMUM (ECM) OVERALL OUT-OF-POCKET MAXIMUM INCLUDES DEDUCTIBLE, COINSURANCE AND COPAYMENTS COPAYS $12,700 $12,700 $14,700 $14,300 OUT-OF-POCKET MAXIMUM EMBEDDED COINSURANCE MAXIMUM $7,150$7,350 $6,350 $6,350 DEDUCTIBLE OPTION 1 SINGLE FAMILY 2017 MMA MICHIGAN 2018 MMA MICHIGAN 2017 IRS MAXIMUM 2018 IRS MAXIMUM 24 OUT-OF-POCKET MAXIMUMS (WITHOUT ECM) THE IN-NETWORK MEDIAN OVERALL OUT-OF-POCKET MAXIMUMS, FOR EMPLOYERS WITHOUT AN EMBEDDED COINSURANCE MAXIMUM (ECM) OUT-OF-MAXIMUM INCLUDES DEDUCTIBLES, COINSURANCE AND COPAYMENTS $14,300 $14,700 OUT-OF-POCKET MAXIMUM COINSURANCE AND COPAYS $7,150 $7,350 $3,500 $3,300 $3,000 $3,000 $7,000 $6,600 $6,600 $6,000 DEDUCTIBLE OPTION 2 SINGLE FAMILY 2016 NATIONAL 2017 NATIONAL 2017 MMA MICHIGAN 2018 MMA MICHIGAN 2017 IRS MAXIMUM 2018 IRS MAXIMUM 25

14 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 26 HMO PLAN DESIGN: LOCAL/NATIONAL, INCREASE IN COST SHARE PREVALENCE BUT DIFFERENT LEVELING MMA MICHIGAN NATIONAL (MERCER) PLAN PROVISION % PLANS WITH OVERALL DEDUCTIBLE 78% 78% 83% 38% 42% PLAN DEDUCTIBLE $1000/$2000 $1000/$2000 $1000/$2000 $500/$1000 $500/$1000 % PLANS WITH COINSURANCE 67% 69% 72% 34%* 37%* COINSURANCE 20% 20% 20% 20%* 20%* % PLANS WITH INPATIENT DEDUCTIBLE/COPAY 14% 13% 19% 54% 46% INPATIENT COPAY AMOUNT $150 $150 $150 $250 $250 *INPATIENT CARE 27

15 HMO PLAN DESIGN: LOCAL/NATIONAL, INCREASE IN COST SHARE PREVALENCE BUT DIFFERENT LEVELING MMA MICHIGAN NATIONAL (MERCER) PLAN PROVISION OFFICE VISIT COPAY $20 $20 $25 $20 $20 % PLANS WITH SPLIT OFFICE VISIT COPAY 59% 69% 75% 68% 67% SPLIT OFFICE VISIT COPAY $25/$40 $20/$40 $20/$40 $20/$40 $20/$40 URGENT CARE COPAY $40 $40 $50 NOT REPORTED NOT REPORTED EMERGENCY CARE COPAY $150 $150 $150 $100 $ SUMMARY INSIGHTS LOCALLY AND NATIONALLY, WE SEE MEANINGFUL CHANGE IN PPO DEDUCTIBLES: LOCAL: AVERAGE DEDUCTIBLES CONTINUE TO RISE AND MEDIAN SINGLE DEDUCTIBLE INCREASED FROM $600 TO $750 NATIONAL: MEDIAN SINGLE DEDUCTIBLE INCREASED FROM $600 TO $650 WHILE OUT-OF-POCKET MAXIMUM THRESHOLDS ARE INDEXED EACH YEAR (IRS), EMPLOYERS HAVE ELECTED NOT TO ALTER THEIR PLAN LIMITS (PPO) EMPLOYERS CONTINUE TO INTRODUCE DEDUCTIBLES AND COINSURANCE TO THEIR HMO OFFERINGS, BOTH LOCALLY AND NATIONALLY 29

16 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 30 CDHP PREVALENCE, NATIONALLY PERCENTAGE OF NATIONAL EMPLOYERS OFFERING CDHP: MERCER REPORTS 14% OF EMPLOYERS OFFER CDHP AS THE ONLY OPTION IN 2017, DOWN FROM 16% IN % 59% 61% 80% 80% 64% 28% 25% 29% NATIONAL 2015 (MERCER) NATIONAL 2016 (MERCER) NATIONAL 2017 (MERCER) SMALL EMPLOYERS (<500 EES) LARGE EMPLOYERS (500+ EES) JUMBO EMPLOYERS (20,000+ EES) 31

17 CDHP PREVALENCE, LOCALLY PERCENTAGE OF EMPLOYERS OFFERING CDHP LOCALLY: AMONG EMPLOYERS IN SOUTHEAST MICHIGAN, 6% OFFER CDHP AS THE ONLY OPTION IN 2018 (7% IN 2017) 38% 43% 47% 52% 53% MMA SURVEY RESULTS THE NATIONAL HSA GAP $5,000 $4,000 $3,000 $3,900 $3,600 MERCER NOTES THAT IN 2017, 77% OF LARGE EMPLOYERS MADE CONTRIBUTIONS TO THEIR EMPLOYEES HEALTH SAVINGS ACCOUNTS (UP FROM 75% IN 2016) $2,900 $2,600 $2,000 $1,000 $1,800 $1,750 $500 $500 $1,000 $1,000 $1,300 $1,250 $0 MEDIAN DEDUCTIBLE - SINGLE MEDIAN DEDUCTIBLE -FAMILY EMPLOYER HSA CONTRIBUTION - SINGLE EMPLOYER HSA CONTRIBUTION -FAMILY GAP - SINGLE GAP -FAMILY

