This document provides a summary of strategies for making health care more affordable for small businesses. It recaps health care reform changes through 2013 and changes coming in 2014 and beyond, including the individual and employer mandates. It then discusses the top 5 health care concerns for small businesses besides the Affordable Care Act, including rising costs. The document outlines strategies that work, including savvy plan design like partial self-funding, HRAs, and HDHP/HSAs. It also discusses wellness strategies that work through properly designed incentives and year-round communication. Finally, it discusses the importance of creating consumerism and proactive multi-year planning to control health care costs.

1. HEALTH CARE REFORM
PREPAREDNESS 105:
Strategies for Making Your Health
Care More Affordable
Brought to you by:

2. Recap of Previous Sessions
Changes through 2013
2
2010 – 2011 • Small employer tax credit rolled out
• Employers can declare their plans grandfathered
• No lifetime maximum on benefits
• Kids covered up to age 26
• Preventative care provided with no cost sharing
• No over-the-counter drugs under HSA/health FSA
2012 • Must report value of health coverage onW2
• New SBC format for easier plan comparisons
• Expanded preventative care including free contraceptives
2013 • Health FSA now limited to $2,500
• New PCORI fee of $1 per member per year ($2 next 6 yrs)
• New Medicare taxes on those earning over $200,000

3. Recap of Previous Sessions
Changes in 2014 & Beyond
3
Market
Changes
• All policies must be guaranteed issue with no exclusions for
pre-existing health conditions
• All group policies for 2-50 EE’s will be community rated
• New individual and small group exchanges will be available
• New fees on insurance companies will be added to premiums
Pay or Play
Mandate
• NO MANDATE ON EMPLOYERSWITH LESSTHAN 50 EE’S
• Larger employers must provide coverage or pay penalties
• If no coverage, penalty is $2,000 per EE except first 30
• If coverage not “affordable,” pay $3,000 for each EE w/subsidy
Coverage
Changes
• Waiting periods can’t exceed 90 days
• Cost sharing limits: $2,000/$4,000 deductible for small
employers, out of pocket max is limited to HSA limits for all
• Cadillac tax in 2018 on premiums that exceed $850/mo single

4. Top 5 Healthcare Concerns for
Small Businesses (Besides ACA!)
4
1 COST
2 LIMITED CLAIMS DATA
3 UNHEALTHY EMPLOYEES
4 UNEDUCATED EMPLOYEES
5 NO LONG-TERM STRATEGY

5. Cost Trends
5
– Healthcare costs double every 7 years
– 8x higher than the Consumer Price Index (CPI)
– and 5x higher than the average annual increase
in earnings
98%
160%
93%
168%
24%
50%
21%
38%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Health Insurance Premiums
Workers' Contribution to Premiums
Workers' Earnings
Overall Inflation

6. Cost Trends
2013 Towers Watson Study
Median PEPY Cost in 2012: $10,909
Expected Median in 2013: $11,461
• A recent Dun & Bradstreet publication cited rising
healthcare costs as #1 threat to corporate profits in
America today.
• And, 60% of CFOs named healthcare costs as their biggest
concern for 2012, according to a recent Bank of
America/Merrill Lynch Survey.
Healthcare/GDP
Health
care
Other
6
• Healthcare Spending
– $1.4 Trillion in 2001 vs. $3.1
Trillion projected for 2012
– 17.7% of our GDP projected
for 2012

7. Cost Trends:
Employees’ Bottom Line
7

8. Cost Trends:
Employers’ Bottom Line
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
10% Trend
Today
5 Years Out
10 Years Out
Margin Lost to Rising Healthcare Costs
8

9. One More Reason to Watch
Your Health Care Costs
9
Tier Annual Monthly 6% 8% 10% 12%
EE $10,200 $850 $635 $578 $528 $482
EF $27,500 $2,292 $1,712 $1,560 $1,423 $1,300
2018Cadillac Level 2013Premiumthat TriggersTaxin 2018
• There will be a 40% excise tax on “Cadillac” plans in 2018 and later
• Cadillac plans are defined as those with premium exceeding $10,200 single
or $27,500 family
• The limits index very slowly, so this will get harder and harder to avoid
The Cadillac Tax

10. Impact Strategies that Work
1. Savvy Plan Design
10

11. Savvy Plan Design
• Partial Self Funding
• Health Reimbursement Arrangements
(HRAs)
• Dual Option High Deductible Health Plan
(HDHP) paired with a Health Savings
Account (HSA)
11

12. Savvy Plan Design
12
FULLY INSURED VS. PARTIAL SELF FUNDING

13. Savvy Plan Design
PARTIAL SELF FUNDING ADVANTAGES
• Benefits are just like fully insured options,
including HSAs
• Can be invisible to employees
• Escape small group community rating restrictions of the
ACA
• Full claims data at renewal AND mid-year
– Early renewal prediction
– Customize employee communication
– Impact utilization (and, therefore, your own bottom line)
Gain bargaining power beyond “normal”
small group limitations!
13

