Selling Wellness to Your CFO

1. Selling Wellness to Your CFO Illinois Human Resources Conference and Exposition Michael Kelly Director Health & Wellness Services HealthCheck360° July 23, 2009 Proprietary & Confidential

2. – SITUATION –Employers continue to address rising medical, workers compensation, and disability trends through retroactive and disjointed approaches, negatively impacting bottom line performance. – CHALLENGE –Significant opportunity exists to reduce the long term cost of providing insurance, workers compensation, disability, and health benefits to the employer by improving teammate health & productivity and aligning human capital management with your strategic plan. – OUR SOLUTION –Turn health into a viable business strategy by investing in the your most meaningful assets through integrated risk reduction, incentives, employee accountability, communication, and data analysis. Proprietary & Confidential

3. Agenda • Business Case for Wellness • Integrated Incentive Design • Best Practices Intervention Model • Follow-up Programming Support • Measurement/ Evaluation Proprietary & Confidential

4. Current Situation Take Control • Until recently, most employers have accepted near double digit increases in health care costs. • 2009 is no different – 9.6% expected increase in medical cost trend.* • In past recessions, healthcare has increased its portion of GDP and medical prices rise faster than other prices. • Employers can rely on preventative health management programs or they can continue to shift costs onto teammates. • An overwhelming majority of teammates agree that it is important to know their personal risk to take steps to change and seven out of ten support lower premiums for practicing health behaviors.** *PricewaterhouseCoopers’ Health Research Institute, Medial Cost Trends for 2009, June 2008. ** Hewitt Associates, Annual Health Care Survey, 2008. Proprietary & Confidential

5. Political Environment “The Nation faces epidemics of obesity and chronic diseases… Yet, despite all all of this, less than four cents of every health care dollar is spent on prevention and public health.” • Barack Obama • “It’s a conservative idea, insisting that individuals have responsibility for their own health care. I think it appeals to people on both sides of the aisle.” • - Mitt Romney Proprietary & Confidential

6. Obesity Trends* Among U.S. AdultsBRFSS, 1990, 1998, 2006 (*BMI 30, or about 30 lbs. overweight for 5’4” person) 1998 1990 2006 Proprietary & Confidential No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

7. Another way to put it….. Proprietary & Confidential

8. 50-70% of Medical Conditions are Preventable Over 95% of our nation’s health expenditures, including most of the billions of dollars employers spend on health coverage, is committed to diagnosing and treating disease only after it becomes manifest.Source: Partnership for Prevention Researchers have estimated that preventable illness makes up approximately 70% of the burden of illness and the associated costs. Source: Fries, New England Journal of Medicine, 1993. • The 6 Lifestyle Challenges • Lack of physical activity – 60% do not exercise regularly • Rampant Obesity – 73% of Adults will be overweight by 2010 • Diet – consumption of calories and sugar at record levels • Alcohol abuse and Tobacco usage remains high • Stress – 60% of employee absences are related to psychological issues and job stress • Chronic illnesses – more than 90 million Americans have a chronic condition Proprietary & Confidential

9. Doctor Knows Best??? • In a national survey of 13,000 obese adults who had recently had a routine medical exam, only 42% of them were counseled by their physicians to lose weight. • Only 35% of adults report that their physician mentioned regular exercise as an important part of good health • Health care in the United States is really “disease” care; we seek medical attention when we have diseases or problems. • Why isn’t medical care more like the dental industry: prevent first, then treat when necessary. WELCOA, 2007. Proprietary & Confidential

10. Total Value of Health Source: University of Michigan Health Management Research Center Proprietary & Confidential

11. Excess Risks Equals Excess Costs When considering the impact of poor health on total costs, High Risk Employees cost a company almost three times what a low risk employee costs -- $3,300 more per year Source: University of Michigan Health Management Research Center Proprietary & Confidential

12. Excess Medical Costs follow excess Risks Proprietary & Confidential

13. Costs follow risks and age Proprietary & Confidential

14. Which Variable Can you Change? • Median Age of Workforce • 1994 – 36.9 years • 2004 – 41.8 years • 2014 – 43.8 years • To lower costs we must impact lifestyle driven health risks!!! Proprietary & Confidential

15. Doing Nothing is a Losing Strategy Migration study of 43,312 Individuals Over 3 Years Year 0 Year 3 Low Risk (0-2 Health Risks) 27,951 Low Risk (0-2 Health Risks) 26,591 • Key Findings • Risk profile of a population gets worse over time • Number of high risk individuals increased 11.4% • Number of medium risk individuals increased 7.7% • Number of low risk individuals decreased 4.9% • Results are a function of American lifestyle habits and the realities of age Medium Risk (3-4 Health Risks) 10,670 Medium Risk (3-4 Health Risks) 11,495 High Risk (5+ Health Risks) 4,691 High Risk (5+ Health Risks) 5,226 Source: University of Michigan Health Management Research Center Proprietary & Confidential

