Avoiding ACA's Cadillac Tax: Five Most Costly Benefit Plan Misconceptions that Employers Have

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1 Bottom Line Driven Health Benefits Planning Avoiding ACA's Cadillac Tax: Five Most Costly Benefit Plan Misconception #1: Plan Design is the Only Way I Can Reduce Plan Expenses BeneCo of Wisconsin, Inc. Phone: ext jschultz@beneco.co Vice President, BeneCo of Wisconsin For Additional Webinars: Innovation. Dedication. Knowledge. Purpose. Integrity. Vision. Talent. Results.

2 BeneCo of Wisconsin, Inc.: A member of The Benefit Companies, a privately held company. Have been providing insurance and employee benefits consulting since A full service benefits firm serving over 1,200 companies and organizations ranging from 10 to 50,000 employees. Headquartered in Brookfield, WI with additional Wisconsin offices in Green Bay, and Plymouth. -2-

3 Jeff Schultz Vice President BeneCo of Wisconsin Justin Andaloro Manager of Marketing & Communications BeneCo of Wisconsin -3-

4 The Problem Cadillac Tax Know your Numbers Projected 8% Trend 2013 PPO Plan HSA Current Single $ $ Family $2, $1, Single $9,031 $5,870 Family $25,969 $16, Single $9,753 $6,339 Family $28,046 $18, Single $10,533 $6,847 Family $30,290 $19, Single $11,376 $7,394 Family $32,713 $21, Single $12,286 $7,986 Family $35,330 $22, Single $13,269 $8,625 Family $38,157 $24, Single $14,330 $9,315 Family $41,209 $26, Single $15,477 $10,060 Family $44,506 $28,929-4-

5 Cadillac Tax Know your Numbers PPO Plan HSA Family Coverage $2,086 $0 Employee $0 $0 Employee + Spouse $0 $0 Employee + Child(ren) $7,830 $0 40% Excise Tax Per Employee Plan Participant PPO Plan HSA Employee $834 0 Employee + Spouse 0 0 Employee + Child(ren) 0 0 Family Coverage $3,132 0 Current Enrollment in Each Category PPO Plan HSA Employee Employee + Spouse Employee + Child(ren) 23 5 Family Coverage Projected Cadillac Tax Based on Current Enrollment PPO Plan HSA Employee $352,106 $0 Employee + Spouse $0 $0 Employee + Child(ren) $0 $0 Family Coverage $952,170 $0 Total Projected Excise Tax in 2018: $1,304,276-5-

6 Misconceptions Misconception #1: Plan Design is the Only Way I Can Reduce Plan Expenses 4/1/ :00-11:00 Misconception #2: My PBM Doesn't Matter 4/24/ :00-11:00 Misconception #3: Wellness Doesn't Produce an ROI 6/3/ :00-11:00 Misconception #4: All Care Management/Utilization Review Firms Are the Same 7/15/ :00-11:00 Misconception #5: My Employees Will Never Understand Their Benefits and Engage 8/5/ :00-11:00-6-

7 How much of our benefit planning. Is data driven? Identifies, removes, or eliminates plan and vendor inefficiencies? Is integrated with all aspects of employer cost and employee wellness? Is held accountable by measuring and managing each financial and wellness metric? Benchmarks plan performance, member health and utilization? Improves member health and well-being? Supports corporate culture? Achieves sustainable long-term financial objectives? Asks the summary question: Have we deployed every possible tactic to affect healthcare spend within the current plan infrastructure? -7-

8 Business Case For Qualitative Employer Benefits Planning There is a pattern in how companies successfully manage their healthcare costs. Best Performers Poor Performers 15% over two-year overall cost trend Best practices employed 5 percent average two-year overall cost trend Quantitative analysis of healthcare data Integrated health benefits approach Pre-set targets and regular assessment Employee education Moderate Performers 10% average two-year overall cost trend Source: Survey of 555 large US companies, Managing Health Care Costs in a New Era, th Annual National Business Group on Health/Watson Wyatt Survey Report, 2005.