18 THE SOUTHEAST MICHIGAN HSA GAP $5,000 $4,000 $3,000 $2,000 $1,000 $1,800 $1,900 $2,000 $3,600 $4,000 $4,000 $500 $500 $500 $1,000 $1,000 $1,000 IN 2018, 60% OF SOUTHEAST MICHIGAN EMPLOYERS MADE CONTRIBUTIONS TO THEIR EMPLOYEES HSA ACCOUNTS (UP FROM 56% IN 2017) $1,300 $1,400 $1,500 $2,600 $3,000 $3,000 $0 MEDIAN DEDUCTIBLE - SINGLE MEDIAN DEDUCTIBLE -FAMILY EMPLOYER HSA CONTRIBUTION - SINGLE EMPLOYER HSA CONTRIBUTION -FAMILY GAP - SINGLE MMA MICHIGAN 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 GAP -FAMILY 34 LOWER CONTRIBUTIONS REMAIN AN INCENTIVE MONTHLY EMPLOYEE CONTRIBUTIONS FOR CDHP AND PPO PLANS: (-0.9%) (-4.1%) $321 $318 $294 $282 (+0.6%) (+4.6%) $467 $470 $457 $478 $84 (-1.2%) $83 $88 (-8.0%) $81 (+6.1%) (+5.8%) $132 $140 $139 $147 SINGLE CDHP FAMILY CDHP SINGLE PPO FAMILY PPO NATIONAL 2016 NATIONAL 2017 MMA MICHIGAN 2017 MMA MICHIGAN

19 SUMMARY INSIGHTS LOCALLY, MORE THAN HALF OF ORGANIZATIONS HAVE A CDHP 53% (52% IN 2017) NATIONALLY, NEARLY TWO IN THREE LARGE EMPLOYERS HAVE A CDHP 64% (61% IN 2017) THOUGH THE PREVALENCE OF CDHP S HAS INCREASED INCREMENTALLY, EMPLOYERS ARE STILL SOMEWHAT RELUCTANT TO OFFER THE PLAN AS THE ONLY OPTION (NATIONAL, 14%; LOCAL, 6%) MEDIAN CDHP DEDUCTIBLES HAVE STABILIZED LOCALLY AND NATIONALLY EMPLOYER PREVALENCE TOWARDS HSA FUNDING CONTINUES TO RISE LOCAL: 60% (56% IN 2017) NATIONAL: 77% (75% IN 2016) 36 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 37

20 DISTRIBUTION OF HEALTH CARE COSTS FOR 2018, HALF OF EMPLOYER HEALTH CARE COSTS ARE PROJECTED TO DERIVE FROM HOSPITAL INPATIENT AND OUTPATIENT SERVICES THE PRESCRIPTION DRUG SHARE IS SMALL, BUT LARGEST GROWING CATEGORY 40% 35% 30% 25% 20% 15% 10% 5% 0% -16% +1% 35% 30% 30% 29% +18% +20% 18% 19% 15% 16% -12% 4% 4% PHARMACY INPATIENT OUTPATIENT PHYSICIAN OTHER , PROJECTED % CHANGE SINCE 2008 SOURCE: PWC HEALTH RESEARCH INSTITUTE, BEHIND THE NUMBERS NATIONAL: Rx TRENDS MEDIAN RX COPAYS FOR PPO: GENERIC: $10 ( ) BRAND, FORMULARY: $35 ($30 IN 2016) BRAND, NON-FORMULARY: $55 (SAME AS 2016) SPECIALTY: $115 (SAME AS 2016) SOURCE: MERCER

21 LOCALLY: RX AT RETAIL PPO PLAN DESIGN PREVALENCE 1-TIER 1% 2-TIER 5% 3-TIER 56% 4-TIER 15% 5-TIER 23% 2018 MMA MICHIGAN 40 LOCAL Rx COPAY TRENDS MEDIAN RX COPAYS FOR PPO PLANS: 1-TIER COPAY PLANS 2-TIER COPAY PLANS 3-TIER COPAY PLANS $80 $80 $75 $50 $50 $40 $40 $40 $40 $15 $15 $10 $10 $10 $10 $10 $10 $10 GENERIC BRAND GENERIC AMONG HMO PLANS: 29% HAVE 3 TIERS AT $15, $40 AND $80 (SAME AS 2017) 55% OF EMPLOYERS UTILIZE A 4 OR 5 TIER PLAN DESIGN FORMULARY BRAND NON-FORMULARY BRAND MMA MICHIGAN 2016 MMA MICHIGAN 2017 MMA MICHIGAN

22 SPECIALTY MEDICATION SPEND MICHIGAN, LARGE INSURER, BOOK OF BUSINESS DATA (LESS GM, FORD AND CHRYSLER): IN 2011, 0.7% OF DRUGS DISPENSED WERE SPECIALTY, REPRESENTING 19.4% OF TOTAL RX SPEND IN 2017, SPECIALTY REPRESENTED 1.0% OF ALL DRUGS DISPENSED, BUT WAS RESPONSIBLE FOR 41.2% OF THE TOTAL RX SPEND MICHIGAN, LARGE INSURER 2011, 2016 AND BOOK OF BUSINESS RESULTS* % OF TOTAL SCRIPTS DISPENSED % OF TOTAL DRUG PAID DOLLARS SPECIALTY SPECIALTY % 19.4% % 38.0% % 41.2% *EXCLUDING GM, FORD, CHRYSLER 42 LOCAL Rx SPECIALTY PLAN DESIGN TRENDS PLAN TYPE 4-TIER DESIGN 2018 TIER 1 TIER 2 TIER 3 TIER 4 GENERIC FORMULARY, BRAND NON- FORMULARY, BRAND SPECIALTY COINSURANCE SPECIALTY PER SCRIPT COINSURANCE MAXIMUM PPO $10 $40 $70 20% $200 HMO $10 $50 $80 20% $175 PLAN TYPE 5-TIER DESIGN 2018 TIER 1 TIER 2 TIER 3 TIER 4 TIER 5 GENERIC FORMULARY, BRAND NON- FORMULARY, BRAND FORMULARY, SPECIALTY COINSURANCE FORMULARY, SPECIALTY PER SCRIPT COINSURANCE MAXIMUM NON- FORMULARY, SPECIALTY COINSURANCE NON- FORMULARY, SPECIALTY PER SCRIPT COINSURANCE MAXIMUM PPO $10 $40 $80 15% $150 25% $300 HMO $15 $50 $80 20% $200 20% $300 DIFFERENCES BETWEEN 4 AND 5-TIER DESIGNS 43

23 NATIONAL: PRESCRIPTION DRUG CARVE-OUT DRUG BENEFITS CARVED OUT OF MEDICAL PLAN, BY EMPLOYER SIZE EMPLOYEES 3% 1% 3% EMPLOYEES 7% 5% 9% 500+ EMPLOYEES 19% 21% 29% 2015 NATIONAL (MERCER) 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 44 LOCAL: PRESCRIPTION DRUG CARVE-OUT RX CARVE-OUT PREVALENCE (FOR SELF-FUNDED EMPLOYERS) RX CARVE-OUT PREVALENCE MMA MICHIGAN % 16% 26% 45

