But what do benefit executives think about the current healthcare landscape?

2. But what do benefit executives think about the current healthcare landscape?

3. We asked benefits executives just that . . . • Annual survey conducted in partnership with Employee Benefit News (EBN) • Approximately 910 respondents participated in this year’s survey • Respondents include benefits executives across North America • Variety of company sizes, industries and geographies represented

4. Agenda • Benefits and cost containment trends • Growth/decline in benefits offered • Cost containment strategies used • Growth in Disease Management and Health/Wellness benefits • Leading CDH plan structures

5. Benefit richness is being diluted, but not at the expense of preventative care and growth in the consumer-directed health market

6. Top benefits currently offered mirror 2006 • Prescription Benefits • Preventative care (e.g., annual physical) • FSA for employee health expenses • Health and wellness benefits or programs (e.g., smoking cessation) • Structured disease management programs (e.g., programs for diabetes or depression)

7. Small employers struggle to offer these key benefits Which of the following benefits or programs does your company offer to/provide for employees 97% Prescription benefits 100% 99% 85% Preventative care 86% 92% 50% FSA for employee health expenses 83% Small companies (less than 99 employees) 92% 47% Health and wellness benefits or programs Medium companies (99 too 999 ) 56% 67% Large companies (999+ ) 37% Structured disease management program 53% 70% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

8. Tried and true cost containment strategies remain • Use of formulary or benefit design to encourage the use of more favorably priced medication • Increase generics utilization • But employers of all sizes continue to lean on cost-sharing and increasingly dilute benefits

9. Large employers most likely to turn to cost sharing as containment strategy Currently use cost sharing as strategy Plan to use cost sharing as strategy Small employers (less than 99 employees) 53% 22% Medium employers (99 too 999 ) 64% 16% Large employers (999+ ) 69% 13% Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

10. . . .but small employers are reducing benefits Currently reducing benefits as containment strategy Plan to reduce benefits as containment strategy Small employers (less than 99 employees) 27% 16% Medium employers (99 too 999 ) 10% 24% Large employers (999+ ) 24% 11% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

11. What other perks are employers looking to reduce? • Retiree health benefits • 17% of large employers, and 15% of small, either currently or intend on eliminating retiree health benefits • Spousal coverage • 26% of large employers, and 21% of small, either currently or intend on requiring spouses to go on own plan if available • Less than 2% of employers, across all sizes, say they intend to stop offering health insurance in entirety

12. Will consumer-directed health plans and preventative health save the day? . . .many benefits professionals think so and continue to increase wellness offerings while cementing their CDH platforms

13. Growth continues in the disease management market Which of the following benefits or programs does your company offer to/provide for employees? Structured disease management programs? Currently offer Plan to offer within the next two years : 2007 54% 14% 15% 2006 50% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

14. Employers tackle most expensive, chronic conditions • Diabetes • Asthma • Cardiovascular and coronary artery diseases • High risk pregnancy • Depression • Back pain • Obesity

16. Gaps exist in measurements of DM • The biggest gap between what employers want to measure and what they actually measure lies in indirect cost categories: • Duration of medical leaves • Absenteeism • Lost productivity

17. Employers increasingly offer health and wellness programs Which of the following benefits or programs does your company offer to/provide for employees? Health and wellness benefits or programs? Currently offer Plan to offer within the next two years 23% 2007 57% 21% 54% 2006 Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

18. The greatest overall growth in health and wellness programs comes from: • Targeted education and support programs • Nutrition education • Health coaching • Convenient diagnoses and monitoring opportunities

19. . . .in fact more than half of employers offer • Smoking cessation • Flu shots • Health risk assessments (HRAs) • Weight management/reduction • Nutrition education • On-site health screenings • Stress management

20. Employer size defines the wellness market • Company size matters in DM and wellness • While 70% of large employers currently offer DM programs, only 37% of small companies do • With health and wellness benefits, 67% of large employers are offering these benefits with only 47% of small

21. Why wellness and lifestyle programs? • Cost, of course But also . . . • To promote a healthy workplace • As part of a broader care management strategy • Goodwill

22. Despite this intention, less than half offer incentives Do you offer employees incentives to participate in DM or wellness programs? Did you know? In 2006, 47% of employees offered incentives to participate in DM or wellness programs. 52% 48% No Y e s Base: all respondents who provide employees health insurance

23. Those that do, offer cash Which of the following incentives do you use to encourage DM or wellness participation? Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

24. The CDH market continues to mature ... and benefit executives are starting to show their preferences

25. 23% 17% 40% 14% 10% 24% 12% 4% 16% Employers favor offering a HDHP with HSA Which of the following benefits or programs does your company offer to/provide for employees Currently offer Plan to offer within the next two years Health savings account (HSA) tied to a high-deductible (CDH) plan Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan High-deductible health plan (HDHP) but without a savings/spending account Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

26. Perhaps because HSA products are expected to produce the greatest costs savings Which of the following health benefits strategies does your company use to control costs? Currently use Plan to use within the next two years Health savings account (HSA) tied to a high-deductible (CDH) plan 21% 19% 40% Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan 12% 12% 24% High-deductible health plan (HDHP) but without a savings/spending account 12% 5% 17% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

27. Medium sized employers last to turn to CDH Which of the following benefits or programs does your company currently offer or intend on offering within the next two years? 43% Health savings account (HSA) tied to a high-deductible (CDH) plan 29% 48% 19% Health reimbursement arrangement (HRA) tied to a high-deductible (CDH) health plan 20% Small companies (less than 99 employees) 31% Medium companies (99 too 999 ) 17% High-deductible health plan (HDHP) but without a savings/spending account 14% Large companies (999+ ) 20% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

28. Do you offer a debit card program? Debit cards offered by nearly half of employers Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

29. Why consumer-directed health? • Cost, of course But also because . . . • Employers believe employees should be more responsible for their healthcare costs • A desire exists to offer innovative benefits • Employers want to encourage employees to live healthier

30. But not all employers are turning to CDH • What are the main reasons employers chose not to offer a CDHP? • Resistance from employees • Employees not ready to be HC consumers • Hesitancy to put more financial burden on employees • Don’t believe the savings will be significant

31. Will you change your primary health plan next year? Half of employers will stay with current health plan Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

32. But smaller companies are more hesitant Will you change your primary health plan next year? 2% 4% Yes 8% 33% No 43% 67% 54% Small employers (less than 99 employees) Maybe – we will put out to bid 40% 15% Medium employers (99 too 999 ) 11% Don’t know 13% Large employers (999+ ) 9% Base: all respondents who provide employees health insurance Source: 2007 EBN/Forrester Benefits Decisions’ Impact Study

33. Final thoughts • Companies will continue to share the burden of rising premiums with their employees • Preventative health and disease management will continue to grow and disease management vendors will expand (and improve) offerings • HSA products will surpass other CDH products, often at the expense of other savings accounts such as FSAs • . . .and in response, carriers will respond by focusing on flexibility in plan design and preventative health incentives

34. Thank you Julie Snyder (617) 613-6448 jsnyder@forrester.com