9 Qualitative Employer Benefits Planning Identify Inefficiencies Identify Cost Drivers Benchmark Your Data Engage Your Members Supercharge Your Wellness Program Measure and Manage Your Results ACA Compliance and Guidance Identify areas of unnecessary spending and increased cost within the framework of your health plan. Review plan performance history and identify areas of excess spending. Is it price, utilization, both? Review plan performance history against industry benchmarks. Create a clear, concise, and ongoing message to create a partnership mentality Leverage health promotion and worksite wellness to generate significant healthcare cost savings Continually measure to manage claims data for possible intervention Though out the year, we will continue to strategize and keep you informed of the issues that affect you and your employees as it relates to ACA. -9-

10 Case studies Client #1 Location: Employees: 2,000 WI, IL and IA 2.4% average cost increase per year since 2007 Most recent per employee per year cost $6,461 Client #2 Location: Marshfield, WI Employees: % decrease in cost since cost per employee per year $10,

11 Case Studies Client #3 Location: Sheboygan Falls, WI Employees: 2, % total cost increase since % average increase per year since cost per employee per year $9,977 Client #4 Location: 25 Locations throughout WI Employees: % average increase per year since cost per employee per year $

12 Case Studies Client #5 Location: Hartford, WI Employees: 250 3% total cost decrease since cost per employee per year $6,015 Client #6 Location: Cudahy, WI Employees: % average increase since cost per employee per year $14,

13 Identify Inefficiencies Network $16,000,000 $14,882,985 45% $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $9,261,268 $7,850,852 23% 23% $11,615,935 $10,421,405 24% 25% 41% 40% $7,514,725 $6,102,118 40% 35% 30% 25% 20% 15% $4,000,000 $2,000,000 $1,773,496 $2,094,678 $2,544,910 $2,850,900 $3,009,924 10% 5% $ YTD Total Eligible Total Discount Discount 0% Over past 2 years, client saved $3.5 Million in additional discount dollars. -13-

14 Identify Inefficiencies PBM Case Study: Group 1: 1300 Employees Generic Prescriptions % Utilization 59% 63% 67% 72% 73% 75% 76% 80% 83% Overall Rx Net $PMPM $ PMPM $34 $38 $35 $34 $33 $38 $41 $43 $37-14-

15 Identify Cost Drivers High Cost Claimant Summary -15-

16 Identify Cost Drivers Inpatient Outpatient and Rx Financial/Services Breakdown A B C % Var (C to B) Total Net Payment $1,865,905 $2,125,013 $2,068,233-3% Average Member Count % Net PMPM $ $ $ % Inpatient Net Payment $664,636 $657,873 $404,624-38% Admits/ % Average LOS % Per Diem $4,373 $4,569 $2,791-39% Inpatient PMPM $71.84 $66.61 $ % Outpatient Net Payment $948,271 $1,160,182 $1,285,213 11% Outpatient Services/ ,263 20,868 23,328 12% Net Payment/Service $64 $68 $66-3% Outpatient PMPM $ $ $ % Pharmacy Net Payment $252,998 $306,959 $378,396 23% Scripts/1000 7,887 8,366 8,348 0% Net Payment/Script $41.60 $44.58 $ % Pharmacy PMPM $27.35 $31.08 $ % -16-

17 Identify Cost Drivers Expensive Discretionary Utilization Patterns: MRI, CT scans, etc. -17-

18 Identify Cost Drivers Expensive Discretionary Utilization Patterns: MRI, CT scans, etc. Top 10 MRI (Brain) - Cost Breakdown $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Childrens Hospital Of Wisconsin Froedtert Memorial Lutheran Hospital Aurora Sheboygan Memorial Medical Center Two Rivers Community Hospital St Francis Hospital & Medical St Agnes Hospital St. Mary's Hospital of Rochester (Mayo) Columbia St Mary's Hospital Univ Of Wisconsin Hospital & Clinic Aurora Medical Center of Oshkosh Total Plan Payments /Svc $1,394 $1,353 $1,369 $3,409 $1,049 $2,880 $4,753 $3,359 $3,291 $3,083 Services

