McGraw Wentworth 2013 Southeast Michigan Mid-Market Group Benefits Survey

Transcription

1 1 McGraw Wentworth 2013 Southeast Michigan Mid-Market Group Benefits Survey COLLECT CLASSIFY CHART COURSE May / June 2013 The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute's criteria to be pre-approved for recertification credit. 2 1

2 Just a Refresher -10% 0% 4% 8% 25% th Percentile Median 75 th Percentile Average: All the numbers added together and divided by 100 (6%) Look at 2013 local data compared to 2012 national data Local data we review from two perspectives All survey participants TrendBenders TM 3 Ten Years of Survey Data There was a need to track SE MI benefits data SE MI historically had much better plans than national benchmarks The demographics have changed over the decade: Organizations Participating Average Number of Employees Median Number of Employees

3 Ten Years of Survey Data This last decade has brought challenges: High increases in early 2000 s Economic challenges in SE MI over the last five years New innovations to help control cost: Consumer driven health plans Wellness integrated into corporate cultures Economic struggles that pushed employers to change Approach to benefits has changed dramatically moved from entitlement to engagement The next decade should be very interesting 5 Summary of Demographics Survey is statistically valid with a 4% margin of error Of the 537 Michigan-based participating organizations, 50 schools and 48 municipalities are included (their data is not reflected here) 81% (356) are year-over-year returning participants 10% (44) are new participants 9% (39) have participated all 10 years of the MW survey! 30% of participants are unionized or have union presence 26% of survey respondents are auto suppliers 6 3

4 New for 2013 Health Care Reform Revised questions to better reflect current understanding of health reform requirements / impact Cost Control Strategies Removed section on cost control strategies Retiree Health Care Revised questions for health care reform issues Dental, life and disability sections included for 2013 Removed the vision questions 7 National and Actuarial Data Sources Mercer National Survey of Employer-Sponsored Health Plans, 2012 Towers Watson and the National Business Group on Health, Employer Survey on Purchasing Value in Health Care, 2013 Nyhart (Actuary) Detailed summaries can be found on our website 8 4

5 2013 Top Stories Plan Design & Strategies Lowest cost increase in a decade 4%! 25% of employers report 0% increase or better (a decrease!) Close to the national increase in 2012 at 4.1% Ten year lookbacks are eye-opening! The change in benefits over 10 years in SE MI is dramatic Moderate plan changes Continued growth of CDHP - longer CDHP in place, higher the enrollment PPO plans show limited cost-sharing increases More employers offering split copays (primary care/specialist) Increase in out of pocket maximums HMO plans showed little change Employee contributions increased nominally Top Stories Plan Design & Strategies Wellness continues to evolve Employers offering more often to spouses Outcomes-based wellness continues to grow 36% of employers tie incentives to the achievement of a health factor (up from 27% in 2012) SE MI uses spousal eligibility limitations more often than national 30% of employers have a spousal force-out or spousal surcharge 12% of employers nationally have either a spousal force-out or surcharge SE MI and national take up of dependent coverage close (59% in SE MI and 58% nationally) TrendBenders TM continue to focus on CDHP and wellness achieved an average -1% reduction in cost over 2 years 10 5

6 2013 Top Stories Health Care Reform Most employers will continue offering health coverage 91% of SE MI employers plan to continue offering coverage to at least some, if not all, of their employees 93% of employers nationally expect to continue offering coverage Size and industry matter greatly in determining HCR impact Nearly half of employers will struggle with 30 hour issue - 34% will reduce work hours to avoid 30 hours Most popular response to HCR cost concerns include reduced plan design, spousal surcharges, and outcomes-based wellness Employers are moving forward on HCR making decisions on how they will handle 2014 requirements 11 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 12 6

7 Health Care Reform 13 Current HCR Issues 2013 MW Survey Data Grandfathered plans 21% of participants indicate they have at least one plan option that qualifies for grandfathered status (27% in 2012). Of those: 56% expect to maintain grandfathered status 18% expect to lose grandfathered status prior to % don t know Coverage for adult dependent children 76% of organizations extended dental and vision coverage to adult children Only 4% of organizations charge a per dependent contribution; 5% are considering for

8 Looking Forward In 2014, the whole market changes Launch of Exchanges/Government Subsidies Employers and individuals will face Play or Pay mandate Critical issues for employers in 2014 Impact of full-time status being set at 30 hours financial and administrative burden Will plans pass affordability test? Will employers continue to offer a health plan in 2014 & beyond? Towers Watson notes most employers will offer in 2014, but only 26% are very confident they will be offering health benefits in 10 years Data shows increased understanding of health reform 15 Plans to Address Full-Time Issue Play or Pay requires coverage for 30 or more hours/week 41% of employers do not offer coverage to all employees working 30 hours or more per week; strategies to address: Strategy 2013 MW SE MI 2012 MW SE MI Intend to extend coverage to all employees 57% 44% working 30+ hours in 2014 Intend to offer a lower cost plan for 3% 3% employees working less than 40 hours per week Plan to reduce work hours to fewer than 30 34% 12% hours per week Intend to make no changes and will pay 2% 1% penalty for any employee affected Don t know 4% 40% 16 8

9 Additional Upcoming Issues 2013 MW Survey Data Do you anticipate at least of one of your plans will pass the benefits and affordability tests for most employees? 88% replied YES (62% in 2012) 1% replied NO (3% in 2012) 11% replied DON T KNOW (35% in 2012) Decisions being made...clarity increasing 17 Potential Strategies or MW Survey Data Stay In: Continue employer-sponsored coverage for full-time employees Hybrid: Retain employer sponsored coverage for some employees. Direct subsidy-eligible to Exchange (if permitted by law) Hybrid: Plan to fail the affordability test on low income individuals and refer them to the Exchange Get - Out: Eliminate employer-sponsored health plan for active employees. Provide financial subsidy to purchase coverage in Exchange Get - Out: Eliminate employer-sponsored health plan for active employees. Direct employees to Exchange, no financial subsidy Very Likely Somewhat Likely Not at All Likely 84% 14% 2% 3% 14% 83% 4% 20% 76% 0% 11% 89% 1% 5% 94% 18 9