16. Worker’s Compensation Correlation Empirical research overwhelmingly supports a direct correlation between individual health risks and both the frequency and cost of workers compensation claims. • Johns Hopkins study surveyed medical and injury surveillance data on hourly workers employed in eight aluminum manufacturing plants in 2002 and 2003 and determined that 85% of those injured were overweight or obese. • Duke University and its health system that showed that workers classified as obese filed workers compensation claims at a rate of 11.65 per 100 full-time positions, more than double the 5.8 per 100 rate of teammates who were not overweight. • The same study demonstrated that an even greater correlation was shown between lost workdays, medical claims costs, and indemnity claims costs. Lost workdays were 13 times higher, medical claims were 7 times higher, and indemnity costs were 11 times higher. • Larry Chapman, chair of health management company Summex, concluded that “The evidence is very strong for average reductions in sick leave, health plan costs, and workers compensation and disability costs of slightly more than 25%.” • University of Michigan study found high WC costs were related to individual health risks - smoking, poor physical health, physical inactivity, etc. • WC costs increased with increasing health risk status (low-risk to medium-risk to high-risk). 85% of WC costs could be attributed to excess risks (medium- or high-risk) or nonparticipation. Proprietary & Confidential

17. 80-20 Rule • The 80-20 rule is almost always correct but is terribly flawed as long term strategy. • How do you identify who your next 20% are going to be. • 60-70% of your highest claimants recycle every year. • Employer Case Study: Proprietary & Confidential

18. Severe Cost High Cost Moderate Cost Low Cost HealthCheck360° Case Study for Risk Migration Individuals with Claims before s/l of >$50,000 Individuals with Claims before s/l of >$5,000 and <$50,000 Individuals with Claims before s/l of >$1,000 and <$5,000 Individuals with Claims before s/l of <$1,000 Proprietary & Confidential

19. Severe Cost High Cost Moderate Cost Low Cost Distribution of Company’s Total Claims Costs* (before s/l reimbursements) by Classification Number of Participants Percent of Participants Total Claims Dollars Percent of Total Claims Avg. Cost per claimant 50 0.6% $5,120,000 26.2% $102,400 711 8.1% $9,785,000 50.1% $13,762 1,562 17.9% $3,510,000 18.0% $2,447 6,425+ 73.4% $1,135,000 5.8% $177 * Using data from 12/07-11/08 Proprietary & Confidential

20. Severe Cost High Cost Moderate Cost Low Cost Chronic Claimants Example 2007 Claim Status 2008 Chronic Claimants 12 161 711 High Cost Claimants 200 309 29 Over 70% of 2008 High Cost Claimants were Normal or Minimal Claimants in 2007 New to Health Plan in 2008 Proprietary & Confidential

21. Severe Cost High Cost Moderate Cost Low Cost Latent health risks eventually turn into large claims 2007 Claim Status 2008 Catastrophic Claimants 6 13 50 Severe Cost Claimants 11 20 Over 60% of 2007 Severe Claimants were Normal or Minimal Claimants in 2005-06 Proprietary & Confidential

22. Wellness tools identify early – not claims! Proprietary & Confidential

23. Significant Risks Not Being Managed Case Study 2 • 4 with glucose in diabetic range • 61 with glucose in pre-diabetic range HRA Findings Claims information • 3 of 65 have claims with a diagnosis suggesting diabetes or pre-diabetes Diabetes Hypertension • 57 individuals with elevated systolic and diastolic blood pressure readings • 10 of 57 have claims with a diagnosis suggesting hypertension • 131 with elevated cholesterol • 75 with BMI readings > 30, of which 31 (40%) are also pre-diabetic • 10 individuals have claims with a diagnosis suggesting being at risk of a heart attack Heart Attack Risk Significant latent health risks in the population but not visible to care management teams Proprietary & Confidential

24. Summary University of Michigan Health Management Research Center, 2009. Proprietary & Confidential

25. The New Paradigm New Focus • What are the root causes of my claims? • Turnkey approach with integrated health risk management, incentives, support, & safety. • Integrated Solution with Internal Database Analytics • Proactive • Real and significant impact on long-term performance of company • Traditional Benefit Focus • How can I get lower cost insurance? • “Silo” approach with separate and outsourced programs. • Disjointed programs with no data management • Reactive • Minimal impact on long-term performance of client Proprietary & Confidential