19 Identify Cost Drivers Expensive Discretionary Utilization Patterns: MRI, CT scans, etc. Top 10 CT Scan - Cost Breakdown $2,500 $2,000 $1,500 $1,000 $500 $0 Aurora Sheboyga n Memorial Medical Center St Nicholas Hospital Watertown Memorial Hospital Holton Comm St Francis Hospital & Medical Aurora Healthcare So Lakes Two Rivers Communit y Hospital Childrens Hospital Of Wisconsin St Agnes Hospital Stormont Vail Regional Medical Total Plan Payments /Svc $695 $679 $1,939 $1,587 $1,776 $989 $1,644 $804 $1,315 $1,812 Services

20 Example: MRI Analysis Identify Cost Drivers Services Total Cost $48,221 $46,063 $26,337 Other provider Total Cost $18,600 $16,200 $9,600 Total Savings $29,621 $29,863 $16,

21 Percentage of All Cholesterol Rxs Identify Cost Drivers 80% Blain Supply, Inc Blain's Farm and Fleet Cholesterol Meds 70% Generic 60% 50% 40% Formulary 30% 20% 10% Non- Formulary 0% -21-

22 Identify Cost Drivers -22-

23 Percentage of All Gastro Rxs Identify Cost Drivers Prescription Drugs -Prescription Class By Source 90% Blain Supply, Inc Blain's Farm and Fleet Gastro Meds 80% 70% Generic 60% 50% Formulary 40% 30% 20% 10% Non- Formulary 0% -23-

24 1/06 4/06 7/06 10/06 1/07 4/07 7/07 10/07 1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1/10 4/10 Identify Cost Drivers Prescription Drugs -Prescription Class By Source $250 GI Rx Cost per Script $200 $150 $100 $50 $0-24-

25 Identify Cost Drivers Generic Utilization - Cost/Script- $90.00 $85.00 $80.00 $75.00 $70.00 $65.00 $60.00 $55.00 $50.00 $ % 70% 75% 80% 85% Case Study of 10 Beneco Clients: 5/09-4/10 Cost/Script Linear (Cost/Script) y = x Every one percent increase in a plan sponsor's generic dispensing rate is equal to a one percent decrease in overall plan costs

26 Benchmark Your Data -26-

27 Benchmark Your Data Benchmark Utilization & Average Charges Jan August 2010 All Comparisons Utilization per 1000 Average Charge Per Member Per Month (PMPM) % vs. Benchmark) Jan August 2010 % vs. Benchmark) Jan August 2010 % vs. Benchmark) Benchmark Benchmark Benchmark Inpatient (Days) Medical % 4,739 4,326 10% % Surgical % 7,253 9,006-19% % Maternity % 3,859 5,361-28% % Mental Health & Substance Abuse % 1,028 1,001 3% % Rehabilitation % Unclassified 0 0 Subtotal % 5,262 5,414-3% % Outpatient Facility (Cases) Emergency Room % 1,388 1,456-5% % Outpatient Surgery % 5,169 4,199 23% % Radiology % 1, % % Laboratory % % % Pharmacy and Blood % % % Cardiovascular % 1, % 3 3-6% PT/OT/ST % % % Other % % % Subtotal 1,517 1,764-14% % % Outpatient Professional (Services) Surgeries 1, % % % Office & Home Visits 2,410 3,448-30% % % Physical Exams & Immunizations % % 6 6-6% ER Visits % % % Radiology 1,106 1,636-32% % % Laboratory 3,507 4,137-15% % % Physical Medicine & Rehab 2,417 2,440-1% % % Other 2,010 3,787-47% % % Subtotal 13,961 17,356-20% % % Prescription Drugs (Scripts) Generic 4,740 9,054-48% % % Brand 1,539 5,502-72% % % Subtotal 6,279 14,557-57% % % Total Provider Payments % -27-

28 Benchmark Your Data Data is available: Leverage and Supercharge Your Efforts Create a strategic plan to focus resources on areas low patient compliance. -28-

29 Supercharge Your Wellness Program -29-

30 Supercharge Your Wellness Program Supercharging your Wellness Program Means. Changing the conversation around health and productivity. From Health as: The absence of disease to Vitality and energy Only caring for the sick to Enabling people to stay healthy The cost of healthcare to The total value of health Individual participation to Population engagement Behavior change to Culture of health -30-

