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Agenda. Background Review the Contribution Strategy Consider a Consumer-Driven Health Plan (CDHP) Introduce an Employee Education Program Evaluate the Plan Design Introduce a Wellness Program Consider Self-Funding. Background.
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Agenda • Background • Review the Contribution Strategy • Consider a Consumer-Driven Health Plan (CDHP) • Introduce an Employee Education Program • Evaluate the Plan Design • Introduce a Wellness Program • Consider Self-Funding
Background • Cost of health insurance is approaching the gross earnings of a full-time minimum wage worker • Cost of employer health plan premiums rose by 11.2% in 2004* • This is an improvement compared to a 13.9% increase in 2003 • Still outpaced overall inflation by 8.9% • There are valuable, practical initiatives companies can employ to recharge their plan • Deflect the most destructive dynamics in the marketplace • Provide maximum return on the company’s investment *Kaiser Family Foundation
Review the Contribution Strategy • Companies should evaluate their contribution strategy routinely • A vast majority of workers are paying more each year for health benefits • In 2004, the average share of employees of large and medium-sized companies is expected to reach* • $2,800 for family coverage • $800 for individual coverage • Employees paid an average of 18% of their medical premiums for single coverage and 31% for family coverage** in 2003. * New York Times ** U.S. Department of Labor
Review the Contribution Strategy Average Monthly Worker Contribution, 2000-2004* Note: Family coverage is defined as health care coverage for a family of four. *Kaiser Family Foundation
Review the Contribution Strategy Actions and Outcomes • Review and adjust contribution strategies on an annual basis to avoid the catch-up predicament • Make sure that strategies align with company’s human resource and business objectives • Educate employees on rising health care costs
Consider a CDHP • CDHP is defined as a high-deductible health plan with a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA) • 74% of companies offering CDHPs started them in 2004 and 2005* • 11% of companies believe that CDHPs are very effective as a cost containment strategy** • 42% believe they are somewhat effective • 50% of employees will consider offering a CDHP in the next few years*** *Aon Corporation News Release **Employer Health Benefits Survey, Kaiser Family Foundation ***2004 Health Care Consumerism Survey, Towers Perrin
Consider a CDHP Likelihood of Offering High-Deductible Health Plan with a Personal or Health Savings Account Option in the Next Two Years, 2004* Very Likely Somewhat Likely Small firms (3-199 workers) 6% 20% Mid-size firms (200-999 workers) 7% 28% Large firms (1,000 – 4,999 workers) 11% 25% Jumbo firms (5,000 or more workers) 22% 28% All firms 6% 21% *Kaiser Family Foundation
Consider a CDHP Actions and Outcomes • Get the facts on CDHPs to determine if they match a company’s objectives and would be a good option for employees • Determine whether an HRA or HSA is the best option for the workforce • Implement a well-designed communication plan that describes and promotes the CDHP
Introduce an Employee Education Program • 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 they do* • To build an effective health care communication system, employers should:** • Make communication an ongoing, rather than a once-a-year, event • Take a long-term approach • Align with plan design • Leverage the internet *2004 Health Care Consumerism Survey, Towers Perrin **WorldatWork
Introduce an Employee Education Program Actions and outcomes • An education program should provide resources employees need to make wise health care decisions • For a program to be effective it must be a long-term investment of company resources • An employee education program is advantageous whether or not a company offers a CDHP
Evaluate the Plan Design Employers Very or Somewhat Likely to Change Annual Deductibles, Office Visit Co-Pays or Co-Insurance in Next 12 Months* Small Employers Large Employers Increase annual deductibles 42% 52% Increase office visit co-pays or co-insurance 42% 52% *Kaiser Family Foundation • Review co-insurance, co-payments and deductibles annually • Between 2002 and 2004, the majority of employers increased deductibles at least once • Diverse needs of the workforce may be better met by offering multiple plan options
Evaluate the Plan Design Actions and outcomes • Adjusting deductibles and co-pays can influence employees to use network providers • Reducing costs for both employers and employees • Check the relative size of in-network and out-of-network deductibles and coinsurance • Consider converting from a fixed dollar co-pay plan design to a co-insurance design • Consider if the company’s employee population warrants the expansion of existing program to include multiple plan options
Introduce a Wellness Program • Wellness programs have the potential to: • Decrease health care costs • Reduce absenteeism and medical claims • Increase productivity and employee retention • The National Business Group on Health estimates that there is a $300 return for every $100 invested per employee* • Approximately 70% of conditions requiring health care are avoidable* * Benefit News, March 2005
Introduce a Wellness Program Actions and outcomes • Wellness programs have the potential to reduce costly workplace problems (absenteeism, medical claims and loss of productivity) • A good wellness program might include: • 100% coverage for preventive care services • Self-care workshops • Nurse lines • “Flextime” to allow employees to participate in exercise programs during working hours • Partial reimbursement for health club dues
Consider Self-Funding • Self-funding can empower employers: • Improved access to information • Ability to exert greater control over health care spending • Reduce overall costs • Financial and administrative control • Companies that self-fund have access to extensive reporting, providing detailed claims information • Allows employer to make adjustments to its health plan design or administration to create savings
Consider Self-Funding • Improved cash flow • Pay as you go • Plan savings • Premium taxes • Plan flexibility • Customized health plans that best address the unique needs of their workforce • Self-funded plans are exempt from state health insurance mandates • Mandated benefits increase the cost of basic health coverage from a little less than 20% to more than 50%, depending on the state* * Council for Affordable Health Insurance, January 2005
Consider Self-Funding Actions and outcomes • Employers can leverage the cost advantages of a self-funded plan to extend their benefit dollars and improve case flow • Flexibility of self-funding allows for multiple plan options at varying price points • Factors to review when considering self-funding include: • Employer’s current and projected cost trends • Claims history • Makeup of company’s workforce • Projected cost of plan management and administration • Availability of stop loss coverage • Financial Risk tolerance
Start Recharging • There are cost-saving strategies initiatives that you may not have considered or implemented entirely • These initiatives can help reduce health care costs and improve the bottom line • The appropriateness of implementing any benefits strategy depends on the employer’s unique human resource, financial and operational objectives • Consult with a broker and other health benefits industry specialists • Design a strategy to explore these initiatives
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