24 EMPLOYERS AGGRESSIVELY MANAGE Rx SPEND OTHER PHARMACY COST MANAGEMENT STRATEGIES: MMA MICHIGAN NATIONAL PRIOR AUTHORIZATION / STEP THERAPY 48% 60% 60% 61% MANDATORY GENERIC 42% 49% 35% 34% ELIMINATE COVERAGE FOR CERTAIN SPECIALTY DRUGS 7% 7% NOT REPORTED 46 SUMMARY INSIGHTS PRESCRIPTION DRUG PLAN COSTS REMAIN A CONCERN FOR EMPLOYERS TO ADDRESS THIS CONCERN, ORGANIZATIONS ARE ACTIVELY MANAGING THEIR PHARMACY PROGRAM STRATEGY LOCALLY, A SIGNIFICANT JUMP IN RX UTILIZATION MANAGEMENT STRATEGIES BOTH LOCALLY AND NATIONALLY, WE OBSERVED A SUBSTANTIAL UPTICK IN PBM CARVE-OUT ARRANGEMENTS FOR PPO PLANS, 3-TIER STILL THE MOST COMMON DESIGN AMONG EMPLOYERS, BUT SPECIALTY TIERS ARE CATCHING UP QUICKLY 55% OF HMO PLANS USE A SPECIALTY TIER DESIGN (2018) 47

25 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 48 STOP-LOSS PREVALENCE AND DELIVERY BY EMPLOYER SIZE EMPLOYER SIZE MMA MICHIGAN 2018 EMPLOYERS WITH STOP-LOSS COVERAGE STOP-LOSS CARVED-OUT (ADMINISTRATOR MEDICAL CARRIER) EMPLOYEES 100% 51% EMPLOYEES 100% 29% 1,000 4,999 EMPLOYEES 96% 37% 5,000+ EMPLOYEES 87% 40% 49

26 STOP-LOSS PROGRAM CONFIGURATION BY EMPLOYER SIZE EMPLOYER SIZE SPECIFIC & AGGREGATE PROTECTION MMA MICHIGAN 2018 SPECIFIC PROTECTION ONLY MEDIAN SPECIFIC DEDUCTIBLE LEVEL EMPLOYEES 58% 39% $100, EMPLOYEES 43% 57% $200,000 1,000 4,999 EMPLOYEES 37% 59% $250,000 5,000+ EMPLOYEES 29% 57% $300,000 to $375, Rx INCLUDED UNDER STOP-LOSS? OF LOCAL SELF-FUNDED EMPLOYERS WITH STOP-LOSS COVERAGE, 84% INCLUDE PRESCRIPTION DRUGS UNDER THE PROTECTION IN 2018 THIS DATA WAS NOT REPORTED NATIONALLY MMA MICHIGAN MEDICAL & RX 82% 84% MEDICAL ONLY 18% 16% 51

27 SUMMARY INSIGHTS WHILE THE MAJORITY OF SELF-FUNDED EMPLOYERS HAVE RETAINED STOP- LOSS PROTECTION, THE APPROACH TO ADMINISTRATION (MEDICAL TPA OR CARVE-OUT) VARIES 84% OF EMPLOYERS INCORPORATE PRESCRIPTION DRUGS UNDER THEIR STOP-LOSS COVERAGE WHICH MEANS 16% OF SELF-FUNDED SURVEY RESPONDENTS DO NOT (YIKES!) WHILE EVERY EMPLOYER S TOLERANCE FOR RISK VARIES, THERE IS A STRONG CORRELATIONS BETWEEN SPECIFIC LEVEL AND ORGANIZATIONAL SCALE THE LARGER THE EMPLOYER, THE HIGHER THE SPECIFIC DEDUCTIBLE 52

28 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 54

29 WHY? QUALITY & CUSTOMER SATISFACTION GENERATE REVENUE & GROW BUSINESS EFFICIENCY IN OPERATIONS EMPLOYEE ENGAGEMENT & RETENTION RISK MANAGEMENT 56 THRIVE VERB (USED WITHOUT OBJECT) 1. To prosper; be fortunate or successful. 2. To grow or develop vigorously; flourish Photoby Sean Stratton on Unsplash

30 BENEFITS OF FOCUSING ON THRIVING (WHITE-COLLAR EMPLOYEES) 2016 SHRM FOUNDATION: CREATING A MORE HUMAN WORKPLACE WHERE EMPLOYEES AND BUSINESS THRIVE 58 BENEFITS OF FOCUSING ON THRIVING (BLUE-COLLAR EMPLOYEES) 2016 SHRM FOUNDATION: CREATING A MORE HUMAN WORKPLACE WHERE EMPLOYEES AND BUSINESS THRIVE 59

31 WHY INVEST IN HEALTH & WELLBEING? HEALTH ENHANCEMENT RESEARCH ORGANIZATION ENERGY INACTIVITY RESILIENCE, ADAPTABILITY PROCESSED FOODS POSITIVE LIFE PURPOSE BURNOUT QUALITY OF LIFE STRESS, ANXIETY ENGAGEMENT WITH WORK DEPRESSION MORE POSITIVE MORALE DIMINISHED VITALITY LESS WORKER PERFORMANCE TURNOVER APPROPRIATE USE OF ACTIVE DISENGAGEMENT HEALTH CARE ABSENCE, DISABILITY BUSINESS PERFORMANCE HOSPITALIZATIONS TEAM COHESION AVOIDABLE RISK / LOSS TOXIC WORK CLIMATE SOURCE; ALL WORKPLACES POSITIVELY INFLUENCE THE HEALTH AND WELL-BEING OF EMPLOYEES THEIR FAMILIES AND COMMUNITIES HEALTH ENHANCEMENT RESEARCH ORGANIZATION WHY INVEST IN HEALTH & WELLBEING POSITIVE IMPACT ON MEDICAL TREND EMPLOYEE FEEDBACK SURVEYS 61% 64% 55% 56% VALUE OF INVESTMENT 36% 39% IMPROVED ABSENTEEISM 17% 22% IMPROVED PRODUCTIVITY 13% 21% INDUSTRY RECOGNITION AWARDS 10% 13% 2017 MMA MICHIGAN 2018 MMA MICHIGAN 61

