A Step-by Step Approach to Launching CDHPs

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A Step-by Step Approach to Launching CDHPs HSAs
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• The Healthcare Cost Problem
• Introducing a CDHP Design
• Preparing for an HSA Launch
• Launching the HSA Plan
• HSA Enrollment Results

Agenda
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Sperian Protection A Brief Introduction

• Worlds largest manufacturer of Personal
  Protective Equipment. Headquartered in Paris,
  France.
• 1 billion global sales, 400m in the United
  States
• 1600 Employees in 14 Business Units in U.S.
• 10 Major locations in 9 States National Sales
  Force
• 2007 US health insurance expense 8.8 million

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Sperians Cost Containment Challenge

• 1600 Employees in 14 Business Units in U.S.
• 5 Health Plans in 2002
• Health Insurance Trend
• 2002 6,616,212 (12.3 increase)
• 2003 7,132,928 (7.8 increase)
• 2004 9,764,864 (36.9 potential increase)

Tried Contingent Premium
Funding Gap When will it occur and how much will
it be?
2004
2001
2002
2003
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Achieving Long-Term Cost Containment Required a
Strategy

• Key Elements of our strategy
• Support our overall business plan
• Be consistent with our corporate culture.
  Understand our benefits relationship with our
  employees. What is it now and what do we want it
  to be in the future?
• Be implemented in phases so that employees will
  be introduced to consumerism gradually, over time.

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Our Roadmap to Containing Healthcare Costs Over
Time
Reduced Trend
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Our Solution Phasing in a CDHP

• Working with Primarily Care, Inc. (PCI) Sperian
  adopted a hybrid funding arrangement in 2004 to
  reduce health insurance premiums by carving out
  certain parts of our insured plans to be
  self-insured.
• 1 National PPO plan and 2 regional HMOs
• BCBS-RI Covers 1,013 Employees (274 in HSAs)
• A lower health cost trend
• 2004 7,965,538 (11.7 increase)
• 2005 8,320,981 (4.5 increase)
• 2006 8,622,024 (3.6. increase)
• 2007 8,846,197 (2.6. increase)
• 3-year plan savings of 7.69 million
• Payroll deductions have remained stable for 4
  years

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Average Cost Per Employee - 2007

• Avg. Cost of PPO Plans Family Individual
• Kaiser Survey (Sept. 2007) 12,443 4,638
• Sperian PPO Option 9,616 3,640
• Sperian HSA Option 8,685 3,299
• Source Kaiser/HRET 2007 Survey of
  Employer-Sponsored Health Benefits, Exhibit 6.3
• Average Cost Per Employee All Plan Types
• Towers Perrin (2007) 8,748
• Sperian 6,532
• Source 2007 Towers Perrin Health Care Cost Survey

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Claims Reduced 20 Compared with Traditional PPO
Design
(18.7)
(0)
(28.3)
(25.5)
(22.8)



Comparison of Sperian Per Member Utilization with
BCBS-RI Plan-wide Data for 2006 Plan Year
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• The Healthcare Cost Problem
• Introducing a CDHP Design
• Preparing for an HSA Launch
• Launching the HSA Plan
• HSA Enrollment Results

Agenda
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Components of a CDHP Hybrid Funding Plan

• The Primary Insurance Plan
• The Supplemental Plan
• Flex Account (or an HSA) with a Debit Card

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Advantages of the Hybrid CDHP Design

• The Hybrid CDHP design permits employers to
  reduce cost while preserving benefits. By
  self-funding the deductible coinsurance expense
  the employer accomplishes five things
• Significantly reduces overall health plan costs
• Maintains present level of benefits for PPO
  participants
• Raises employee awareness as to the value of the
  benefit they are receiving from the company
  because the company name is on the E.O.B.
• Raises the level of employee awareness that
  health costs are increasing rapidly and that
  change is imminent
• Prepares employees for taking more
  responsibility for their own health care
  purchasing and lifestyle

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HSA Platform as an HSA Specific Stop Loss
Example of the maximum self-funded exposure in a
6,000 family deductible HSA plan that is
repackaged into a 2,250 employee deductible HSA
Plan
All Claims above 6,000 paid by health insurer
Sperian pays claims from 2,251 to 6,000
Employee pays first 2,250 of claims
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HSA Platform as a PPO Specific Stop Loss
Example of the maximum self-funded exposure in a
6,000 family deductible HSA plan that is
repackaged into a PPO with employee co-pays.
All Claims above 6,000 paid by health insurer
HSA Platform
Sperian pays difference between PPO
co-pays and the cost of service on first 6,000
of claims
Employee pays PPO co-pays and deductibles for all
services on first 6,000 of claims

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2007 Plan Comparison

• PPO Option
• Weekly Payroll Deduction
• 23 Single
• 46 2-Person
• 59 Family
• Deductible 500/1,000
• Everything but OVs Rx
• Co-pays 15/25 OV 25 Rx
• Use with Flex Account

• HSA Option
• Weekly Payroll Deduction
• 13 Single
• 26 2-Person
• 39 Family
• Deductible 1,100/2,250
• Up-front, cumulative
• OVs Rx are FREE after deductible is met
• Use with HSA Account

Both Plans Use
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• The Healthcare Cost Problem
• Introducing a CDHP Design
• Preparing for an HSA Launch
• Launching the HSA Plan
• HSA Enrollment Results

Agenda
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Listen Before You Launch

