High Deductible Health Plans Health Savings Accounts

1. High Deductible Health Plans Health Savings Accounts A Benefit Solution October 3, 2007

2. Example of Current WNY Carrier Rates* Health Care Cost Inflation The Local Perspective *Assumes typical plan design: $10 co-payment; $0 in-patient; $7/15/30 Rx; student age to 23 Note: Average family/single = $6,819

3. Example of Future WNY Carrier Rates* Health Care Cost Inflation The Local Perspective *Assumes typical plan design: $10 co-payment; $0 in-patient; $7/15/30 Rx; student age to 23 **Average approx 13% per year during the next 5 years

4. Future of Healthcare • If we do nothing, we can expect continued double-digit rate increases • Continued increase of experience rating – a rate determined on the specific company’s health risk. • More emphasis on healthy lifestyles • HMOs with comprehensive benefits and low co-pays become historic. • Consumer Driven Healthcare & HSA’s (Health Savings Accounts) will become the “norm” • Emphasis on increased generic use • Employees will transition from passive consumers to active consumers

5. Community Rate • Pros • Rates are known and guaranteed for 12 months • Attractive premium for groups having higher than average claims experience or an older population • Spreads risk over a broader group Description A fully insured methodology that encompasses the historical claims experience of all groups in the community Risk is allocated across the entire population vs. the groups specific experience • Healthier than average employer groups pay higher premiums than necessary • No adjustments are made for individual group experience • Health plan is less accountable for group cost management • Community rate will become more expensive as smaller groups 51-100 are experience rated • Community pool should be strengthened, not weakened Cons

6. Health Savings Accounts (HSA)The Amherst Chamber of Commerce Solution

7. Definitions of the HSA • High Deductible Health Plan - A qualified benefit plan defined by the IRS. Guidelines define deductibles, out-of-pocket maximums and annual indexing. • Health Savings Account - A savings account established through a financial institution used to cover qualified medical care expenses. Funds can be invested like an IRA, and are owned by the individual.

8. How Do HSAs Work?

9. How do People use their Health care? The following chart shows annual medical expenses for the United States population by percentage: Dollars Spent on Medical Care Annually Percentage of U.S.No Medical Expenses 13% $1 - $500 33% $501 - $1,000 19% $1,001 - $2,000 17% $2,001 - $5,000 9% $5,001 - $10,000 3% $10,001 - $25,000 3% $25,001 – And Up 2% Health Savings Accounts provide coverage for preventative care, not subject to deductibles or co-pays 65% of Americans spend less than $1,000 annually on healthcare

10. Low Co-Pay vs. HDHP with HSA Scenario An average, healthy family of four who uses their medical plan regularly throughout the year. Their main objectives when selecting the right medical plan is cost, coverage, ease of use and peace of mind. Medical Usage Annually for Average Family • 2 Adult Primary Care Sick Visits • 1 Gynecological Office Visit • 1 Mammogram • 4 Chiropractic Visits • Monthly Maintenance Drug, Tier 2 • 6 Pediatric Visits • 2 Immunizations • 6 Prescription Drugs, Tier 1 • 1 Emergency Room Visit • 1 Diagnostic X-Ray

11. Low Co-Pay (HMO) Plan

12. Health Savings Account

13. Low Co-Pay vs. HDHP with HSA Cost Comparison

14. Low Co-Pay vs. HDHP with HSAComparison Summary