10 Size and Time Matter ESI Employer size matters on keeping ESI after 2014 (Mercer, 2011/2012) 21% of employers with fewer than 500 lives are likely to terminate (20% in 2011) within next 5 years Just 7% of employers with 500 or more lives are likely to terminate (9% in 2011) within the next 5 years Towers Watson (2013) indicated time will tell 54% of their respondents expect to continue offering coverage to active employees in 3-5 years Only 26% of survey respondents were very confident that they would be offering coverage to employees in 10 years 19 If Your Organization Maintains ESI 2013 MW Survey What reasons would your organization cite for your decision to maintain coverage? Reason to Maintain ESI % of Employers Retention and recruiting concerns 95% Savings would not justify the change 29% Concerned about readiness of the Exchange 40% Concerned about future changes to the political climate 21% Change would be contrary to corporate culture 63% Union concerns 23% 20 10

11 Expected Cost Increase - Health Reform Cost Increase HCR Only MW Compass Avg. Increase to Stay In: 9.9% Wide Range: 4.7% % 29% 34% 10% 27% Employer cost increases due to a number of factors: 1. Employees that work 30 hours today, not offered coverage 2. More employees electing coverage 3. Plan design changes required by HCR 4. New taxes and fees No Increase Increase of 2% or less Increase of 3% or more Don't Know Source: 2012 Mercer National Survey of Employer-Sponsored Benefit Plans 21 Expected Increases Will Vary 1. Requirement to offer to employees - 30 or more hours/week High variability highly dependent on organization 2. More employees electing coverage Depends on current opt-out rate An employer with a 15% opt-out rate may see a 10% take up of former opt-outs (Increase - 1.5%) 3. Plan design changes Out of Pocket maximum all cost sharing accumulates: 1% - 2% New hire waiting period longer than 90 days depends on current waiting period and turnover 4. New taxes and fees Estimated impact between 1% - 3% 22 11

12 HCR Cost Increases-Industry Specific 45% 40% 46% 40% By industry, employers that expect a cost increase of 3% or more 35% 30% 33% 32% 31% 29% Percent of Employers 25% 20% 15% 10% 5% 24% 0% Retail/ Hospitality Health Care Services Manufacturing Financial Services Transportation Communication Utilities Other Services Government Source: 2012 Mercer National Survey of Employer-Sponsored Benefit Plans 23 Average Cost Stay In by Industry Industry Compass Count Avg % Increase To Stay In Wholesale/Retail % Health Care 2 5.5% Manufacturing % Financial Services/ Accounting 7 7.3% Transport/Utilities/ % Communication Engineering & Managed Services 6 7.5% Services/All Others % Government 5 5.8% 24 12

13 Average Cost Stay In by Industry Industry Compass Count Avg % Increase To Stay In K-12 Schools Private % K-12 Schools Public 2 7.0% Law Firms 1 4.7% Contract Services % Other % Social Services 3 8.7% Engineering & Managed Services 6 7.5% 25 Thoughts on Cost Control? 2012/2013 MW Survey Data Reduce current plan design (move closer to 60%) Outcomes-based wellness plans (tobacco surcharges, awarding incentives based on the achievement of a health factor) Newly offer or more aggressively steer employees to consumer driven health plans Defined Contribution Health Plan (employer sets contribution for coverage) % N/A 53% 64% 50% 55% 49% 61% 26 13

14 Thoughts on Cost Control? 2012/2013 MW Survey Data (continued) Implement spousal surcharges or forceout 44% N/A Introduce a lower cost plan to pass 43% N/A benefits/affordability test Shift cost more aggressively to families 38% 46% (two-person or family coverage) Add income-based contributions 23% N/A Provide employee subsidy and direct to Exchange to purchase individual coverage 18% N/A 27 In Summary Health care reform will dramatically change marketplace in 2014 Most employers will have increased costs associated with health reform Will need to decide to play or pay Need to evaluate workforce and health plan what changes need to be made to meet HCR requirements? Expect increased cost in 2014 Employers will have to actively manage plan cost and are considering a variety of options for 2014 Many are looking to cut benefits to move closer to 60% mandate 28 14

15 Plan Options 29 PPOs Dominate Offerings % Employers Offering 89% PPO HMO CDHP 38% 39% 34% 35% 33% 36% 91% 90%** Multiple Plans offered: 15% offer 1 plan 33% offer 2 plans 31% offer 3 plans 21% offer 4 or more 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% National 2012* 2012 MW Survey 2013 MW Survey **Includes PPO and POS * Mercer,

16 PPOs Dominate Enrollment Percent of Employees Enrolled in Plan Type 69% PPO 70% 65%** HMO CDHP 16% 16% 20% 11% 10% 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% National 2012* 2012 MW Survey 2013 MW Survey **Includes PPO and POS * Mercer, General Information on Plans Blue Cross Blue Shield continues to dominate the MI PPO market with 76% of market (75% in 2012); Priority Health (2%), HealthPlus (4%), Aetna (2%), Alliance (2%) More competition in HMO market (% market share) 58% 61% 17% 13% 11% 8% 3% 6% 4% 4% BCN HAP Priority Health Total Healthcare Health Plus 2012 MW Survey 2013 MW Survey 32 16

17 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 33 CDHP Continues to Increase 34 17

18 CDHP Prevalence, Nationally 60% 50% 48% 7% of employers offer CDHP as the only option 59% 40% 32% 36% Percentage 30% 20% 20% 22% 10% 0% National - Small Employers* up to 499 EEs National - Large Employers* 500+ EEs National - Jumbo Employers* 20,000+ EEs *Mercer, 2011 & CDHP Prevalence, Locally For 2013, 30% of SE MI employers offered CDHP as an option (5% offered as total replacement/only option) 40% 33% 35% Percentage 30% 20% 27% 10% 0% 2011 MW Survey 2012 MW Survey 2013 MW Survey 36 18