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33 IF YOU DON T KNOW WHERE YOU RE GOING, YOU LL PROBABLY SUCCEED IN GETTING NOWHERE. -JESSICA GROSSMEIER VICE PRESIDENT OF RESEARCH AT 64

34 LOCALLY, HEALTH AND WELLBEING COMMITMENT REMAINS STEADY IN 2018, 82% OF ALL SURVEY PARTICIPANTS INDICATED THEY HAVE WELLBEING INITIATIVES (80% IN 2017) FULL-FLEDGED WELLBEING PROGRAM WITH SPECIALTY VENDOR 14% 18% FULL-FLEDGED WELLBEING PROGRAM WITH HEALTH PLAN 9% 12% LIMITED FOCUS ON WELLBEING: A LA CARTE PROGRAMS LIMITED FOCUS ON WELLBEING: HEALTH PLAN AT NO COST 19% 19% 35% 36% 2017 MMA MICHIGAN (ALL PARTICIPANTS) 2018 MMA MICHIGAN (ALL PARTICIPANTS) 66 WELLBEING PROGRAM FOCUS PHYSICAL MENTAL/EMOTIONAL FINANCIAL SOCIAL COMMUNITY PROFESSIONAL/CAREER OTHER 4% 8% 46% 35% 38% 32% 39% 26% 33% 58% 71% 73% 94% 89% 2017 MMA MICHIGAN 2018 MMA MICHIGAN 67

35 WELLBEING PROGRAMS IN GENERAL AMONG THE 82% OF EMPLOYERS WHO MANAGE WELLBEING PROGRAMS, PARTICIPATION WAS EXTENDED TO: 45% 48% 49% 32% 32% 32% 9% 5% 8% 14% 15% 12% ALL BENEFIT-ELIGIBLE EMPLOYEES ALL BENEFIT-ELIGIBLE EMPLOYEES & THEIR SPOUSES ONLY EMPLOYEES ONLY EMPLOYEES ENROLLED IN HEALTH PLAN ENROLLED IN HEALTH PLAN & THEIR SPOUSES % OF SOUTHEAST MICHIGAN EMPLOYERS OFFERED HEALTH ASSESSMENTS IN 2018, VERSUS 37% IN % OF SOUTHEAST MICHIGAN EMPLOYERS OFFERED BIOMETRIC SCREENINGS, DOWN FROM 28% IN SOUTHEAST MICHIGAN: MOST EMPLOYERS OFFER INCENTIVES 66% OF EMPLOYERS OFFER INCENTIVES, AND ACHIEVE 76% 99% PARTICIPATION OF THESE EMPLOYERS, 45% OFFER MORE THAN ONE INCENTIVE 34% OF EMPLOYERS DO NOT OFFER INCENTIVES, AND ACHIEVE PARTICIPATION RATES OF LESS THAN 25% 69

36 VARIETY OF INCENTIVES OFFERED MMA MICHIGAN SURVEY PARTICIPANTS PROVIDED THE FOLLOWING INCENTIVES IN 2018: REDUCED CONTRIBUTION TO HEALTH PLAN MERCHANDISE (T-SHIRTS, MOVIE PASSES, ETC.) CASH LOTTERY PRIZE DRAWING EMPLOYEE RECOGNITION ENHANCED PLAN DESIGN PAID DAY OFF EMPLOYER FUNDS FOR FSA/HSA/HRA 12% 8% 10% 8% 7% 9% 41% 48% 37% 43% 33% 34% 28% 29% 25% 25% 2017 MMA MICHIGAN 2018 MMA MICHIGAN 70 MORE ON INCENTIVES EMPLOYEE CONTRIBUTION REDUCTIONS TIED TO A HEALTH AND WELLBEING PROGRAM, DECREASED IN 2018: $430 ANNUALLY (OR ~$36 PER MONTH) FOR SINGLE COVERAGE (VERSUS $510 ANNUALLY IN 2017) $895 ANNUALLY (OR ~$75 PER MONTH) FOR FAMILY COVERAGE (VERSUS $1,350 ANNUALLY IN 2017) 85% COMMUNICATE THE INCENTIVE AS A CARROT (DISCOUNT); THE OTHER 15% COMMUNICATE IT AS A STICK (SURCHARGE) HOW DO YOU PLAN TO HANDLE INCENTIVES IN THE NEXT MONTHS? NO CHANGE IN THE AMOUNT OF INCENTIVES 81% INCREASE THE AMOUNT OF INCENTIVES 17% DECREASE THE AMOUNT OF INCENTIVES 3% 71

37 OUTCOMES-BASED INCENTIVE PROGRAMS EMPLOYER INTEREST IN OUTCOMES-BASED INCENTIVE DISSIPATED BOTH LOCALLY AND NATIONALLY MMA MICHIGAN NATIONAL TIE INCENTIVES TO ACHIEVEMENT OF A TARGET HEALTH GOAL 33% 27% 29% 23% DEFINITELY DOING OR HIGHLY LIKELY TO TIE INCENTIVES TO ACHIEVEMENT OF HEALTH GOAL IN NEXT MONTHS 38% 28% NOT REPORTED 72 TOBACCO SURCHARGES PERCENTAGE OF EMPLOYERS UTILIZING THE FOLLOWING TACTICS: MMA MICHIGAN NATIONAL PREVALENCE 15% 19% 26% 22% TOBACCO SURCHARGE MEDIAN MONTHLY SURCHARGE AMOUNT SMOKE FREE CAMPUS 43% 32% TEST EMPLOYEE CLAIMING NON-TOBACCO USE $50 $50 $50 $43 7% 12% NOT REPORTED 54% NOT REPORTED 10% 73

38 BARRIERS TO WELLBEING STRATEGY MMA MICHIGAN LACK OF BUDGET 56% 60% LACK OF STAFF 45% 53% EMPLOYEES NOT INTERESTED 37% 37% NOT READY FOR CULTURAL CHANGE 26% 33% MANAGEMENT NOT INTERESTED 18% 14% 74 TRENDING AREAS OF FOCUS 75

