Presented at the Illinois Chamber of Commerce Health Care Symposium in April - Check it out.

1. Managing Your Health Insurance in Inflationary Times The next era in providing health insurance as an employee benefit Presented by: Marcus Newman, CBC Vice President, GCG Financial

2. Let’s Start With the New Law

4. Pre-existing condition exclusions for enrollees under age 19 must be eliminated.

5. Lifetime limits in coverage are no longer allowable.

6. Annual limits on non-essential benefits are no longer allowable.

7. Eligibility rules favoring highly compensated employees are prohibited.The implementation of this new law will usher in an era of unprecedented “hyper inflation” to group insurance for both small and mid-sized groups. As if the past 10 years have not been marked by inflation of the cost of health insurance beyond what most employers can easily accept, we are already seeing a dramatic affect on the size of the renewal increases. This presentation is designed to help you understand how to deal with rapidly rising costs. We will examine how traditional methods of cost control will help, and look as some creative strategies that can make a difference.

8. Is There Cause for Concern?

9. Health Insurance Cost Increase 2006-2007 Differential Source: 2006 - 2007 Benefits Benchmark™ Survey – Chicagohealthinsurance.com

10. Health Insurance Cost Increase 2009-2010 Differential Source: 2009 - 2010 Benefits Benchmark™ Survey – Chicagohealthinsurance.com

11. Just in case the last two slides didn’t make an impact Differential Differential

12. Cost Control

13. Traditional Methods of Cost Control Alter Plan Design Deductible Co-Pays Co-Insurance Drug Coverage Max Out of Pocket Change Cost Sharing Pass on Cost Alter Strategy Stop Offering Benefits

15. Higher Encounter Fees

17. Employee Distrust Relative to Benefit Decisions

19. Employee Cost Sharing as Cost Control 2009 Survey Results Increased Employee’s Share of the Premium 25% Methodology Percentage Relationship (i.e. 75/25) Flat Dollar Amount (i.e. $200 per employee) Based on Longevity (i.e. 1-3 yrs. 50% 4-6 yrs. 75%) Source: 2009 Benefits Benchmark™ Survey – Chicagohealthinsurance.com

21. Employers offering “unaffordable” coverage will be assessed a $3000 penalty for each full-time employee receiving a federal subsidy (first 30 employees will be excluded.)

22. Coverage will be deemed “unaffordable” if the employee’s share of the premium exceeds 9.5% of the family income.Source: Rebecca L. Dobbs, Esq. Smith Amundsen “How Employers Will Be Affected by Health Care Reform

24. Employers who do not offer coverage will be assessed an annual penalty of $2,000 for each employee not covered. In calculating the amount of the tax, the first 30 employees will be excluded.Source: Jerry Geisel, businessinsurance.com/article 3/30/10 “Understanding key provisions in federal health care reform legislation”

25. Creative Strategy

26. Creative Plan Design Using CONSUMERDRIVENHEALTHCARE Qualified High Deductible Health Plans Standardized plan design developed from the Federal Government Price points significantly below traditional PPO (-20 – -30%) Health Saving Accounts (HSA) Healthcare Reimbursement Arrangements (HRA) Employee Education

27. Traditional PPO Environment Medical Underwriting FINAL RATES Insurance Quote

28. HRA Provides Leverage FINAL RATES FINAL RATES

29. Traditional PPO Plan Doctor Co-Pay Deductible NOTES $30 $500 Why do we have this plan at all? It is so old and expensive. I wonder if my employees even appreciate how benefit rich it really is. At my last job we didn’t have this kind of plan and nobody ever complained. Prescription Drug Co-Pay $15 / $35 / $50 In Network Coverage In Network Max $2,500 90%

31. Everything goes to deductible

32. Employee charged negotiated discountsDeductible $1500 Doctor Co-Pays NOTES I am not sure that I like this because it seems like the employee would be on the hook for more money. Doctor visits and prescriptions … they might not like it. Did he say 20-30% reductions in cost. I like that!! Prescription Drugs In Network Max Out of Pocket In Network Co-Insurance Coverage $3000 80%

34. Limits Employer reimbursement exposure to $1,000

35. Employee max reduced to $2000

36. Creates 100% coverage environment for first $500 $500 $500 EMPLOYER POTENTIAL REIMBURSEMENT NOTES $500 Oh! I get we use our savings on the premium to fund the reimbursements. We save money on all of our employees that are healthy. I like it!! EMPLOYEE POTENTIAL EXPOSURE

38. Implements a reimbursement program for additional employee exposure on “as incurred” basis only.

39. Premium savings offsets new financial risk.

41. Benefits from 100% reimbursement of new exposure

43. 10 Things You Might Not Know about Health Insurance

44. 1. Market Segmentation Unique market segments determine programs available to each business owner 2 to 50 employees (SEHIRA) 51 to 200 employees (Middle Market) 201+ employees (large Group)

45. 2. SEHIRA = Full Underwriting 2-50 Eligible Employees Manual Rates Filed with State Full Medical Underwriting Required 67% Increase Worst Case Medical Load From Year to Year Limited to 27% (Renewals Can Be Higher)

46. 3. Middle Market (51-200)is the Most Challenging Underwriting moving to individual questionnaires instead of group Typically too small to try self funding Experience plays larger role in renewal pricing

47. 4. Large Market – Self Funding? Large number of options available both in terms of insurance companies and plan design Experience becomes key component to pricing Wellness programs need to be an integral part of the benefits package

48. 5. More Brokers ≠ Better Pricing Do you want a company to have 3 CPA’s prepare a tax return? Companies need to pick a partner to work with based on capabilities. Carriers are reluctant to be competitive when multiple brokers are working a case.

49. 6. CDHP’s are Mainstream! CDHP will potentially account for $88 billion in 2007 – a six-fold increase since 2005. 25% of employers currently offer a CDHP option as at least a choice for employees; this is expected to double in the near future. Choice of broker should be based on services offered, client lead and support team and price Blue Cross Blue Shield thinks that 20-25% of their coverage will be in CDHP by the end of 2010

50. 7. Employees Want Wellness Programs Employers are making an effort to communicate the importance of being healthy to their employees Employees are okay with having incentives be a part of their wellness program Programs include Smoking Cessation Weight loss On site wellness screenings

51. 8. Renewal Process does not begin at renewal notice 100 Days before the next renewal Be prepared to negotiate with incumbent carrier. Be prepared to change companies. Maximize your relationship with your insurance company Annual renewal does not mean you should treat it as a yearly “purchase”

52. 9. Employers Underestimate Value of Communication 82% of employees believe they are effective health care consumers – only 36% of employers agree 31% of employees think that employers communicate effectively–70% of employers believe that they do Good communication with lesser program is better than poor communication with more expensive program

53. 10. There is a Healthcare CHANGE Happening in Washington Healthcare Reform vs. Health Insurance Reform Viable Alternative to Employer Sponsored Plans? Affordability – Consumer, Employer, Tax Payer, Government Assistance CHANGE

54. Questions? Thank you very much for your time. Marcus Newman, CBC Phone: 847.457.3058 Email: Marcus.Newman@gcgfinancial.com