31 Engage Your Members -31-

32 Engage Your Members Do Your Employees See the Benefit? Communication is Key. Percentage of employees responding favorably Effective Communication Ineffective Communication Above-Average Benefits 83.6% 25.7% Below-Average Benefits 76.2% 22.1% WorkUSA 2004/2005: Watson Wyatt Study: Effective Employees Drive Financial Results -32-

33 Engage Your Members Brand : Nexium Share real Rx alternatives Varied cost of Heartburn and Acid Reflux drugs Prescription Tier Examples Generic : Omeprazole Nexium Zegerid Prevacid Protonix Omeprazole cost $192/month cost $185/month cost $189/month cost $247/month cost $28/month -33-

34 Measure and Manage Your Results -34-

35 Measure Quarterly All Vendors Network PBM Coordinated Care All Changes Plan Design Employee Contributions Employee Cost Share Measure and Manage Your Results Thoughout the year and then at year end. And then don t stop. -35-

36 Employer Driven Health Care Are we driving or is the system? Identify Inefficiencies Are we holding our vendors accountable? Identify Cost Drivers Do we fully understand the costs driving our plan? Benchmark Your Data Supercharge Your Wellness Program Engage Your Members Measure and Manage Your Results Are we reviewing plan performance history against independent and objective industry benchmarks? Are we reaching for Zero Trend? Are we educating our employees beyond plan design? Are we continually looking for areas of intervention? -36-

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38 Pay or Play Webinar Series Series: Course Level Date Time Top 10 Frequently Asked Questions about ACA (Rebroadcast) 101 4/16/ :00-11:30 Top 10 Frequently Asked Questions about ACA (Rebroadcast) 101 5/14/2014 9:00-10:30 To Register:

39 ACA Learning Series: Course Level Date Time What do the Updated Regs Mean to our Company and Our ACA Strategy (Rebroadcast of March 19, 2014) Cadillac Tax: Creating a Glide Path to Minimize the 2018 Excise Tax Impact 200 4/9/ :00-11: /23/ :00-11:00 What do the Updated Regs Mean to our Company and Our ACA Strategy (Rebroadcast of March 19, 2014) 200 5/20/2014 2:00-3:00 Top 5 Most Inaccurate Assumptions about the ACA and How to Avoid Them 301 5/28/ :00-11:00 To Register:

40 : Course Level Date Time Misconception #2: My PBM Doesn't Matter 300 4/24/ :00-11:00 Misconception #3: Wellness Doesn't Produce an ROI 300 6/3/ :00-11:00 Misconception #4: All Care Management/Utilization Review Firms Are the Same 300 7/15/ :00-11:00 Misconception #5: My Employees Will Never Understand Their Benefits and Engage 300 8/5/ :00-11:00 To Register:

41 We are grateful AM 620 WTMJ has asked BeneCo to host a radio series to educate listeners on how best to tackle the ins and outs of the Affordable Care Act (ACA). Focused primarily on educating: Business Owners, CEO's, CFO's and HR professionals; we will help them determine if ACA is a "Top 3" or "Top 30" business priority. Tune in to hear us discuss critical ACA challenges to businesses on April 27th from 8:00-9:00pm. Be sure to listen for the advertisements! If you would like the podcast from the February 16 th or March 16 th show, please drop us a line. -41-

42 You asked for it ACA Impact Study How will ACA impact my organization? What do I need to plan for? Free initial consultation Fee for service basis based on plan complexity ACA Sustainability Analysis How do I create a long term sustainable ACA cost strategy and still comply? Fee for service basis based on plan complexity -42-

43 Ask us about Haiti The work: Orphan care and sponsorship, tent city refugee relocation and community development, microenterprise other ministry opportunities To get more info or engaged in some way drop us a , or for a glimpse of the work go to or Upcoming trips: December 2013 or 2014: April June and October -43-

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45 Post-workshop questions or to get the links for upcoming webinars: Jeff Schultz Vice President BeneCo of Wisconsin, Inc x