26. Agenda • Business Case for Wellness • Integrated Incentive Design • Best Practices Intervention Model • Follow-up Programming Support • Measurement/ Evaluation Proprietary & Confidential

27. What Will My Employees Think? • Employees are beginning to see the link between their behaviors and financial well-being • However, while most teammates (88%) say that they engage in healthy behavior, they don’t necessarily take specific actions toward living a health lifestyle. • Employees do not see “health” and “health care” as linked in the manner that employers do. • Employees delineate between health care coverage – availability and benefits – and actions or strategies aimed at keeping themselves healthy. • Employees DO recognize that financial incentives may influence their health choices and future behaviors. Proprietary & Confidential

28. Health Risk Assessment is an employee benefitCIGNA Survey Highlights • About 9 out of every 10 U.S. adults would value information that could accurately predict whether they are at risk for developing future health problems. • Americans overwhelmingly say that if this information indicated they were at medium to high risk for developing health problems, they would be either very (69%) or somewhat (25%) motivated to make changes in their lives. • The youngest segment of the population (18-24) is most likely to say they would be very motivated (84%), while the oldest segment is least likely (53%). • Three out of four say periodic reminders and motivational tips would be helpful when trying to make changes in their lives after learning of such risk. • Those between age 18 and 44 would most likely find such information helpful. Proprietary & Confidential

29. Changing Employee Behavior Proprietary & Confidential C&B Confidential

30. Incentives have become an Essential Piece Incentives have become essential for driving program participation, activity and behavior change: • According to a study of CEOs from 150 large United States employers, 80 percent said that incentives were the most promising tool for reducing healthcare costs. (PricewaterhouseCoopers) • Health improvement programs show the greatest potential for success when they are tied to incentives. (Blue Cross Blue Shield of Minnesota) • Two-thirds of large employers are now offering incentives to improve employees’ health—based on interviews with 135 top executives of large, U.S. based, multinational businesses. (PricewaterhouseCoopers) • A survey of 585 midsized and large companies found that employers are using incentives to encourage employees to complete Health Risk Assessments (53 percent), improve personal health (43 percent) and use lower cost providers (21 percent). (Watson Wyatt Worldwide) • In its 2006 survey of employers, WELCOA found that 58 percent believed incentive programs would be the most important resource required by employers in the next two years. (WELCOA) Proprietary & Confidential

31. Direct Correlation Between Value & Participation • Results for completion of Health Risk Assessments show a direct correlation between incentive value and participation • SET INCENTIVES TO REWARD HEALTHY CHOICES!!! Proprietary & Confidential

32. Integrated Incentive Based Participation Proprietary & Confidential

33. Example Example of Implementation • Year 1: Increase contribution rates by $25 company wide for singles and $50 for a family, then offer $25 and $50 discount for participating • Year 2: Upon retesting, offer discount for score of maintaining high level of health, an improvement of health, or a letter from MD that states compliance with care • Expected Results: 80%+ of teammates take screening; ongoing accountability; benefits culture improves for long term; improves compliance; and claims begin to decrease. Proprietary & Confidential

34. Employee Accountability Creates Funding Proprietary & Confidential

35. Bend the Trend Proprietary & Confidential

36. HIPAA Compliance • Where a Wellness Program conditions receipt of the reward on an outcome, the program MUST comply with the additional requirements contained within the HIPAA Wellness Program Regulations. These requirements are: • Limit on Reward. Where the Wellness Program allows the employee to participate, the reward must not exceed 20% of the cost of employee-only coverage (e.g., total amount of employer and employee contributions for the cost of employee-only coverage). • Reasonably Designed To Promote Good Health or Prevent Disease. Wellness Programs must be designed to promote good health or prevent disease. • Annual Opportunity to Qualify For Reward. Wellness Programs must give individuals an opportunity to qualify for the reward at least once per year. • Reasonable Alternative Standard. The Wellness Program must provide a reasonable alternative standard for obtaining the reward for certain individuals. This alternative standard must be available for individuals for whom it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard. A program does not need to establish the specific reasonable alternative standard before the program commences. • Disclosure Requirements. All Wellness Program materials must include a description of the general standard and disclose the availability of a reasonable alternative standard. Proprietary & Confidential

37. Participant Experience Must be perceived to be worthwhile Must be simple To understand To do To report Management Experience Must produce results Risk reduction Satisfaction Must be simple To communicate To administer To track Incentive Summary You CAN quantify the impact of wellness and health management programs. Proprietary & Confidential