19 How Long Has CDHP Been Offered? 2013 MW Survey Data 10% reported having CDHP for less than 1 year 40% Percentage 30% 20% 17% 21% 11% 11% 23% 10% 6% 0% 1 Year 2 Years 3 Years 4 Years 5Years More than 5 Years 37 Enrollment Increases Over Time 2013 MW Survey 50% 40% 30% 20% 10% 0% 38% Less than 5% 4% 20% 38% 16% 5%-19% 43% 0% 36% 18% 25% 20% - 50% Greater than 50% 36% 28% More than 5 years At 3 Years At 1 Year 38 19

20 HRA or HSA? 100% 80% 71% 71% 84% 85% 82% Percentage 60% 40% 29% 29% 20% 16% 10% 14% 0% HRA National (2011) National (2012) HSA 2011 MW Survey 2012 MW Survey 2013 MW Survey Mercer, 2011 & National HSA Gap The Mercer report notes that 71% of large employers make contributions to employees HSAs HSA Gap National 2011: Single $1,000 Family $1,800 HSA Gap National 2012: Single $1,000 Family $2,000 $3,000 $3,000 $3,000 Amount in Dollars $2,000 $1,000 $1,500 $1,500 $500 $500 $1,200 $!,000 $0 Median Deductible - Single Employer Contribution to HSA - Single Median Deductible - Family Employer Contribution to HSA - Family National (2011)* National (2012)* * Mercer, 2011 &

21 SE MI Gap $4, Gap SE MI: Single $1,000 Family $2, Gap SE MI: Single $1,000 Family $2, Gap SE MI: Single $1,000 Family $2,000 Amount in Dollars $3,000 $2,000 56% of SE MI employers make contributions to employees HSAs $1,500 $1,500 $1,500 $3,000 $3,000 $3,000 $1,000 $500 $500 $500 $1,000 $1,000 $1,000 $0 Median Deductible - Single Employer Contribution to Account - Single Median Deductible - Family Employer Contribution to Account - Family 2011 MW Survey 2012 MW Survey 2013 MW Survey 41 ER Funding of HSA Drops Over Time Average Monthly Funding $140 $135 $120 Per Month Contribution to HSA $100 $80 $60 $40 $20 $69 $50 $97 $41 $77 1 Year Single Contribution Employer only 3 Years Family Contribution Employer only 5Years 42 21

22 Lower Employee Contributions Act As Incentive $400 Monthly Employee Contributions for CDHP and PPO Plans $391 $338 $354 $300 $259 Amount in Dollars $200 $100 $66 $64 $70 $209 $227 $111 $106 $112 $0 Single CDHP Family CDHP Single PPO Family PPO National 2012* 2012 MW Survey 2013 MW Survey * Mercer, CDHP Summary Thoughts CDHPs continue to increase steadily more than a third of employers offer CDHPs in 2013 Nationally, small and large employers see steady growth Almost 60% of jumbo employers offer a CDHP plan option Employers are committed to funding a portion of the HSA Important to manage your plan effectively Employer funding of account decreases over time Important to communicate plan information regularly Enrollment tends to grow over time 44 22

23 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 45 PPO Plans 46 23

24 Median In-Network PPO Deductibles $1,400 $1,200 $1,000 16% of PPO plans charge a per admission deductible, 20% of plans nationally charge per admission deductible* Averages are in red above the medians; Mercer did not report family averages $1,369 $1,565 $1,637 $1,000 $1,000 $1,000 $1,000 $1,000 Amount in Dollars $800 $600 $400 $200 $586 $666 $671 $757 $779 $500 $500 $500 $500 $500 $0 Single National (2011)* National (2012)* Family 2011 MW Survey 2013 MW Survey 2012 MW Survey * Mercer, 2011 & Median Coinsurance for PPO Plans 50% 40% 40% 40% 40% 40% 40% 30% Percentage 20% 20% 20% 20% 20% 20% 10% 0% PPO: In-Network PPO: Out-of-Network National (2011)* National (2012)* 2011 MW Survey 2012 MW Survey 2013 MW Survey Mercer combines PPO and POS due to declining enrollment in POS Plans * Mercer, 2011 &

25 Amount in Dollars In-Network Median OOP Maximums Includes the deductible $5,000 $4,000 $3,000 $2,000 $1,000 Average in-network out of pocket maximums are higher: Single $2,340 $2,703 Family $4,633 $5,487 $2,250 $2,300 $2,000 $2,000 $2,000 Mercer did not report family out of pocket maxes in 2011 $5,000 $4,000 $4,000 $4,600 $0 Single National (2011)* National (2012)* 2011 MW Survey 2012 MW Survey Family 2013 MW Survey * Mercer, 2011 & Employers with Split Copays Primary Care and Specialists Locally, split copays are: $25/$40 Nationally, split copays were: $20/$40 50% 48% 48% 40% Percentage 30% 20% 20% 27% 30% 10% 0% National (2011)* 2011 MW Survey 2013 MW Survey National (2012)* 2012 MW Survey * Mercer, 2011 &

26 Median PPO Office Visit Copays In 2012, Mercer reports 22% require coinsurance for office visits Amount in Dollars $30 $20 $10 $20 $20 $25 $25 $25 $0 Office Visit Copay National (2011)* National (2012)* 2011 MW Survey 2012 MW Survey 2013 MW Survey *Mercer, 2011 & Coverage for Emergent Care Emergency Room Copays Are Much Higher Than Urgent Care Copays $125 $100 $100 $100 $100 $100 $100 Dollar Copay Amount $75 $50 $25 $30 $30 $30 Urgent Care $0 National (2011)* 2011 MW Survey 2013 MW Survey National (2012)* 2012 MW Survey *Mercer, 2011 &