39 DISTRIBUTION OF WELLBEING INITIATIVES INDIVIDUAL INFLUENCERS TOBACCO CESSATION PROGRAMS 32% DISCOUNTED MEMBERSHIPS 32% LUNCH & LEARNS 25% WEIGHT & OBESITY MANAGEMENT 22% 19% 15% 13% 28% ORGANIZATIONAL INFLUENCERS VACCINATION PROGRAMS CHALLENGES 26% 41% 32% 13% FOUNDATIONAL INFLUENCERS HEALTHY FOOD CHOICES HEALTHY CAMPUS INITIATIVES 26% 23% 16% 26% MMA - CURRENTLY OFFER MMA - HIGHLY LIKELY IN NATIONAL EMPLOYER WELLBEING ACTIVITIES PERCENTAGE OF NATIONAL (MERCER) EMPLOYERS OFFERING THE FOLLOWING HEALTH AND WELLBEING INITIATIVES: HEALTHY FOOD CHOICES IN CAFETERIA, COMPANY MEETINGS OR EVENTS 59% NO SMOKING ANYWHERE ON CAMPUS 54% OFFER ONSITE FITNESS FACILITY 43% HAVE POLICIES TO PROMOTE HEALTHY WORK / LIFE BALANCE COMPANY VISION / MISSION STATEMENT SUPPORTS A HEALTHY WORKPLACE CULTURE HAVE MODIFIED PHYSICAL WORK ENVIRONMENT TO PROMOTE PHYSICAL ACTIVITY 42% 23% 23% NONE OF THE ABOVE 11% 77

40 SUMMARY INSIGHTS EMPLOYERS ARE EMBRACING AN EXPANDED VIEW OF WELLBEING AND WHY FOR STRATEGY FINANCIAL WELLBEING = GREATEST INCREASE IN FOCUS EMPLOYERS COMMITMENT TO HEALTH AND WELLBEING REMAINS STABLE (82% IN 2017 VS. 80% IN 2016) LACK OF BUDGET CONTINUES TO BE A PERCEIVED ISSUE 78 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 79

41 10 YEARS OF NATIONAL HEALTH CARE COSTS 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 9.8% 9.1% 8.3% 8.2% 8.0% 6.9% 7.4% 7.1% 6.1% 6.3% 6.3% 6.5% 5.5% 4.1% 3.9% 3.8% 4.2% 3.2% 2.2% 2.3% 2.1% 2.4% 2.6% 2.0% 2.3% 2.5% 2.5% 1.0% 1.1% 1.1% 2.1% 1.6% 1.9% 1.8% -0.1% -0.1% 0.8% % PROJECTED ANNUAL CHANGE IN HEALTH BENEFIT COST PER EMPLOYEE - EXPECTED TREND BEFORE PLAN CHANGES ACTUAL TREND - AFTER PLAN CHANGES OVERALL INFLATION WORKERS' EARNINGS SOURCE: MERCER S NATIONAL SURVEY OF EMPLOYER-SPONSORED HEALTH PLANS; BUREAU OF LABOR STATISTICS, CONSUMER PRICE INDEX, U.S. CITY AVERAGE OF ANNUAL INFLATION (APRIL TO APRIL) ; BUREAU OF LABOR STATISTICS, SEASONALLY ADJUSTED DATA FROM THE CURRENT EMPLOYMENT STATISTICS SURVEY (APRIL TO APRIL) FIVE YEARS OF COST INCREASES BEFORE CHANGES AVERAGE PERCENTAGE INCREASE IN HEALTH PLAN COST BEFORE CHANGES (ALL PLANS COMBINED): SOUTHEAST MICHIGAN: 2018, ACTUAL = +8% NATIONAL (MERCER): 2018, PROJECTED = +6.5% 8.0% 7.1% 6.3% 9% 8% 6% 6.3% 6.5%* NATIONAL (MERCER) MMA MICHIGAN *PROJECTED 81

42 FIVE YEARS OF COST INCREASES AFTER CHANGES AVERAGE PERCENTAGE INCREASE IN HEALTH PLAN COST AFTER CHANGES (ALL PLANS COMBINED): SOUTHEAST MICHIGAN: 2018, ACTUAL = +5% NATIONAL (MERCER): 2018, PROJECTED = +4.2% 7% 3.8% 4% 5% 5% 3.9% 3% 2.4% 2.6% 4.2%* NATIONAL (MERCER) MMA MICHIGAN *PROJECTED 82 NATIONAL: AVERAGE ANNUAL GROSS COST $9,215 (+4.9%) $10,019 $9,551 (+1.0%) (+3.1%) $12,056 $12,388 $12,513 $12,235 $12,611 $11,609 CDHP* HMO PPO MERCER 2015 MERCER 2016 MERCER 2017 *CDHP COST DATA INCLUDES EMPLOYER CONTRIBUTION TO HSA 83

43 LOCAL: MONTHLY GROSS COST BY PLAN TYPE $1,666 $1, % $1,452 $1,400 $1, % $1,357 $1,352 $1, % +5.6% $539 $ % $493 $510 $471 $465 $440 $ % -1.3% +4.3% SINGLE FAMILY SINGLE FAMILY SINGLE FAMILY SINGLE FAMILY PPO CDHP WITH HSA FUNDING HMO CDHP WITHOUT HSA FUNDING TODAY S AGENDA 1. PLAN OPTIONS 2. PPO PLAN DESIGN 3. HMO PLAN DESIGN 4. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 5. PRESCRIPTION DRUG PLANS 6. STOP-LOSS 7. HEALTH & WELLBEING 8. HEALTH PLAN COSTS 9. EMPLOYEE CONTRIBUTIONS 10. ADDITIONAL COST CONTROL STRATEGIES 11. OTHER TRENDS 12. TRENDBENDERS 13. CONCLUDING THOUGHTS 85