38. Agenda • Business Case for Wellness • Integrated Incentive Design • Best Practices Intervention Model • Follow-up Programming Support • Measurement/ Evaluation Proprietary & Confidential

39. Champion Companies – Best Practices • Health Risk Assessment Plus • Biometrics Screening and Counseling Plus • Health Coaching Available to Everyone Plus • Two Other Activities Proprietary & Confidential

40. Must Identify Risks to Address the Issue Over two years, 60-70% of new chronic claimants were normal to minimal risks based on claims data the previous year. • Claims data did not allow for the employer to recognize or react in preventing the normal and minimal from becoming chronic claimants… • Claims data did not help the employee become aware of health conditions and did not educate employees of their underlying or current health conditions… • Claims data did not create a baseline for the employer to begin measuring results from… Health Risk Assessments Would!

41. Importance of onsite screening • Early Identification of potential catastrophic claims • Current risk projections are based off of trend and existing medical and Rx claims. • Objective data points to measure over time • Biometric measures are indicators of future risk and consequently cost. Self-reported information would fail to identify those people who are unaware of their health conditions • Biometrics determine follow-up programming • Accurate biometric information allows our clinicians to accurately place participants in programs that most benefit the individual. • Participants do not “know their numbers” • In a random sample of 12,000 participants in an employer-sponsored, data-driven wellness program, 74 percent could not self-report their cholesterol, blood pressure, or body fat. • Participants are not honest • In the same study, 42 percent more participants tested positive for nicotine than self-reported they smoked; 33 percent self-reported “good or excellent” self-perception of health but unknowingly had 3+ clinical risk factors; and 28 percent self-reported “good eating habits” but had dangerous levels of fat in their blood. • Biometric data empowers participants to take action • Before participation in this program, 60% of the participants did not have a primary care physician. • After the program, almost 75 percent actually reviewed their report with a physician. At the end of one year, 90 percent had an improvement in three or more risk factors, and more than 50 percent had an improvement in six or more clinical risks.

42. Not all HRA’s are the same • Combined self reported and biometric data • Ability to perform full blood draw rather than finger stick only • No minimum group size • Program that is carrier portable • On-line tools • Multilingual (if applicable) • Provides timely or immediate results for employees • Follow up wellness programs available • Explanation of aggregate report • Health coaching options

43. Avoid Carrier Programs • Keep wellness consistent over time • Don’t share your proactive risk information with your risk bearer • Ensure you have year around support • Traditional data analytics tell only part of the story • Drive real participation across your population Proprietary & Confidential

44. HRA Saves Money Versus Traditional Doctor Office Lab Work Proprietary & Confidential

45. Add Proactive Value to Disease Management HRA participants HRA Identified Participants Existing Participants • Program identifies undiagnosed DM candidates. • Disease Management program provides follow-up • Provides another level of data and input. • Disease management program provides follow-up Already in Disease Management Biometrics qualify for Disease Management Proprietary & Confidential

46. Intervention Summary • Health Risk Assessments are Essential • Biometric Screenings create measurable data points to track progress. • Objective (non-self reported) scoring provides the ability to incent positive change. Proprietary & Confidential

47. Agenda • Business Case for Wellness • Integrated Incentive Design • Best Practices Intervention Model • Follow-up Programming Support • Measurement/ Evaluation Proprietary & Confidential

48. Health Coaching - Support and Motivate Health Coaching • Health coaching intervention model seeks out those with risk • Outbound calls based on risk level • Will refer participants into other care management programs like DM and CM • Unlimited incoming calls • Flexible choices for client Proprietary & Confidential

49. Telephonic Coaching Philosophy • Empower individuals towards self responsibility for wise, daily choices to achieve and sustain optimum health • Assessment, build rapport, use MI techniques • Review previous session notes and individuals goals • Update – barriers, goals, progress and motivation/self-confidence, “SMART” goals • Coaches aid individuals to take ownership of short and long-term goals • Coach responds to concerns – explain next mailings, emails • Coaches encourage individuals to schedule next appointment Proprietary & Confidential

50. Health Coaching Goals • Empower individuals by changing unhealthy habits through: • Readiness to change, stages of change model, motivational interviewing, learning principles, mindfulness, relaxation techniques, and educational tools • Assist individuals in overcoming barriers and fears; increase self-efficacy • Gently guide individuals based on internal values, rather than extrinsic • Reduce risk factors, improve quality of life • Reduce risk mitigation, reduce costs Proprietary & Confidential