27 Is Wrapping Deductibles Going Away? In 2013, 6% of PPO plans indicate the employer wraps a portion of the deductible. Of these plans: $8,000 $7,250 $4,000 $3,500 Median Single Deductible Median Employer Funding Median Family Deductible Median Employer Funding Be careful Be aware of carrier underwriting policies relating to wrapping! 53 Funding Arrangements for PPO Plans Funding arrangements for SE MI 54% self-fund the PPO health plan (57% in 2012) 46% fully insure the PPO health plan (43% in 2012) Group size matters when self-funding: Employees % Self-Funded % Fully Insured <100 8% 92% % 63% % 27% 1, % 9% Nationally*, of large group PPO plans (500+), 75% selffunded, 25% fully insured in 2012 HCR likely to move more employers to self-funding * Mercer,

28 Ten Year Look Back Median Plans Plans No Deductible In-Network Single Ded. In-Network Family Ded. In-Network Coinsurance Out Network Coinsurance In Network Out of Pocket Max Office Visit Copay 2004 MW Survey 2004 Mercer Survey 35% 25% $100 $250 $200 $625 0% 20% 20% 30% $600 $1,500 $10 $ MW Survey 2012 Mercer Survey 11% 15% $500 $500 $1,000 $1,000 20% 20% 40% 40% $2,300 $2,250 $25 $20 55 HMO Plan Design 56 28

29 HMOs SE MI Show Little Change In 2013, 46% of plans in SE Michigan have 100% coinsurance (50% in 2012); 80% is median coinsurance for others Plan Provision 2012 SE MI 2013 SE MI Mercer* Mercer* Plans with Inpatient Deductible/Copay 25% 23% 57% 56% Amount of Inpatient Copay $250 $250 $250 $250 Plans with Overall Plan Deductible 50% 56% Not reported 27% Amount of Plan Deductible Single/Family $500/$1,000 $500/$1,000 Not reported $500/Not reported * Mercer, 2011 and HMO Plan Design Office visit copays In 2013, median office copay was $20 ($20 in 2012) Nationally*, in 2012, the median copay was $20 Additional copay strategies In 2013, 36% of HMO plans in SE MI had split copays (37% in 2012). The median primary and specialist copays were $25/$35 Nationally* in 2012, 50% of HMOs set a higher copay for specialists. The primary and specialist copays were $20/$35 84% of plans include an urgent care copay (94% in 2012) and the median amount was $35 In 2013, median emergency room copay locally is $100. Nationally* in 2012, it was $100 * Mercer,

30 Are Employers Wrapping Deductibles? In 2013, 13% of HMO plans indicate the employer wraps a portion of the deductible. Of these plans: $6,000 $5,200 $3,000 $2,500 Median Single Deductible Median Employer Funding Median Family Deductible Median Employer Funding Be careful Be aware of carrier underwriting policies relating to wrapping! 59 Ten Year Look Back Median Plans 2004 MW Survey 2004 Mercer Survey 2013 MW Survey 2012 Mercer Survey Coinsurance 100% Not asked Office Visit Copay $10 $15 Plan Deductible Not asked Not asked Inpatient Ded. / Copayment % of Plans Not Asked 46% 80% Not asked $20 $20 $500/ $1,000 $500/ Not Reported 23% 56% Inpatient Ded. / Copayment Amount Emergency Room Copayment Not Asked $250 Not Asked $50 $250 $250 $100 $

31 In Summary Locally and nationally, we see very little change in PPO plan designs both increased out of pocket maximums Locally, modest increase in split dollar copay arrangements Locally and nationally very little change to HMO plans Continue to see a commitment to introducing more cost sharing locally most plans have coinsurance, not 100% coverage Mercer has started to ask about plan deductibles quarter of the plans had a plan deductible Wrapping deductibles may not be possible post 2014 Concern with how these plans will be measured for minimum value (60%) Carriers may no longer allow this option 61 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 62 31

32 Prescription Drug Plans 63 Rx Trend Continues to Decrease Prescription Trend Up Specialty utilization and % pipeline % Price inflation Updated treatment % guidelines % Aging population Health care reform % Down % Patent expirations % Increased generic use % Increased utilization management programs % Consumerism focus % Economic factors OTC conversions 0.0% 5.0% 10.0% 15.0% 20.0% Source: 2012 Mercer National Survey of Employer-Sponsored Benefit Plans 64 32

33 National Trends Copay Tiers Retail Plan Prevalence 80% 74% 72% 70% Mercer reports 32% of large employers use coinsurance in at least one tier of their Rx plan 60% Percentage 40% 20% 0% 4% 3% 4% 10% 10% 10% 14% 2% 3% 2% 1-Tier Copay 2-Tier Copay 3-Tier Copay 4 or 5-Tier Copay Other Form of Copay National (2010)* National (2011)* National (2012)* * Mercer, 2010, 2011 & National RX Copays Median Rx Copays $50 Mercer only reports 3-tier amounts $50 $50 $50 $40 Amount in Dollars $30 $20 $10 $10 $10 $10 $25 $30 $30 $0 Generic Formulary Brand Non- Formulary Brand National (2010)* National (2011)* National (2012)* * Mercer, 2010, 2011 &

34 SE MI 3-Tier Copays Grow Retail Plan Prevalence PPO Plans 80% 17% offer a prescription plan design with a 4 th tier HMO Plans: 61% of plans have 2 - tier copays 60% 54% 60% 64% Percentage 40% 20% 4% 4% 4% 32% 27% 24% 10% 9% 8% 0% 1-Tier Copay 2-Tier Copay 3-Tier Copay Coinsurance 2011 MW Survey 2012 MW Survey 2013 MW Survey 67 SE MI Copay Trends Median Rx Copays - PPO Plans $60 $50 $40 HMO Plans: Median Copays: $10 generic/$40 brand $40 $40 $50 $60 $60 $60 Amount in Dollars $30 $20 $10 $10 $10 $10 $10 $10 $10 $10 $10 $10 $30 $30 $30 $0 1-Tier Copay Plans Generic Brand Generic Formulary Brand Non-Formulary Brand 2-Tier Copay Plans 3-Tier Copay Plans 2011 MW Survey 2012 MW Survey 2013 MW Survey 68 34