44 MONTHLY PPO EE CONTRIBUTIONS $500 $ NATIONAL (MERCER) 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 MMA MICHIGAN $472 $467 (+0.6%) $470 $448 $457 (+4.6%) $478 $300 $200 $100 $130 $132 (+1.6%) $140 $136 $139 (+5.6%) $147 $0 23% 24% 24% 26% 26% 26% 30% 32% 31% 29% SINGLE PPO FAMILY PPO 28% 29% DOLLAR AMOUNTS INDICATED ABOVE EACH COLUMN; CONTRIBUTION AS A PERCENT OF PREMIUM NOTED IN WHITE. 86 MONTHLY HMO EE CONTRIBUTIONS $500 $400 $ NATIONAL (MERCER) 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 MMA MICHIGAN $476 $487 (-0.6%) $484 $332 $365 (+9.0%) $398 $200 $100 $0 (-7.9%) (+5.6%) $127 $139 $128 $96 $107 $113 23% 23% 23% 22% 24% 24% 30% 32% 32% 28% 29% 17% SINGLE HMO FAMILY HMO 29% DOLLAR AMOUNTS INDICATED ABOVE EACH COLUMN; CONTRIBUTION AS A PERCENT OF PREMIUM NOTED IN WHITE. 87

45 MONTHLY CDHP EE CONTRIBUTIONS $500 $400 $ NATIONAL (MERCER) 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 2016 MMA MICHIGAN 2017 MMA MICHIGAN 2018 MMA MICHIGAN NOTE: MMA MICHIGAN PERCENTAGES DO NOT INCLUDE ER HSA FUNDING $303 (-0.1%) (-4.1%) $321 $318 $280 $294 $282 $200 $100 $73 $84 (-0.1%) $83 $81 $88 (-8.1%) $81 $0 17% 20% 18% 20% 21% 18% SINGLE CDHP 25% 27% 25% 23% 24% 21% FAMILY CDHP DOLLAR AMOUNTS INDICATED ABOVE EACH COLUMN; CONTRIBUTION AS A PERCENT OF PREMIUM NOTED IN WHITE. 88 OTHER CONTRIBUTION STRATEGIES INCOME-BASED CONTRIBUTIONS: LOCALLY, 5% OF EMPLOYERS VARY CONTRIBUTIONS BASED ON EMPLOYEE INCOME LEVEL, DOWN FROM 7% IN 2017 MERCER 2017 REPORTED THAT 12% OF LARGE EMPLOYERS HAVE INCOME-BASED CONTRIBUTIONS, DOWN FROM 14% IN 2016 MOST EMPLOYERS REPORT USING 3 INCOME BANDS 89

46 SUMMARY INSIGHTS LOCALLY, AVERAGE INCREASE IN PLAN COSTS AFTER PLAN CHANGES, HAS STABILIZED (+5.0% IN BOTH 2017 AND 2018), AND ARE ABOVE NATIONAL PROJECTION (+4.2) ABSENT OF AN EMPLOYER HSA CONTRIBUTION, CDHP S REMAIN THE LOWEST GROSS COST PLAN OPTION (VERSUS PPO/HMO), BOTH LOCALLY AND NATIONALLY SE MI EMPLOYEE CONTRIBUTION CHANGES VARY BY PLAN PPO CONTRIBUTIONS INCREASED BY ~5% HMO CONTRIBUTION LIFT EQUALS ~7% CDHP CONTRIBUTIONS DECREASED BY ~6% (FURTHER DISTANCING ITSELF AS A LOWER COST OPTION FROM PPO/HMO OFFERINGS) 90 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO & HMO PLAN DESIGN 3. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 4. PRESCRIPTION DRUG PLANS 5. STOP-LOSS 6. HEALTH & WELLBEING 7. HEALTH PLAN COSTS 8. EMPLOYEE CONTRIBUTIONS 9. ADDITIONAL COST CONTROL STRATEGIES 10. OTHER TRENDS 11. TRENDBENDERS 12. CONCLUDING THOUGHTS 91

47 MOST EFFECTIVE COST-CONTROL STRATEGIES 2017 SOUTHEAST MICHIGAN - STRATEGIES 1 INCREASE DEDUCTIBLES 2 INCREASE EMPLOYEE CONTRIBUTIONS 3 MODIFY RX COVERAGE 4 CONSUMERISM & CDHP 5 HEALTH AND WELLBEING STRATEGIES 6 CHANGE HEALTH VENDORS 7 LIMIT PLAN ELIGIBILITY (E.G. SPOUSAL COVERAGE LIMITATIONS) 92 MOST EFFECTIVE COST-CONTROL STRATEGIES SOUTHEAST MICHIGAN - STRATEGIES 1 1 INCREASE DEDUCTIBLES 2 2 INCREASE EMPLOYEE CONTRIBUTIONS 3 3 MODIFY RX COVERAGE 4 4 CONSUMERISM & CDHP 5 5 HEALTH AND WELLBEING STRATEGIES 6 7 LIMIT PLAN ELIGIBILITY (E.G. SPOUSAL COVERAGE LIMITATIONS) 7 6 CHANGE HEALTH VENDORS 93

48 EMPLOYER ACTIONS TO CONTROL COSTS CONSIDERING FOR 2017 ADOPTED IN 2017 CONSIDERING FOR 2018 ADOPTED IN 2018 CONSIDERING FOR 2019 INTRODUCE A LOWER-COST PLAN TO PASS BENEFITS/AFFORDABILITY TESTS 25% 6% 27% 9% 23% NEWLY OFFER OR MORE AGGRESSIVELY STEER EMPLOYEES TO CDHP 22% 4% 25% 6% 23% OUTCOMES-BASED INCENTIVE PLANS (E.G. TOBACCO SURCHARGES, AWARDING INCENTIVES BASED ON 29% 1% 23% 2% 21% THE ACHIEVEMENT OF A HEALTH FACTOR) SHIFT COST MORE AGGRESSIVELY TO FAMILIES (I.E. TWO-PERSON OR FAMILY COVERAGE) 17% 3% 22% 6% 14% 94 EMPLOYER ACTIONS TO CONTROL COSTS CONSIDERING FOR 2017 ADOPTED IN 2017 CONSIDERING FOR 2018 ADOPTED IN 2018 CONSIDERING FOR 2019 IMPLEMENT SPOUSAL SURCHARGE OR SPOUSAL FORCE-OUT 19% 2% 20% 3% 16% LEVERAGE MEDICAID EXPANSION (ADVISE EMPLOYEES OF MEDICAID OPTION) 17% 2% 19% 0% 14% ELIMINATE SPOUSAL COVERAGE 5% 0% 3% 0% 3% 95