• To help us understand the decision-making
  behavior of our employees when it come to health
  care decisions and to help us plan our
  communication campaign, we held a series of focus
  groups around the company in June 2006
• 71 Employees from 5 key locations
• 12 to 15 per session mixture of salaried and
  hourly
• Participants from all of our health plan
  options, plus non-participants
• Each group followed a structured agenda with four
  main components that allowed us to capture
  consistent information for comparison and
  analysis
• Reasons for selecting their current plan option
• A ranking exercise for key health insurance
  attributes
• Understanding of how they make consumer
  decisions
• Recommendations for improving plan
  communications and education

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2006 Focus Groups Ranking the 4 Cs

• Coverage Comprehensive Network, Providers
  Services
• Cost Payroll Out-of-Pocket Co-pays and
  Deductibles
• Convenience Easy to follow forms and
  processes
• Cash Flow Ability to pay as you go - with no
  surprises

2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses
  Ranking 1 2 3 4
  Coverage 59 24 14 3
  Cost 30 53 10 7
  Convenience 8 11 44 37
  Cash Flow 3 12 32 53

Most Common Response in the Category Second Most
Common Response

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Focus Groups Effective Communication

• Buying Behavior
• Willing to spend a lot of time researching a
  major consumer purchase (car, home appliance,
  computer purchase, etc.)
• Will use a variety of information sources
  (print, friends, internet, legwork)
• But - DO NOT want to spend a lot of time
  choosing a health plan

• Communication Preferences
• Keep it simple use basic side-by-side
  comparisons
• Health insurance is too complex give us more
  time to make a decision
• Give us tools (like online calculators and
  worksheets) to help determine how much it will
  cost us.

• General Observations and Conclusions
• Plan communications need to be broken down into
  a series of smaller, more targeted pieces leading
  up to enrollment meetings
• Comparisons between key plan options must be
  described simply and clearly without a lot of
  unnecessary detail
• Simple decision making calculators and tools are
  essential

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• The Healthcare Cost Problem
• Introducing a CDHP Design
• Preparing for an HSA Launch
• Launching the HSA Plan
• HSA Enrollment Results

Agenda
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Our Plan Design Strategy for 2007

• Increase employee control, involvement and
  responsibility for their health care by
• Redesigning our PPO option to make more services
  subject to the deductible while maintaining our
  current 70/30 cost-sharing formula
• Changing the Pharmacy co-pay to increase
  employee awareness of the true cost of their
  prescriptions
• Introducing the next phase of Consumer Driven
  Health through an HSA compatible health plan with
  an up-front deductible
• Making Health Savings Accounts available to
  employees to allow them to save for their current
  and future health care needs

Its YOUR money to keep, spend or save!
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Explaining the Plan to Employees

• Use multiple communication vehicles to get your
  message across
• Employee Meetings
• Webcasts
• Print
• Intranet
• Clearly explain what is changing and what
  isnt
• Health insurance is a family decision plan
  your communication for ease of use at home
• Communication needs to be adaptable for
  bilingual/bicultural audiences

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Targeted Employee Communications Campaign
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HSA FSA Comparison

• FSA Account
• Its a Spending Account
• 3,000 max/yr.
• Available Jan. 1 to use
• Use it or lose it
• Tax Advantages
• Pretax payroll deduction
• Earns no interest
• Tax-free withdrawals
• Leave your unused behind if you leave the
  company

• HSA Account
• Its a Savings Account
• 2,850/ 5,650 max/yr.
• 250 Company contribution
• Use it or save it
• Tax Advantages
• Pretax payroll deduction
• Savings can be invested
• Tax-free withdrawals
• Its YOUR money take it with you if you leave
  the company

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• The Healthcare Cost Problem
• Introducing a CDHP Design
• Preparing for an HSA Launch
• Launching the HSA Plan
• HSA Enrollment Results

Agenda
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2007 Enrollment Results
23 HSA Enrollment in Year 1
Based on 1219 Employees enrolled in a health plan
option for 2007
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HSA Participants by Age
69 of HSA Participants Age 40
Based on 274 Employees enrolled in the HSA option
for 2007
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HSA Participants by Income
52 of HSA Participants Earn lt 50,000/yr.
Based on 274 Employees enrolled in the HSA option
for 2007
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Focus Group Comparison The Maslow Effect
2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses 2006 Focus Group Results - of Responses
  Ranking 1 2 3 4
  Coverage 59 24 14 3
  Cost 30 53 10 7
  Convenience 8 11 44 37
  Cash Flow 3 12 32 53
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2007 Focus Group Results - of Responses 2007 Focus Group Results - of Responses 2007 Focus Group Results - of Responses 2007 Focus Group Results - of Responses 2007 Focus Group Results - of Responses 2007 Focus Group Results - of Responses
  Ranking 1 2 3 4
  Coverage 45 30 5 20
  Cost 29 39 27 5
  Convenience 12 20 34 34
  Cash Flow 14 11 34 41
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Concierge Service for Plan Participants
Call Sara
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For More Information
Mike Vittoria Sperian Protection 900 Douglas
Pike Smithfield, RI 02917 401-757-2111 mvittor
ia_at_sperianprotection.com
Ed Belt Primarily Care, Inc. 75 Sokanosset CR
Suite 300 Cranston, RI 02920 401-946-4441 800-395
-1300 ebelt_at_ primarilycare.com