35 More Tiers, More Popular 17% of plans in SE MI include a 4th copay tier; of those that do: 63% use a fixed dollar copay 37% use coinsurance The median copay in the 4th tier was $100 5% of plans in SE MI include a 5th copay tier; of those that do: 60% use a fixed dollar copay 40% use coinsurance Nationally*, 14% of employers have a 4th or 5th tier in Rx plan * Mercer, Ten Year Look Back Median Plans 2004 MW Survey 2004 Mercer Survey PPO Plans Single Tier 8% 1% Two Tier 62% 15% Three Tier 30% 61% Two Tier Copays $10/$20 $10/$20/$40 HMO Plans Single Tier 14% 4% 2013 MW Survey 2012 Mercer Survey 4% 4% 24% 10% 64% 70% $10/$30/$60 $10/$30/$50 1% Two Tier 61% 19% Three Tier 25% 67% Two Tier Copays $6/$15 $10/$20/$40 61% 33% $10/$40 Not reported separately 70 35

36 Summary Thoughts Pharmacy trend has been manageable the last several years Focus on generics is paying off Mercer* reports the following strategies for employers 1,000+ to manage high cost specialty medications 52% require prior authorization and quantity limits 44% require step therapy 34% limit coverage to formulary medications 22% require higher cost sharing 14% carve out to specialty third party pharmacy vendor Pharmacy carve outs may change post-2014 because all out of pocket costs accumulate to out of pocket maximum SE MI carve outs at 20% (few HMOs carve out) Nationally* carve outs are at 18% overall * Mercer, Lets Take A Break! 72 36

37 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 73 Wellness Programs 74 37

38 Wellness Commitment Steady Full-fledged wellness program with specialty vendor Full-fledged wellness program with health plan vendor 10% 11% 10% 11% Limited Focus on Wellness A la Carte Programs Limited Services through health plan at no cost 21% 24% 37% 39% In 2013, only 19% of survey participants indicated they have no wellness initiatives MW All Survey Participants 2012 MW All Survey Participants 75 Nationally, Health Management Programs Health Plan Standard Services Only 62% 66% Health Plan Optional Services Contract with Specialty Vendor for Health Management Services 27% 24% 30% 23% Mercer notes a significant increase in the use of specialty vendors. These employers see a value in a more intensive, coordinated approach to comprehensive wellness programs Mercer Large Employers 2011 Mercer Large Employers 76 38

39 Wellness Plans, In General When employers offer wellness plans (SE MI) % 56% Offer to employees only 15% 19% Offer to employees and spouses 26% 26% Offer to employees, spouses and dependents 42% offer health assessments (46% in 2012) 33% offer biometric screenings (30% in 2012) Incentives influence participation 57% of employers offer incentives; they achieve 76%-99% participation 43% of employers do not offer incentives; most achieve less than 25% participation 77 Most Popular Incentives Percent of Employers 40% 35% 30% 25% 20% 15% 10% 5% 40% 36% 35% 27% 23% Of the employers that offer incentives for the wellness plans, 34% offer more than one incentive to participate! 12% 8% 9% 0% Reduced contributions to health plan Cash Merchandise (t-shirts, movie passes, etc.) Lottery prize drawing Employee Recognition Enhanced Plan Design ER funds for FSA/ HSA/HRA Paid day off MW 2013 Survey 78 39

40 More on Incentives Incentive amounts: Cash payment, the average annual dollar amount is $204 Premium reduction, $360 is average annual amount for single coverage Premium reduction, $707 is average annual amount for family coverage 36% tie incentives to achievement of a targeted health goal 60% indicate they are definitely doing or highly likely to tie incentives to achievement of a health goal in the next months Has your approach to incentives changed/will change? Approach 2013 Plans Plans No change in amount of incentives 82% 70% Increase the amount of incentives 16% 29% Decrease the amount of incentives 2% 2% 79 Wellness-Driven Plan Designs Wellness-driven plan designs offer two levels of benefits enhanced and standard To qualify for the enhanced benefits, participants need to meet the plan requirements In SE MI, these plans are popular: 26% of HMO plans are wellness-driven (29% in 2012) 8% of PPO plans are wellness-driven (6% in 2012) Different carriers require different qualifications to be met for enhanced benefits. Of the HMO plans: 42% of plans allow enhanced benefits based on participation (48% in 2012) 58% of plans require the achievement of a health factor (52% in 2012) 80 40

41 SE MI s Most Popular Wellness Strategies Tobacco Use Cessation 43% 31% Discount Memberships (gym, Weight Watchers) 42% 34% Health Assessments 40% 25% Medical Information 39% 28% Currently Offer Tobacco Free Campus Internal Wellness Activities 38% 37% 14% 27% Highly Likely Weight Management 32% 32% Lunch and Learns 28% 32% 0% 50% 100% 81 Outcomes Measured Only if Wellness has been in place for 2 or more years Metric Currently Measuring Plan to Measure 2013/2014 Participation 86% 0% Participant satisfaction 42% 29% Risk factors 36% 12% Changes in biometric measures 36% 8% Corporate culture 28% 28% Improvement in member 26% 36% knowledge, attitude or behavior Return on investment 14% 38% Productivity 10% 13% 82 41

42 Nationally Offered Wellness Programs Case Management 82% Nurse Advice Line 80% Disease Management Health Assessment Behavior Modification 63% 74% 78% Continuum Addressing Health Needs Health Advocate Services 51% Worksite Biometric Screening 48% 2012 Mercer Large Employers (500+) 83 Nationally Tools Provided to Help Percentage of Employers Encouraging Employees to Improve Health by Providing the Following: On-Site Yoga/Exercise Class A Web Portal with Activity or Incentive Tracking On-Site Weight Watchers Program Social Networking Opportunities-Peer Support 42% 38% 35% 31% Mobile Apps for Activity Tracking or Peer Interaction 11% None of These 28% 2012 Mercer Large Employers (500+) 84 42