49 SPOUSAL LIMITATIONS LOCALLY 58% OF EMPLOYEES ELECT DEPENDENT COVERAGE FOR SPOUSES AND/OR CHILDREN (VERSUS 54% NATIONALLY) MMA MICHIGAN MERCER SPOUSAL FORCE-OUT 18% 18% 10% 11% 10% SPOUSAL SURCHARGE 19% 21% 21% 14% 14% TOTAL (FORCE-OUT + SURCHARGE) 37% 39% 31% 25% 24% MEDIAN MONTHLY SURCHARGE AMOUNT $100 $100 $100 $100 $ OPT-OUT INCENTIVE MMA MICHIGAN MERCER OPT-OUT PREVALENCE 45% 34% 29% 17% 14% 12% MEDIAN MONTHLY OPT-OUT AMOUNT* $75 NOT REPORTED $139* *AVERAGE MONTHLY AMOUNT 97

50 TELEMEDICINE SOUTHEAST MICHIGAN NATIONAL (MERCER) TELEMEDICINE (CURRENTLY OFFER) 38% 66% 77% 30% 60% 73% TELEMEDICINE MEMBER COST PER CONSULTATION SOUTHEAST MICHIGAN 2018 COVERED AT 100% 24% SAME COST SHARE AS PRIMARY CARE PHYSICIAN VISIT 56% DIFFERENT COST SHARE THAN PRIMARY CARE PHYSICIAN VISIT 20% 98 REFERENCE-BASED PRICING SOUTHEAST MICHIGAN NATIONAL (MERCER) CURRENTLY IN PLACE 3% 8% CONSIDERING FOR NEXT YEAR 7% 12% 99

51 SUMMARY INSIGHTS WHILE NON-TRADITIONAL COST REDUCTION STRATEGIES CONTINUE TO BE CONTEMPLATED, EMPLOYERS STILL RELY MORE HEAVILY ON TRADITIONAL METHODS TO CONTROL COST (I.E. PLAN DESIGN AND CONTRIBUTION CHANGES) LOCALLY AND NATIONALLY, THE PREVALENCE OF OPT-OUT INCENTIVES CONTINUES TO DETERIORATE VERY LIMITED ADOPTION OF REFERENCE-BASED PRICING INTERESTING TO SEE HOW THE CONCEPT EVOLVES IN THE FUTURE NEARLY 75% OF LOCAL AND NATIONAL EMPLOYERS INCLUDE TELEMEDICINE AS A PROGRAM FEATURE FOR EMPLOYEES 56% STRUCTURE THE TELEMEDICINE COST SHARE TO MATCH THEIR PRIMARY CARE OFFICE VISIT BENEFIT 100 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO & HMO PLAN DESIGN 3. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 4. PRESCRIPTION DRUG PLANS 5. STOP-LOSS 6. HEALTH & WELLBEING 7. HEALTH PLAN COSTS 8. EMPLOYEE CONTRIBUTIONS 9. ADDITIONAL COST CONTROL STRATEGIES 10. OTHER TRENDS 11. TRENDBENDERS 12. CONCLUDING THOUGHTS 101

52 VOLUNTARY BENEFITS OFFERED ACCIDENT CRITICAL ILLNESS/CANCER 60% 61% 60% 61% 57% 56% 49% 51% WHOLE LIFE INSURANCE 30% 36% 44% 41% HOSPITAL INDEMNITY 22% 20% 29% 35% 2017 MMA MICHIGAN LONG TERM CARE INDIVIDUAL DISABILITY (IDI/EXECUTIVE) 18% 23% 27% 24% 17% 32% 42% 42% 2018 MMA MICHIGAN 2016 NATIONAL (MERCER) 2017 NATIONAL (MERCER) 102 VOLUNTARY BENEFITS VOLUNTARY BENEFIT OPTIONS HAVE BECOME MORE POPULAR WITH EMPLOYEES AND EMPLOYERS ALIKE MMA MICHIGAN WHY EMPLOYERS OFFER VOLUNTARY BENEFITS PROVIDES EMPLOYEES OPPORTUNITY TO FILL GAPS IN EMPLOYER-PAID BENEFITS 80% 80% ENHANCES BENEFIT OFFERING, AT NO COST TO EMPLOYER 60% 67% HELPS EMPLOYEES REDUCE FINANCIAL STRESS/IMPROVE FINANCIAL HEALTH 51% 65% MAINTAINS EMPLOYEE BENEFIT OPTIONS AS CORE BENEFIT PLANS CHANGE 12% 27% HELPS DRIVE PARTICIPATION IN LOWER-COST PLANS 10% 18% REDUCE RISK OF TRIGGERING EXCISE TAX 0% 3% 103

53 ABSENCE MANAGEMENT INCREASINGLY, EMPLOYERS HAVE EXPRESSED CONCERN WITH LOSSES DERIVED FROM THE ACTUAL/POTENTIAL MISHANDLING OF LEAVE OF ABSENCE PROCEDURES MMA MICHIGAN GREATEST CHALLENGE REGARDING ABSENCE MANAGEMENT TRAINING STAFF ON HOW TO BETTER MANAGE ABSENCES AND LEAVE 35% 39% MANAGING / TRACKING INTERMITTENT LEAVE 33% 34% POLICY ABUSE 17% 17% MANAGING / TRACKING ADA LEAVE ACCOMMODATIONS 9% 7% EVALUATING CLINICAL REASONS FOR LEAVES 5% 3% 104 ABSENCE MANAGEMENT MMA MICHIGAN HOW ARE YOU MANAGING LEAVE OF ABSENCE PROCESS IN-HOUSE DESIGNED TRACKING AND RECORDKEEPING TOOLS 32% 37% DO NOT USE ANY SPECIAL SOFTWARE 19% 14% PART OF HUMAN RESOURCES INFORMATION SYSTEM (HRIS) 17% 18% OUTSOURCED TO TPA OR LIFE/DISABILITY CARRIER 14% 16% PART OF TIME AND ATTENDANCE TRACKING SYSTEM 13% 10% OTHER 4% 3% STAND-ALONE SPECIALTY SOFTWARE 1% 1% 105

