Summary of Trends in EmployerSponsored Health Plans

1
Summary of Trends in Employer-Sponsored Health
Plans

• May 13, 2004

Deborah A. Wozniak Marsh Benefits, New England
Operations
2
Total Health Benefit Cost for 2003 Rises More
Slowly Than ExpectedAll Employers
3
Large Employers Held Cost Increase to 10.2 in
2003, Expect 12.5 Increase in 2004Total Health
Benefit Cost Per Employee
12.5
13.0
10.2
13.9
10.1
9.7
11.5
14.7
18.1
Projected cost increase for 2004.
4
Benefit Reductions The Key To Slower Cost Growth

• In summer/fall of 2002, Mercer survey respondents
  predicted an average increase of 13.5 for 2003
• The 10.2 actual increase reflects subsequent
  benefit reductions, and may reflect a mid-year
  slowdown in medical trend (MCPI)
• No cause to celebrate health benefit cost is
  still rising 4 times the rate of general
  inflation

5
Some Employers Took Steps Not Just to Slow Cost
Growth, but to Cut Cost
Based on employers providing 2002 and 2003 costs
17
20
5
29
29
6
Changes to Employee Contributions, 2002-2003
7
Significant Plan Design Changes
8
Prescription Drug Benefit Cost Increases
Stabilize As Employers Add 3-tier Copays
Drug trend in largest medical plan at last renewal
Projected for next renewal
9
Growth in Use of 3-tier Copays for Prescription
DrugsPercent of Employers Using 3-tier Copays in
Primary Medical Plan
Increasing employee copays for generic,
formulary brand, and non-formulary brand
10
HMO Enrollment Drops to Lowest Level in 9 Years
PPOs Continue to Gain
PPO
HMO
POS plan
Traditional Indemnity
11
Enrollment Shift Into PPOs Occurs Despite Lower
Average HMO Cost Per Employee
9.8
11.9
14.9
11.5
8.1
15.0
12
How Employers Are Addressing Cost in 2004 and
Beyond

• 49 of large employers expect to increase
  employee premium percentage in 2004
• 45 expect to increase employee cost-sharing in
  2004
• 38 are engaging in consumerist strategies
• 58 offer one or more disease management
  programs, up substantially over 2002
• Health management activities up substantially
  over 2002

13
Emerging TrendsConsumer Directed Health Care
and Disease Management

• May 13, 2004

Deborah A. Wozniak Marsh Benefits, New England
Operations
14
Consumer Directed Health Care PlanBasic
Financial Structure
100 After Out-of-Pocket Maximum
In-NetworkInsurance (example 90)
Out-of-NetworkInsurance (example 70)
Health Care FSA (Employee funded)
Preventive Care(100)
Member Responsibility (example 500)
Annual Insurance Deductible (example 1,500)
Health Care Account(HRA or HSA)(example
1,000)
Note HRA is employer funded. HSA may be funded
by employees or other. Unused dollars can be
rolled over and added to subsequent years funds.
15
Jumbo Employers Add Consumer-directed Health
PlansPercent of Employers Offering CDHP,
2002-2003
2003
2002
Jumbo employers (20,000 employees) 7
9
All employers
lt 1 1
Jumbo employers (20,000 employees) 7
9
? Locally, Marsh has implemented CDHPs for two
mid-sized clients for 2004 ? All clients will
consider pricing in strategy for 2005
16
Employers Quick to Embrace Health Care Consumerism
Health care consumerism informed and
responsible spending by employees for
health-care-related goods and services

• 38 of employers say promoting consumerism is
  part of current benefits strategy
• 44 say its not yet, but theyre interested

17
Steps Taken to Promote Consumerism Among
Employers Who Say Its Part of Current Strategy
18
Other Advanced Cost-management Techniques
19
The Future

• Focus will be on managing consumer behavior and
  demand
• Consumerist strategies
• Higher-cost populations
• Forces that converged to drive up cost will not
  abate any time soon
• Demographics
• Lack of competition
• Technology

20
Disease and Health Management
21
Health and Productivity ManagementMultiple
Chronic Diseases Are Common and Costly
Source Anderson Knickman., Health Affairs,
Nov/Dec 2001
Source Anderson Knickman., Health Affairs,
Nov/Dec 2001
22
Wellness/Preventive ProgramsOffer
Service/program Outside of Medical Plan
Number of Employees
20,000
500
Immunization for adults 59 70 Blood pressure
screening 36 51 On-site fitness
facility 34 41 Cholesterol measurement 31 44
Stress reduction/management 20 32 Mammograms 16
40
or subsidized health club membership
23
Employers Add Health Management ProgramsPercent
of Employers Offering
24
Alternative Medicine Therapies Covered Offered to
Employees Enrolled in Primary Medical Plan
Number of Employees
20,000
500
Acupuncture/acupressure 27 43 Biofeedback
7 11 Chiropractic 85 92 Homeopathy 7
5 Massage therapy 13 10 None
14 7
25
Opportunities for Savings

• May 13, 2004

Deborah A. Wozniak Marsh Benefits, New England
Operations
26
Potential Short- and Long-Term Savings
Short-Term
Long-Term

• Review program design and contribution strategy
  relative to benchmarks
• Understand demographic profile
• Collect utilization reports
• Analyze your health care partners tools
• Challenge financial underwriting
• Trends, credibility, demographic and plan design
  adjustments, IBNR calculations

• Revisit corporate philosophy on benefits
• Educate management on costs and industry trends
• Educate employees about cost and responsibility
• Study utilization for targeted care management
  strategy
• Investigate consumerist strategy options
• tools, behaviors, plans

27
Bariatric Surgery Coverage
18
52
30
Surgery to reduce the weight of morbidly obese
individuals
28
Infertility Services Covered Percent of
Employers Providing Coverage Through Primary
Medical Plan
29
Attacking the Problem, Strategically

• Start with data analysis
• Avoid surprises
• Be proactive
• You cant manage what you dont measure
• Evaluate vendor performance
• Network access/discounts
• Medical management
• Claim processing
• Adopt corrective measures
• Vendor changes/process improvements
• Plan design changes
• Communications