43 Health Management National Focus Encouraging participation*: 49% offer incentives to complete HA; of those: 20% use cash 21% use lower premium contributions 5% use financial contributions to HRA/HSA or FSA 3% use improve plan design (lower deductible, copays, and so on) Average incentive (cash or lower premium) is $268 annually When incentive is offered, 46% of participants complete 18% offer incentives to achieve specific health outcomes Towers Watson report employers tying incentives to achieving health factors, specifically: Body Mass Index: 9% Cholesterol: 9% Blood Pressure 9% * Mercer, Tobacco/Wellness Surcharges 11% of employers (10% in 2012) in SE MI charged a tobacco surcharge; Mercer reports 15% of employers do Average monthly surcharge in SE MI is $46, the median is $44 Of employers that assess tobacco surcharges Determining Tobacco Use 2013 SE MI 2012 Mercer Affidavit 63% 92% Health Assessment 18% Testing 6% 20% Other Method (include random testing) 2% 13% According to Towers Watson, smoking is a target 42% of employers charge tobacco surcharge ($50/month) 52% ban smoking on campus; 8% will adopt ban in % have adopted policy not to hire smokers; 2% will adopt in

44 Growth of Wellness-Large Companies Wellness Incentives and Initiatives Plan for 2014 Financial rewards for individuals who 54% 61% 62% 81% participate in health management programs Using penalties for not completing health 19% 20% 18% 36% management programs/activities Require completion of health assessment/biometric screening for incentives 35% 42% 54% 75% Require employees to validate participation in healthy lifestyle activities for incentives Not asked 23% 33% 59% Penalize tobacco use 30% 35% 42% 62% Penalize other target health outcomes 12% 10% 16% 47% Apply rewards to employees and spouses 19% 23% 31% 59% Source: 2013 Employer Survey on Purchasing Value in Health Care,Towers Watson 87 Barriers to Wellness/Importance MW Survey Data Lack of Budget 66% 62% Lack of Staff 47% 45% Employees Not Interested 32% 26% Not Ready for Culture Change 30% 27% Management Not Interested 22% 19% Waiting to See What Happens with Health Reform 18% 27% Employers role in changing employee health and lifestyle choices Today, only 9% of employers believe they play a significant role Over the next months, the percent of employers that believe they will play a significant role increased to 46% 88 44

45 Summary Thoughts Employers remain committed to wellness as a cost control strategy Nationally and locally, more employers are tying incentives to the achievement of health factor Health reform may impact this approach HCR will allow an increase to the allowable incentive for health contingent wellness plans (20% increases to 30%) Alternative standards have to be offered to everyone who can t achieve standard, not just those with a medical reason The dollar amount of incentive is increasing both locally and nationally Employers see their role in improving employee health expanding in the coming years 89 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 90 45

46 91 National Change in Average Health Cost 18% After Employer Changes Mercer reports employers expect a 7.4% increase to cost before plan changes in 2013 and expect to reduce it to 5% with plan changes. 14% 10% 6% 7.3% 8.1% 6.1% 11.2% 14.7% 10.1% 7.5% 6.9% 6.1% 6.1% 6.1%6.3% 6.1% 5.5% 4.1% 2% 2.1% 2.5% 0.2% -2% All employers - all types of health care plans (Mercer) 92 46

47 Five Years of Cost Increases 15% 10% 5% National Mercer 5.5% 5% 7% Average Health Plan Cost Increase AFTER Plan Changes (All Plans Combined) 6.9% 6.1% 8% 4.1% 6% 5% 4% 0% 2009 MW Survey Average 2010 MW Survey Average 2011 MW Survey Average 2012 MW Survey Average 2013 MW Survey Average 93 Range of Cost Increases Medical Plan Cost Increases - All Plans 12.0% 10.0% 8% Percentage 8.0% 6.0% 4.0% 4.1% 4% 2.0% 0.0% 0% Active National Average (2012)* 2013 Survey Median 2013 Survey 25th Percentile 2013 Survey 75th Percentile * Mercer,

48 2013 vs Spectrum of Cost Average Monthly Cost of Health Plans by Plan Type Five Year Cumulative Increases in Red $1,500 25% $1,171 31% $1,200 24% $1,369 $1,000 25% 26% $500 $443 $435 17% $471 $934 $916 $1,103 $0 $354 $345 $401 Single Family 2013 HMO 2013 CDHP 2013 PPO 2008 HMO 2008 CDHP 2008 PPO 95 National Cost Spectrum Cost Data includes ER contribution to HSA/HRA $10,000 $8,000 $6,000 $4,000 $2,000 $0 CDHP HSA CDHP HRA PPO 2011 National 2012 National HMO Mercer, 2011 &

49 Employee Contributions 97 Monthly Contributions in $ and % PPO and HMO Plans Contribution as a Percent of Premium in Red $400 $300 31% $366 30% $391 25% 26% $353 $338 30% $376 28% $370 25% 27% $293 $275 Amount in Dollars $200 $100 23% $111 22% 23% 24% $111 $106 $112 23% 23% 21% 23% $102 $105 $87 $99 $0 Single PPO Family PPO Single HMO Family HMO National 2011* National 2012* 2012 MW Survey 2013 MW Survey * Mercer, 2011 &

50 Monthly Contributions in $ and % CDHP Plans Contribution as a Percent of Premium in Red Amount in Dollars $300 $200 $100 18% $58 23% 17% $66 $64 16% $70 25% $233 23% $259 19% $209 19% $227 $0 Single CDHP Family CDHP National 2011* National 2012* 2012 MW Survey 2013 MW Survey * Mercer, 2011 & vs Spectrum of Contributions $400 $300 Five Year Cumulative Increases in Red 68% $227 38% $293 29% $353 Monthly Employee Contribution Amount $200 $100 $0 66% 43% $70 $99 $42 $69 Single 22% $112 $92 $135 $212 Family $ CDHP 2008 CDHP 2013 HMO 2013 PPO 2008 HMO 2008 PPO