54 SUMMARY INSIGHTS INTEREST CONTINUES TO GROW LOCALLY AROUND VOLUNTARY BENEFIT OFFERINGS THE PRIMARY EMPLOYER MOTIVATION TO OFFER VOLUNTARY BENEFITS IS THEY PROVIDE EMPLOYEES OPPORTUNITY TO FILL GAPS IN EMPLOYER-PAID BENEFITS WHETHER IN-HOUSE OR THROUGH AN OUTSOURCED ARRANGEMENT, MORE EMPLOYERS ARE USING TECHNOLOGY TO COMBAT CHALLENGES WITH ABSENCE MANAGEMENT VENDOR PRICING REMAINS COMPETITIVE, THEREFORE ABSENCE MANAGEMENT OUTSOURCING MAY BE WORTH EXAMINING 106 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO & HMO PLAN DESIGN 3. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 4. PRESCRIPTION DRUG PLANS 5. STOP-LOSS 6. HEALTH & WELLBEING 7. HEALTH PLAN COSTS 8. EMPLOYEE CONTRIBUTIONS 9. ADDITIONAL COST CONTROL STRATEGIES 10. OTHER TRENDS 11. TRENDBENDERS 12. CONCLUDING THOUGHTS 107

55 EMPLOYERS CAN BEND THE TREND TRENDBENDERS ARE ORGANIZATIONS WITH THE LOWEST COST INCREASE (25 TH PERCENTILE) AVERAGED OVER THE PAST TWO YEARS TRENDBENDERS TH PERCENTILE MEDIAN 75 TH PERCENTILE 108 THE TRENDBENDER DIFFERENCE IN 2018, TRENDBENDERS AVERAGED A 3% COST DECREASE AFTER PLAN CHANGES SAME AS 2017 IN 2018, NON-TRENDBENDERS AVERAGE COST INCREASE WAS 7% (AFTER PLAN CHANGES) IN 2017, NON-TRENDBENDERS AVERAGED AN 8% INCREASE 109

56 THE TRENDBENDER DIFFERENCE: PROFILE WE HAVE OBSERVED A TRENDBENDER PATTERN FOR SUCCESS OVER THE LAST SEVERAL YEARS TRENDBENDERS AREN T JUST ADOPTING LOWER-COST STRATEGIES, THEY ARE DELIBERATELY FOCUSED ON GAINING EMPLOYEE PARTICIPATION/ENGAGEMENT IN THESE PROGRAMS OFFERING LOWER COST PLAN OPTIONS (CDHP / HMO) AT AN ATTRACTIVE EMPLOYEE CONTRIBUTION LEVEL ENERGY AROUND HEALTH AND WELLBEING PROGRAMS 110 THE TRENDBENDER DIFFERENCE: PROFILE AVG. MONTHLY EE CONTRIBUTIONS TRENDBENDERS PPO CDHP-HSA HMO NON- NON- NON- PLAN OPTIONS TRENDBENDERS TRENDBENDERS TRENDBENDERS TRENDBENDERS TRENDBENDERS TRENDBENDERS % OFFER PLAN TYPE 89% 84% 54% 50% 55% 40% NON- TRENDBENDERS TRENDBENDERS NON- TRENDBENDERS NON- TRENDBENDERS TRENDBENDERS SINGLE $145 $149 $74 $82 $102 $116 TWO PERSON $356 $376 $181 $214 $258 $338 FAMILY $464 $495 $247 $282 $317 $429 STRATEGY TRENDBENDERS NON-TRENDBENDERS STEERAGE TO CDHP 45% 38% STRATEGY TRENDBENDERS NON-TRENDBENDERS ANNUAL WELLBEING BUDGET >$20,000 54% 34% 111

57 THE TRENDBENDER DIFFERENCE EVERY ORGANIZATION S CIRCUMSTANCES ARE UNIQUE HIGH-RISK POPULATION BARGAINED WORKFORCE COMPETITION FOR TALENT CLEARLY, STRATEGIES THAT SUPPORT EMPLOYEE HEALTH AND WELLBEING AND ENCOURAGE POSITIVE HEALTH CARE BEHAVIORS ARE KEY BUILDING BLOCKS FOR: CONTROLLING COST BUILDING A CULTURE OF WELLBEING SIMPLY DEPLOYING THESE PROGRAMS IS NOT ENOUGH SUCH PROGRAMS NEED TO BE SUPPORTED WITH REGULAR AND CLEAR COMMUNICATION TO EFFECTIVELY ENGAGE/EDUCATE EMPLOYEES ONLY THEN WILL THE PROGRAMS GAIN THE PARTICIPATION REQUIRED TO SERVE AS REAL COST CONTROL MECHANISMS 112 TODAY S AGENDA 1. PLAN OPTIONS 2. PPO & HMO PLAN DESIGN 3. CONSUMER-DRIVEN HEALTH PLANS (CDHP) 4. PRESCRIPTION DRUG PLANS 5. STOP-LOSS 6. HEALTH & WELLBEING 7. HEALTH PLAN COSTS 8. EMPLOYEE CONTRIBUTIONS 9. ADDITIONAL COST CONTROL STRATEGIES 10. OTHER TRENDS 11. TRENDBENDERS 12. CONCLUDING THOUGHTS 113

58 CONCLUDING THOUGHTS 5% COST INCREASE AFTER PLAN CHANGES SAME AS 2017 CDHP REMAINS A KEY COST CONTROL LEVER (LOWEST COST PLAN OPTION) EMPLOYER ADOPTION HAS SLOWED EMPLOYEE ENROLLMENT HAS ACCELERATED PRESCRIPTION DRUG COSTS ARE A CONCERN FOR EMPLOYERS UTILIZATION MANAGEMENT PROGRAMS, SPECIALTY PLAN DESIGNS AND PBM CARVE-OUTS ARE POTENTIAL TOOLS TO SUPPRESS RX COSTS WHILE NON-TRADITIONAL COST REDUCTION STRATEGIES ARE CONSIDERED, EMPLOYERS RELY MORE HEAVILY ON TRADITIONAL METHODS TO MANAGE COST 114 CONCLUDING THOUGHTS MANAGING AN EMPLOYEE BENEFITS PROGRAM IS NOT EASY HAVE A PLAN WORK THE PLAN USE THIS DATA AS A RESOURCE AND REMEMBER 115

59 THANKS FOR COMING This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should FOR QUESTIONS ABOUT MARSH & MCLENNAN AGENCY, PLEASE CONTACT: DENISE CHRISTY, CHIEF MARKETING OFFICER MARSH & MCLENNAN AGENCY 3331 W. BIG BEAVER ROAD, SUITE 200 TROY, MI PHONE: (248)