14. Savvy Plan Design
14
HEALTH REIMBURSEMENT ARRANGEMENTS

15. Savvy Plan Design
• Dual Option HDHP + HSA
– HDHP + employer HSA contribution allows
employer to purchase less insurance (i.e. lower
premiums) while keeping employee spend down
– Teaches actual insurance costs (vs. copays) and
almost always for lower out-of-pocket maximums
– Tax advantages that remain with employees, plus
funds can be used for a variety of expenses
– HSA / HDHP coverage now has 13.5 Million
enrollees
15

16. Impact Strategies that Work
1. Savvy Plan Design
2. Wellness that Works
16

17. Wellness: The Bottom Line
17

18. What Small Businesses Can Do
1. Rising healthcare costs are largely due to lifestyle
choices
2. Addressing those choices not only reduces
healthcare costs but also absenteeism, disability,
and accidents
3. Many small group carriers offer included:
a) Health assessment
b) Disease management
c) Online education resources
4. Others include at an extra cost:
a) Online coaching programs
b) Biometric screenings
c) On-site weight management or smoking cessation
programs
18

19. Why Most Wellness Doesn’t Work
1. LACK of proper incentive structures to
engage unhealthy employees
2. LACK of strategic coordination with the
medical plan AND the year-round support to
drive it
Over half (54%) of U.S. consumers say they put effort into
learning more about their personal health risks, but fewer than
half are actively pursuing healthier behaviors. (Deloitte 2009
Survey)
19

20. Wellness that Works
• Properly-designed incentive
structures are VITAL:
– Getting participation
– Behavior changes of those who need it most (i.e. better
claims)
– Coordination with medical plan (e.g. disease management)
• Rewards and/or a “wellness budget” can
be built revenue-neutral into your plan
– Health Insurance Portability and Accountability Act (HIPAA)
– Genetic Information Nondiscrimination Act (GINA)
– Americans with Disabilities Act (ADA)
• Year-round communication is key
• Try various challenges throughout the
year
20

21. Wellness that Works
21
Revenue Neutral Wellness Participation Rate: 54.3%
Current
Employee
Premium
Current
Enrollment
Non
Wellness
Participants
Non
Wellness
PPT
Premium
Wellness
Participants
Wellness
PPT
Premium
Combined
Premiums
After
Incentives
Annual
Premium
Difference
EE $75 20 9 $125 11 $50 $900
ES $150 5 3 $200 2 $100 $1,200
EC $125 3 2 $175 1 $75 $1,200
EF $300 7 2 $350 5 $225 $1,500
Total 35 16 19
Monthly Premium $4,725 $2,775 $1,950 $4,725 $0
Annual Premium $56,700 $33,300 $23,400 56,700$ $0
Revenue Nuetral Wellness Incentive Modeling

22. Impact Strategies that Work
1. Savvy Plan Design
2. Wellness that Works
3. Create Consumerism
22

23. Create Consumerism
IF Car Insurance were like Health
Insurance:
• You’d wait until your car was stolen and then buy a
policy;
• Oil changes, wiper blades and new tires would all be
FREE or have a $20 copay;
• Company cars would all be Mercedes Benz;
• Employees would rack up speeding tickets or get in
wrecks, then be surprised by rate increases.
23

24. • Consumerism Topics:
– Insurance Carrier Online
Resources
– Emergency Room vs. Urgent Care
– Rx Brand Name vs. Generic + Mail
Order
– Flexible Spending Account (FSA)
– How the ACA affects each
employee as an individual citizen
Create Consumerism

25. Create Consumerism
• Plan design + contribution: It’s your $$ at stake!
– Incentives
– Utilization
• Year-round communication campaign
• Encourage use of cost/quality data
• Educate via multiple mediums
• Explain “what’s in it for me?”
25
7
2011 Mercer Survey

26. Impact Strategies that Work
1. Savvy Plan Design
2. Wellness that Works
3. Create Consumerism
4. Proactive Planning
26

27. The Typical Approach
• Waiting Until Renewal
– Leaves no time to implement strategy
– The ACA demands that you plan ahead!
– Continues the cycle of reactive
budgeting/forecasting
• Greater Cost-Sharing
– Creates dissatisfaction
– Jeopardizes participation
– Unsustainable long-term
• Limiting Eligibility
– Limits recruiting
– Compliance concerns under healthcare reform
Defeat the True
Purpose
of Benefits
Anyway!
27

28. • MEDIAN EMPLOYERS
The average large employer,
that typically takes multiple
steps to improve their costs
achieved a two year trend of
7.0%, before plan design or
contribution changes.
• BEST EMPLOYERS
Employers who took the most
proactive steps to manage
their costs experienced a Two-
Year Trend of only 2.2%.
The Value of Proactive Planning
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Median Performers Best Performers
Towers Watson / NBGH 2013 Study on
Purchasing Value in Health Care

29. Brought to you by:
Thank You!
Questions?
Eden Ripingill
(303) 306-2561
Eden.M.Ripingill@kp.org
Kristen Russell
(303) 369-3200
kristen@fallriverbenefits.com