51 Employer Net Cost By Plan $1,500 $1,250 $1,171 $293 $1,369 $353 $1,200 $227 $1,000 $878 $1,016 $973 $750 $500 $250 $471 $443 $435 $99 $112 $70 $344 $359 $365 $0 HMO PPO CDHP HMO PPO CDHP Single Family 2013 Net Employer Cost 2013 Employee Contribution 101 Other Contribution Strategies Per dependent contributions (MW 2013 Survey) 4% of employers vary contributions based on the number of dependents. Of those that do: $31 is the median per child contribution 48% of employers cap the per dependent child rate based on the number of child(ren) covered The most popular cap level is 3 kids Income-based contributions 7% of respondents vary contributions by employee income level in SE MI survey (7% in 2012) Mercer* reports 12% of large employers have income-based contributions; most employers report using 3 median salary bands * Mercer,

52 Spousal Limitations SE MI Medical Plans Spousal Force-Out 15% 13% Spousal Surcharge 15% 17% Median Monthly Medical Surcharge $100 $100 Nationally, Mercer reports in % of large employers have a spousal force-out 6% charge a spousal surcharge Towers Watson reports strong use of spousal limitations in % have a spousal force-out and 8% plan to add in % charge a spousal surcharge and 13% plan to add in 2014 $100 is the median monthly surcharge amount 103 More on Spousal Limitations Locally, employer interest remains significant (30%) and for those that have added limitations 13% characterize cost savings as significant successful 54% characterize cost savings as reasonable moderate success 23% characterize cost savings as break even some savings achieved, but less than expected 10% characterize cost savings as minimal unsuccessful Locally, our survey indicates 59% of employees elect dependent coverage - spouse and/or child(ren) Nationally*, 58% of employees elect dependent coverage * Mercer,

53 Ten Year Look Back Costs/Contributions 2004 MW Survey PPO Plans Single Rate $319 Family Rate $ Mercer Survey $515 Single Contributions $48 (15%) $72 (23%) Family Contributions $152 (18%) $258 (31%) HMO Plans Single Rate $290 Family Rate $767 $500 Single Contributions $29 (10%) $61 (22%) Family Contributions $122 (16%) $246 (33%) 2013 MW Survey 2012 Mercer Survey $471 $1,369 $862 $112 (24%) $111 (22%) $353 (26%) $391 (30%) $443 $1,171 $901 $99 (23%) $105 (23%) $293 (27%) $370 (28%) 105 Summary Thoughts Median cost increases are the lowest they have been in a decade in SE MI! Nationally, increases for 2012 were low at 4.1% Family coverage in SE MI different from national Contributions for family coverage lower than national data SE MI employers gravitate more toward adding spousal force-outs and spousal surcharges to limit dependent enrollment Towers Watson survey supports more employers adding limitations Wider range of net cost across plans may result in bigger impacts to employees if employer considers defined contributions approach

54 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts 107 Thoughts on Cost Control

55 Calm Before the Storm? Plan increases in 2013 locally are the lowest they have ever been Correspondingly, survey data shows only minor changes to median plan designs and employee contributions Employers locally have continued to look toward consumer driven health plans and wellness for cost control In 2014, the market changes dramatically Employer cost will increase next year as a result of health reform New taxes and fees Plan design changes will be required New liability for 30 hours per week workers or previous waivers Employers will need to be diligent in projecting cost for 2014 and will likely take action 109 Does Benefit Benchmark Reset? To avoid some potential penalties, employers must pass the benefits test (60% value) and the affordability tests What does a 60% benefit plan look like? (based on single, innetwork coverage) Sample 60% Plan* Median Cost Sharing 2013 Plans PPO HMO HSA Eligible CDHP Deductible $4,000 $500 $500 $1,500 Coinsurance 30% 20% 20% 20% Out of Pocket Maximum $6,000 $2,300 n/a $3,000 *Actuarial Values Vary Slightly

56 Employer Plans Have Room to Move PPO Plan Ideas More aggressive cost-sharing Increase maximum out of pocket limits Add/restructure copays Primary care/specialist copay difference Add copays for expensive imaging service Revisit networks will limited network options be available? HMO Plan Ideas More aggressive cost-sharing Add deductibles Add coinsurance Add out of pocket maximums Restructure copays Primary care/specialist copay difference Does your vendor offer other copay options to consider? Revisit networks will limited network options be available? 111 Employer Plans Have Room to Move CDHP Plan Ideas Consider adding a CDHP as a lower cost plan option (still pass 60% benefit level) Employers that choose to fund account can tie account funding to metrics other than trend Wellness activities Business performance Budget targets If possible, consider total replacement all plans offered are CDHPs Prescription Benefits Promote or force more generic utilization mandatory generic Review copay tiers, is there enough financial difference to drive generic use? Rx carve outs see if your arrangements can continue in 2015 Use a restricted formulary Implement a 4 th or 5 th tier to help manage specialty medications Consider cost management programs

57 Other Options to Consider Any Plans Can you self-fund your benefit plan? (4%-5% difference/taxes) May avoid impact of market share tax May provide more flexibility in structuring benefits Risk tolerance should be assessed Carriers may offer self-funding options to smaller employers All plans must have out of pocket maximums that don t exceed limit Should you increase maximum to account for new accumulators? Eligibility Considerations HCR only requires employers offer coverage to full-time employees and dependent children Exclude spouse coverage? Spousal surcharge? Spousal force-out? If you currently offer part-time employees working less than 30 hours/week coverage reconsider Exchanges will offer coverage without medical underwriting Individual may qualify for government subsidies to help pay for coverage 113 More Ideas for Cost Control Contribution Ideas Increase contributions for 2 person and family coverage affordability test is based on single coverage Look at employer net cost for all plans options offered Are you subsidizing your most costly plans at a higher rate? Consider income based contributions if you have wide range of compensation Wellness Plans Consider adding wellness initiatives to your current program Wellness incentive picture is complex Provide premium incentives, incentives for non-tobacco use can be used in calculating affordability Premium incentives for other wellness goals or participation should not be included when calculating affordability Incentives for health contingent wellness plans not clear Alternative standard should be offered to all Member-based not clear

58 National Cutting Edge Possibilities High Performance Networks 12% Telemedicine 10% Surgical Centers of Excellence 22% Patient-Centered Medical Homes 6% 2012 Mercer Large Employers (500+) 115 Defined Contribution Possibilities Employer Sets Contributions and Raises Contributions by Preset Percent Each Year 8% Setting Core Contribution for all Employees Employees Buy Up to Plan Choice 28% Employer Provides Subsidy, Employees Purchase Individual Coverage on their own 9% Adopt Some Other Defined Contribution Approach 6% Not Considering a Defined Contribution Approach 62% 2012 Mercer Large Employers (500+)

59 In Summary 2013 has been a good year for most employer-sponsored health plans in term of cost increase 2014 cost increase likely higher New taxes and fees Plan design changes required New liability for 30 hours per week workers or previous waivers Employers may need to take more aggressive action to meet budget targets in 2014 A variety of cost control strategies should be considered to help bring cost increases down to manageable levels 117 Today s Agenda Health Care Reform CDHPs Increased Prevalence PPO and HMO Plan Design Prescription Drug Plans Wellness Programs Cost and Contributions Thoughts on Cost Control Concluding Thoughts

60 Concluding Thoughts 119 Employers Can Bend the Trend!" Our TrendBenders and Towers Watson s Best Performers have kept cost in check TrendBenders are organizations with the lowest cost increase (25th percentile) averaged over the past two years (2012 & 2013) For the 2012 and 2013 years, TrendBenders had cost increases of 2% or less TrendBenders averaged a 1 percent decrease over 2012 & 2013 Best Performers in the Towers Watson survey have managed cost increases below the median for four straight years Best Performers averaged a 2.2% increase annually during the four year period Best Performers and TrendBenders share some common strategies when it comes to cost control

61 Where TrendBenders Differ Overall costs are less for TrendBenders PPO plan costs approximately 9% less HMO plan costs approximately 3% less CDHP costs approximately 3% less (closer because employer funds more of HSA) TrendBenders have lower employee contributions in terms of dollars family contributions are markedly lower with TrendBenders TrendBenders adopted wellness and CDHP ahead of market they are benefiting from the early adoption TrendBenders are also more aggressive in various cost sharing elements 121 TrendBenders More Cost-Sharing More aggressive with PPO plan design Median deductibles are same as survey base, but averages are higher - $855 single and $2,014 family Median emergency room copays are higher at $125 More aggressive Rx cost-sharing 68% use a 3-tier copay structure Higher copays - $10 generic/$40 preferred brand/$75 non-preferred brand HMOs also have more aggressive plan design 56% of HMO plans have split copays for primary care and specialists (36% in survey base as a whole) Median ER copay is higher at $150 Similar number of plans have inpatient copay or deductible; amount is higher for TrendBenders at $

62 TrendBenders Wellness Approach 12% of TrendBenders TM offer a full-fledged wellness plan with a specialty vendor (10% survey base) TrendBenders TM more committed to biometric screening with 41% offering (33% survey base) Senior management supports wellness at TrendBenders TM 47% indicate senior management supports wellness efforts and provides resources to deliver wellness initiatives (40% survey base) 44% indicate senior management is interested but unwilling to provide resources for wellness initiatives (52% survey base) 26% of TrendBenders TM feel they will play a significant role in employees health over the next 12 months 123 TrendBenders CDHP Approach Different approach to CDHPs Offer at about the same rate as survey base, however, 6% offer as the only option Plan deductibles are higher at $1,750 single and $3,500 family Funding for HSA is slightly higher ($732 single/$1,464 family) than survey base ($648 single/$1,296 family) Increased HSA funding does not offset the deductible differential with survey base 27% of TrendBenders TM report 50% or better enrollment in the CDHP option

63 Planned Strategies for 2014 Best Performers Manage company subsidy as total reward, not just health plan budget 30% Decrease employer funding of dependent coverage Decrease employee contribution when they take certain steps Offer telemedicine for professional consultations Tie funding of CDHP accounts to wellness participation Offer specialty treatment providers/networks Provide access to private Exchange 24% 23% 22% 22% 20% 18% 0% 10% 20% 30% Source: 2013 Employer Survey on Purchasing Value in Health Care,Towers Watson 125 In Closing Good news: this year had the lowest cost increase in the last decade Bad news: 2014 will be a challenge cost will increase beyond trend Plan design issues will need to be addressed Play or Pay decisions need to address whether to pass benefits and affordability if you stay in New taxes and fees will impact plans 30 hours or more/week full-time definition will be a challenge for some Be prepared to make changes to meet budget targets

64 Any Questions? CLICK HERE TO EDIT TEXT 127 Contact Contact Information: Information: William William D. Wentworth, D. Wentworth, Principal Vice President McGraw McGraw Wentworth Wentworth, a Marsh & McLennan Agency LLC company W. Big W. Beaver Big Beaver Road, Road, Suite 200 Suite 200 Troy, MI Troy, MI Phone: Phone: (248) (248) / Fax: / Fax: (248) (248) wdw@mcgrawwentworth.com Thanks For Coming!

65 Copyright Notice Copyrighted McGraw Wentworth, Inc all rights reserved. Information and facts presented in this publication may be used without further permission provided they are not presented in a misleading manner, and provided McGraw Wentworth, Inc. and this publication are identified as the sources of the information and facts. This study was prepared by McGraw Wentworth, Inc. Information about this study may be obtained from William D. Wentworth at (248) Data was gathered from sources which McGraw Wentworth, Inc. considers reliable. However, there is no guarantee of accuracy or completeness of the information, and its presentation in this publication does not constitute a recommendation of any type of insurance, insurance company, or any other product or supplier. McGraw Wentworth, Inc. is a licensed insurance agency